Document of The World Bank FOR OFFICIAL USE ONLY Report No. 14748 IMPLEMENTATION COMPLETION REPORT CHINA TIANJIN PORT PROJECT (LOAN 2689-CHA) JUNE 29, 1995 Transport Operations Division China and Mongolia Department East Asia and Pacific Regional Office This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized
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Document of
The World Bank
FOR OFFICIAL USE ONLY
Report No. 14748
IMPLEMENTATION COMPLETION REPORT
CHINA
TIANJIN PORT PROJECT(LOAN 2689-CHA)
JUNE 29, 1995
Transport Operations DivisionChina and Mongolia DepartmentEast Asia and Pacific Regional Office
This document has a restricted distribution and may be used by recipients only in the performance oftheir official duties. Its contents may not otherwise be disclosed without World Bank authorization.
I micter (ni) -- 'S teetI squaic maeter (m ) 10.764 squr, c feetI Cubic m der (m ) = 315.315 cubic feetI kilometer (km) O0 "121 mile1 ton-kim = 0.62 I ton-mileI ton 2-202 ')( pounds
PRINC'IPAL ABBREVIATIONS AND ACRONYMNJS USED
ERR - Econiomic Rate of ReturnGOC - Government ot ChinaICR - Implementation Completion ReportiCB - International Competitive BiddingMOC - Ministry ot CommunicationsMOF Miniistry of FinanceMOR - Ministry of RailwaysREIRR - Re-evaluated Economic Internal Rate of ReturnRFA - Revaluation on Average Net Fixed AssetsRRFA - Rate of Return on Average Net Fixed AssetsSAR - Staff Appraisal ReportSEZ - Special Economic ZoneSPC - State Planning CommissionITJICDC - Tianjin Harbour Constr-uctioin and Development Company'I'MG Tianjin Municipal GovernmentTPA - Tianjin Port AuthorityXTLC - Xing Tang Labor Company
FOR OFECIAL USE ONLY
IMPLEMENTATION COMPLETION REPORT
CHINA
TIANJIN PORT PROJECT(LOAN 2689-CHA)
CONTENTS
Preface ................ iEvaluation Summary .................................... ii
PART I. PROJECT IMPLEMENTATION ASSESSMENT .... ....... 1
A. Statement/Evaluation of Objectives ..................... 1B. Achievement of Objectives ....... ................... 2C. Major Factors Affecting the Project ........ ............ 9D. Project Sustainability ............................ 10E. Bank Performance ............................ 10F. Borrower Performance ........................... 10G. Assessment of Outcome ........................... 11H. Future Operation ............................... 11I. Key Lessons Learned ............................ 11
PART II: STATISTICAL ANNEXES ......... ............... 13
Table 1: Summary of Assessments ..................... 13Table 2: Related Bank Loans/Credits (None) ............... 14Table 3: Project Timetable ........................... 14Table 4: Loan Disbursements: Cumulative Estimated and Actul . .. 15Table 5: Key Indicators for Project Implementation .... ....... 16Table 6: Key Indicators for Project Operation ...... ......... 18Table 7: Studies Included in Project ........ ............ 19Table 8A: Project Costs ............. ................ 20Table 8B: Project Financing .......................... 21Table 8C: Allocation of Loan Proceeds ....... .. ........... 21Table 9: Economic Costs and Benefits ...... .. ........... 22Table 10: Status of Legal Covenants .... 23Table 11: Bank Resources: Staff Inputs ........ ........... 23Table 12: Bank Resources: Missions ......... ............ 24
Appendices: A. Mission's Aide-Memoire ...................... 48B. Borrower Contribution to the ICR ................ 50C. Map ................................... 54
This document has a restricted distiibution and may be used by recipients only in the performance of theirofficial duties. Its contents may not otherwise be disclosed without World Bank authorization. l
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IMPLEMENTATION COMPLETION REPORT
CHINA
TIANJIN PORT PROJECT (LOAN 2689-CHA)
PREFACE
This is the Implementation Completion Report (ICR) f,or the Tianjin PortProject in China for which Loan 2689-CHA in the amount of $130 million was approvedon May 6, 1986. The loan was closed on October 31, 1994. The Loan was extendedtwice, for one year and ten months, respectively. Final disbursements were made onNovember 8, 1994. The Loan amount was fully disbursed.
The ICR was prepared by Messrs. Toshiro Tsutsumi (Task Manager) andHan-Kang Ten (Economic and Financial Analyst) in the Transport Operations Division,China and Mongolia Department of the East Asia and Pacific Region of the Bank andreviewed by Messrs. Richard Scurfield, Chief, EA2TP and Yo Kimura, Project Adviser,EA2DR. The borrower provided comments that are included as appendixes to the ICR.
Preparation of this ICR was started just before the project closing date andwas based on material in the project file. The borrower contributed to the ICR with itsown evaluation of the project preparation and execution.
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TIANJIN PORT PROJECT(LOAN 2689-CHA)
CHINA
EVALUATION SUMMARY
Objectives
1. The project's principal objective was to assist the Government of thePeople's Republic of China (GOC) to relieve congestion in the port of Tianjin and increasehandling capacity by providing additional facilities and improving the planning, managerialand operational capabilities of its staff. The Bank also encouraged the establishment of anautonomous port authority which would be a new organizational model for publicenterprises in China. The Bank helped finance: (a) 11 berths (2,150mr long) for generalcargo, timber and construction materials along with yard, railway, road and other relatedfacilities; (b) cargo handling equipment, navigational aids and harbor boats; and (c)technical assistance and equipment for: a study to minimize siltation in channels andbasins; provision of a management information system; and establishment of the PortDevelopment Center.
Implementation Experience
2. Project implementation was generally satisfactory, although the closing datewas extended twice, first for one year and then for 10 months due to:
(a) A one-year delay in the construction of the north-side wharves, owing tounforeseen soil conditions at the construction site. This required the pilestructure to be redesigned to a caisson-gravity type and bid documents to bemodified; and
(b) A delay in procurement of equipment for the training center, two boats andtwo quay-side container cranes. The former was delayed due to ,xtra timeneeded to finalize the scope and size of the training center; procdrement ofthe boats was delayed due to space shortages at the shipyard. Obtaining thecranes was delayed because of the long period devoted to bid evaluations aswell as to the limited availability of space in the shipyard where the partswere to be assembled.
3. Bid evaluations, which required a dual process (one by the end-user andanother by the central evaluation committee) took a long time (7-10 months) at the initialstage of the project. Although this improved after the borrower became familiar with Bankguidelines, evaluation for other contracts still required about six months, instead of the
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two-to-three months maximum typical of countries at China's stage of development. Thisshould be improved as soon as possible.
Results
4. Total project cost was $321.7 million, against $282.0 million estimated inthe Staff Appraisal Report (SAR). The increase was mainly due to a rise in local pricescompounded by the implementation delay (the local component was $188.1 million against$139.2 million) (para. 12 and Table 8A). The $130 million loan was fully disbursed.Remaining costs were borne by the Tianjin Port Authority (TPA).
5. The principal project objective was achieved, as the port is now moreefficient. For example, productivity per vessel increased over 50 percent, from 777tons/day in 1985 to 1,175 tons/day in 1993 (para. 14). Institutional goals were alsoachieved substantially through technical assistance: TPA's management information andoperations control systems were developed, the Tianjin Port Training Center wasestablished, and the siltation minimization study was completed. In addition, savings wereobtained in cargo-handling costs, ship waiting and berthing time, and cargo time. Theproject's economic rate of return (at completion) was estimated at 15.7 percent against19.2 percent in the SAR, which is considered satisfactory.
6. The objective of decentralizing the port authority so it could operate as afinancially autonomous corporation was only partly achieved, since the function of settingtariffs is still under Government control. The issue of tariffs becomes critical in the longterm because they do not fully incorporate price hikes and the Government must thereforeprovide the port with favorable tax arrangements.
Sustainability
7. The project should be sustainable. Because it extended the port facilities,traffic will grow in conjunction with Tianjin's economic development, the Beijing-Tianjincorridor and the country in general. Further, TPA is a financially stable entity withadequate financial resources to maintain and operate the port efficiently. Moreover, withthe modern equipment and extensive training provided under the project, TPA has thepotential to increase the port's productivity even further and provide services at competitivecosts.
Findings and Lessons Learned
8. The main findings from the project's implementation was that TPA andTianjin Harbour Construction and Development Company (THCDC) were quite capableof handling the construction and procurement of equipment.
9. A key lesson was that the project's flexible design for the wharf, whichallowed it to be converted to a container terminal, was a major factor in its success.Another lesson was that procurement of goods took longer than expected because of the
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dual evaluation process carried out. A third lesson was that financial targets with respectto decentralizing the setting of tariffs, should have been identified more precisely in theSAR. This can be accomplished in the near future. However, to ensure that tariffs areset correctly and do not reflect monopoly pricing (that would adversely affect users of theport), TPA and the municipal government will need to promote competition amongcompanies that operate at the port. This may entail the formation of new companies(which could be joint ventures) and TPA divesting itself of many of its subsidiaries, sothese could operate independently and compete.
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IMPLEMENTATION COMPLETION REPORT
CHINA
TIANJIN PORT PROJECT(LOAN 2689-CHA)
PART 1. lMPLEMENTATION ASSESSMENT
A. STATEMENT/EVALUATION OF OBJECTIVES
1. The project's main objectives were: (a) to increase Tianjin port's capacityto handle timber, construction materials and general cargo by building specialized berthsthat contain modern equipment; (b) to contribute to long-term efficiency and productivity;(c) to improve TPA's efficiency through training for various aspects of port planning anddevelopment and through TA (to help with installing computerized managementinformation systems, conducting a salutation study and establishing the Tianjin PortTraining Center), that could improve TPA's managerial skills.
2. When the project was identified, most ports were badly congested; containerberths, bulk cargo berths, port equipment, storage yards and transport infrastructure fordistribution were in short supply. In fact, congestion was so severe that it could haveconstrained China's foreign trade from expanding further. Thus, the project was designedto address congestion at Tianjin port, China's third largest port at the time and the oneserving Beijing.
3. The Bank also encouraged the Government to introduce organizationalchanges that could improve the port's management and promote its autonomy. Tianjin wasthe first port placed under the local municipality, which gave the TPA broader decision-making and financial authority than the Ministry of Communications (which had previouslybeen in control).
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B. ACHIEVEMENT OF OBJECTIVES
Project Description
4. To achieve these objectives, it was decided (see Map attached) that theproject would comprise 1 1 deep-water berths for ships of 30,000-50,000 dwt with workto be carried out from 1986 to 1992 in two phases: Phase 1 (1986-90) to construct 5 berthsand Phase 11 (1987-92) to construct an additional 6 berths. The 11 berths were designedto be converted into container berths when needed. In the future the project wouldcomprise both phases. It included the following components:
(a) construction of five new berths on the East Pier's south side for timber,general cargo and construction materials, requiring: (i) construction of a780 m quaywall for four berths with alongside depth of 10.5 m; (ii) con-struction of a 170 m quaywall with alongside depth of 10 m for theremaining berth;
(b) construction of six new berths 1,200 m in length on the East Pier's northside for general cargo with alongside depth of 10 m; and the constructionof some service boat quays;
(c) dredging of about 11.82 million cu m of spoil and reclamation of 840,000sq m of land and stabilization of the fill material;
(d) provision of the required cargo handling equipment and navigational aids,and harbor equipment and boats;
(e) provision of other related facilities such as railway, road, yard pavement,water supply, sewage, power supply;
(f) construction of the required buildings; and
(g) provision of supervision consultants.
5. The project also contained components to address the port's needs ininstitutional and technological development. These components comprise:
(a) technical assistance for a study of methods to minimize siltation in channelsand basins and training of port specialists;
(b) equipment for the development of Tianjin Port Authority's managementinformation and operations control systems;
(c) establishment of the Tianjin Port Development Center for training, researchand development studies.
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In particular, TPA agreed to incorporate long-term financial planning in its rolling financialfive-year plan (in which it would assume the position of an autonomous entity).
Project Implementation
6. The loan became effective on March 20, 1987, about five months after thelegal documents were signed on October 16, 1986. Although the closing date wasextended twice (due to unforeseen physical factors, not the Borrower's unsatisfactoryperformance), the major objectives were achieved.
7. Physical components. Prequalification of bidders, preparation of biddocuments, as well as bid evaluations for civil works contracts, were undertaken prior toloan effectiveness. Construction was supervised by experienced teams from the TianjinHabour Construction and Development Company (THCDC), whose backgrounds andprofessional experiences were reviewed and approved by the Bank; they were assisted byforeign consultants. TPA/THCDC applied the deep mixing method to strengthen the softsoil at the wharves, which was then able to accommodate the caisson-gravity type structure(this modification led to a one-year delay).
8. Procurement. Although no major procurement problems surfaced, therewas some delay in the various stages, such as with the preparation of bid documents,evaluation, and delivery of equipment. TPA and GOC took more time than expected toevaluate bids at the beginning of the project since they were not familiar with the Bank'sprocurement guidelines (Table 5C). While performance in this area improved gradually,the evaluation period generally required more than six months (180 days) which was muchlonger than the bid validity period (90-120 days) recommended by the Bank. This was dueto the GOC's multiple authorization procedures.
9. Additional container handling equipment (two quay-side container cranes andthree rubber-tired gantry cranes) were procured through cost savings. The additionalcranes were needed to meet the increase in containerized cargo. For the same reason, onetimber berth was converted to a container terminal. This was anticipated in the SAR andall 11 berths were designed for such conversions. Delivery of the two quay-side craneswas delayed until March 1995 due to constraints in the subcontracted shipyard. However,this delay did not affect the loan closing. The loan proceeds were fully used and theremaining contractual payments were met by local funds.
10. TA components. Implementation of training and studies, including thedevelopment of Management Information System (MIS), was satisfactory. TPA providedoverseas and domestic training in various aspects such as management, long-term planningand cargo handling. TPA's training for the east-pier operation was trimmed because thetype of cargo to be handled was changed from general cargo, which would have requireda large pool of stevedores, to container and dry bulk cargo. The MIS was satisfactorilyestablished and covered a wide area of TPA's activities such as planning, berth operations,financial payroll, personnel management, equipment management, fixed asset evaluations,documentation, and engineering matters. The siltation study was completed as planned.
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The size of the training center was reduced, since it was reconceived as a regional institutethat would be expanded in the future, instead of national center, as originally planned(following the Bank's recommendation).
11. During implementation, TPA prepared and submitted annual financial five-year rolling plans successfully; these plans indicated that TPA's financial condition wouldbe healthy.
12. The project's final cost was $321.72 million against $281.96 millionestimated at the time of appraisal. The increased costs were mainly due to price hikes inlocal costs, which were compounded by a delay in implementation (from $139.2 millionto $188.1 million). For example, steel was Y 1,000/ton at appraisal, but Y 3,300-3,500/ton in 1994.
13. No environmental or resettlement problems arose during implementation.
14. Throughout implementation, the primary objective to increase port efficiencywas achieved: the average cargo-handling period per vessel for general cargo was reducedfrom 2.1 days in 1985 to 1.8 days in 1993 (a 14 percent reduction). Further, when theincrease in vessel size is included in the calculation, vessel productivity increases morethan 50 percent, from 777 tons/day in 1985 to 1,175 tons/day in 1993 (see Table 6).Moreover, the institutional goal to establish a financially autonomous entity was achieved,except that tariffs are still under Government control. Because tariffs do not fully reflectprice increases, the Government must provide TPA with favorable tax arrangements, suchas exemptions. Under these arrangements, the TPA has an incentive to become moreefficient, because it will be able to retain more of its savings.
15. In the long term, ports should encourage competition among companies thatoperate the terminals to increase efficiency. In this regard, a new container handlingcompany (the Oriental Company) was created and is competing with the exiting containerterminal operated by Tianjin Container Company. The Bank highly recommends thisapproach be adopted at other ports, where appropriate. Also, an independent firm, XingTang Labor Company (XTLC) was established to provide personnel for the East Companyand No. 6 Company, which operate at the east pier (their construction was financed by theBank).
16. Decentralization. From June 1984, some of the management and financialfunctions of the port were decentralized from the central Government (MOC) to themunicipality. While the latter assumes most of the responsibility through the portauthority, which handles daily management, operations, construction and development,major projects and plans that affect the port's long-term development still need to beapproved by MOC. In order to avoid placing a financial burden on the municipality, portfinances were restructured in mid-1984; all its tax obligations were eliminated, whichimproved its financial position. To date, this arrangement has not been altered.
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17. The decentralization has significantly affected the port's financial andmanagement structure. The following table summarizes the key financial terms of therestructuring.
Date of Size of Project Needing MajorDecentralization State Approval Effects
June 1984 Rehabilitation projects Port is exempt from allover Y 30 million taxes, funds and
depreciation paymentsAll medium and until the end of 1995large-scale new projects
18. Financial performance. The port's financial performance from 1985-93 hasbeen satisfactory. A comparison of performance with that projected at appraisal indicatesthat the actual average annual growth rate of before-tax income was 8.4 percent during1985-92 compared with the 3.9 percent forecast in the SAR. However, the average annualincrease in operating revenue of 14.5 percent (7.7 percent forecast in the SAR) was offsetby the rise of operating costs of 21.6 percent (7.4 percent forecast). Before-tax incomein 1992 was Y 274.1 million, compared with the SAR's Y 129.7 million, and the figureincreased by 13.8 percent to Y 311.9 million in 1993. The total volume of traffic handledby the port in 1993 was not very different from the level forecast (33.9 million tons in theSAR vs. 34.6 million tons).
19. The SAR's financial forecasts were developed when the country controlledprices for almost every major commodity at the national level; as a result, cost increasesand inflation were rare. In addition, the Government allocated major resources during theprevious three decades and only charged users the "planned" prices. At appraisal, therewas no indication that either the cost of resources or the rate of inflation would change.Therefore, the financial forecasts assumed that: (a) real port charges would remainvirtually constant; and (b) the rate of inflation would be minor (from 6 percent-7 percentduring 1985-92). These assumptions, although reasonable at the time, now appear veryconservative due to the much higher than expected inflation.
20. During 1985-93, although the Government tightly controlled the port'stariffs, unit tariffs increased by an average of 20.9 percent a year. However, this increasestill did not match average unit price increases in operating costs of 31.7 percent (the resultof sharply rising fuel, materials and wage costs, and depreciation (most of which have tobe paid on the basis of market prices, which were much steeper than the rise in regulatedgovernment tariffs). Highlights of the port's income statements for selected years,compared with the SAR forecast, are summarized below with details shown in Table 1.1,Annex 1.
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1985 1990 1992 1993Actual SAR Actual SAR Actual SAR Actual----------------------------(Y million)------------------------------
Return on average netFixed assets (%) /a 24 16 12 it 15 9 15
Operating ratio /b 37 43 55 41 56 42 73
/a Return on average net fixed assets = operating revenue/average net fixed assets.fi Operating ratio = total operating costs/net revenue.
21. TPA's financial performance in 1993 was better than expected at appraisaldue to the preferential financial arrangements stemming from decentralization. Operatingratios, however, continued to deteriorate and were higher than the appraisal targets becausecosts rose rapidly, while tariffs remained lower. Thus, if the current tariff system is notchanged, TPA's operating costs are expected to exceed its operating revenue in 1997(based on the annual growth rates of costs and revenues between 1984-93).
22. The rate of return on average net fixed assets (RRFA), although still quitesatisfactory, also declined from 24 percent in 1985 to 15.4 percent in 1992. The decreasewas largely due to the rise in operating costs. TPA's fixed assets (RFA) were revaluedin March 1993 and it was expected that after this, the RRFA would decline even furtherin 1993. However, it dropped only slightly (to 15.0 percent). This was because: (a) theRFA was too conservative (carried out for the first time in more than 40 years it increasedfixed assets only by an average of about 30 percent in book value and 15.3 percent in netvalue); (b) the impact of the RFA was further diluted when the value of new fixed assetswas averaged with the low-valued fixed assets from the previous year; and (c) the 8.6percent increase in operating revenues in 1993 absorbed some of the negative impact fromthe RFA. Thus, it is very important for TPA to apply the proper market value on its fixedassets so it can adequately depreciate its aging facilities and then replace them withoutjeopardizing the port's future financial capacity.
23. Beginning in July 1993, TPA adopted new financial reporting procedures inorder to align Chinese accounting procedures more closely to the Western accountingsystem. Based on the new procedures, some accounts were abolished and replaced byothers. The purpose of the new system is to accelerate the commercialization andprivatization of the port by providing westernized accounting instruments.
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24. Present performance. At the end of 1993, despite the rapid rise inoperating costs, the port's financial position was still sound. The actual current ratio in1992 was 5.7, which was lower than the SAR's original forecast of 19.2 but stillacceptable. Also, debt service coverage during 1985-92 was much better than the SARforecast, and current assets exceeded liabilities. The percentage of net current assets inthe form of cash, however, declined from 80 percent in 1985 to 75 percent in 1992 andto 55 percent in 1993. For the same years, the share of accounts receivable increased from6 percent to 14 percent and then to 39 percent. Accounts receivables rose due to: (a) themerger of special funds with other accounts, and (b) the merger of accounts with the twoother TPA-owned firms (the Foreign Ship Agent Company and Fuel Supply Company)which had higher accounts receivables.
25. The most noteworthy points of the balance sheet during these years can befound in Table 1.2, Annex 1, and are summarized as follows:
Total 802.6 1.006.0 1,761.1 2.234.1 2,454.9 2.333.1
Debt/equity ratio -- -- 3/97 49/51 10/90 46/54
26. Future performance. Under present financial arrangements, despite therecent high increase in operating costs, the port still enjoys healthy liquidity, leverage andprofitability ratios because it is exempt from all taxes, funds and depreciation payments (tothe Government). These conditions have not been altered over the last 10 years. Theport's new responsibility for financing all its capital investment programs has not yetimpacted on its cash flow (Table 1.3, Annex 1), but is expected to weigh more heavily inthe near future. In addition, its current preferential tax terms, which will expire in 1995,could change at any time in the coming year.
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27. Considering the higher growth rate of operating costs and TPA's futurefinancial obligations, the port's financial personnel should test many scenarios prior tonegotiations with government officials. The critical issues are:
(a) Tariffs. To offset the rapid increase in operating costs, tariffs should beadjusted every year in line with the general price index;
(b) Revaluation of fixed assets (RFA). To improve the port's financialcapacity to replace its aging equipment, RFA should be carried outperiodically;
(c) Investments. To enhance the port's cash flow, some non-cash generatedinfrastructure investments (such as for dredging and construction channelsand breakwaters) should be financed by the State;
(d) Foreign exchange risks. Due to fluctuations in foreign exchange rates, itis expected that TPA will have to pay an additional Y 61.0 million annuallyfor its foreign loans.
Econoniic Re-evaluation
28. The economic analysis presented in this report is based on actual data ontraffic, operational performance, economic costs and the benefits of project components.The methodology used in the revaluation was similar to that in the SAR and is brieflysummarized as follows:
(a) Capital investment and maintenance costs were revised to reflect 1994 pricesand included in the cost stream;
(b) The benefit stream, also reflected in 1994 prices, was also included, andconsists of savings in port handling, ship port time (berth and waiting), andcargo port time (berth and waiting);
(c) A project life of 20 years was assumed and the capital investment period forall berths was from 1985-95;
(d) Benefits started to accrue both for the construction-material berth and thecontainer berths in 1990. For general cargo berths, benefits started in 1993.
29. During project implementation, the use of the berths changed due to changesin the composition of the traffic. In particular, the growth of timber traffic was muchslower than the SAR estimate. Thus, TPA decided to use the existing general cargo berthsto handle the shrinking timber traffic and convert the four timber berths into threecontainer berths. This conversion was taken into account during the planning stage, in thedesign of the timber berths. It was also considered in the economic analysis for this ICR.
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30. Some expenditures (about 1 percent of total project costs) were allocated tothe newly established Port Training Center to improve the operational and managerialefficiency of port staff. The results of these 'improvements are not quantifiable in monetaryterms and, consequently, a conventional cost-benefit analysis of the investment cannot bemade in the usual manner. However, the payoff is expected to be large.
31. When reviewing the three project components together, it appears that twomajor factors had a positive impact on improving the revalued economic internal rate ofreturn (REIRR): (a) the lower average daily ship cost in the port; and (b) better thanexpected traffic performance for the cargoes. Conversely, these factors will be offset by:(a) the higher cargo handling costs; (b) the higher economic capital cost; and (c) the delayin project completion.
32. After the data was revised, the REIRR for the project was 15.7 percent,which is slightly lower than the SAR estimate of 19.2 percent, but still acceptable. Adetailed analysis is presented in Annex 2.
33. The REIRR and SAR estimates of the project in terms of economic rates ofreturn and net present value (NPV) are given below.
SAR ICR
Best estimate of rate of return (%) 19.2 15.7NPV (12%, million Yuan) 310.1 /1 487.2
/1 January 1986 prices.
C. MAJOR FACTORs AFFECTING THE PROJECT
34. Major factors affecting the project are summarized as follows:
Positive factors:
(a) The developing economy of the area and the country which increased porttraffic;
(b) The Borrower's expanded capacity to implement projects;
(c) Simplicity of project design; and
(d) Use of an advanced construction method to improve the soft soil (MDM),which saved costs.
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Negative factors:
(a) Underestimation of the limit of decentralization in the port's financialadministration;
(b) Price hikes during implementation, that increased both project and portoperation costs; and
(c) Underestimation of the difficulty in organizing a training center fornationwide use.
D. PROJECT SUSTAINABILITY
35. The project can be considered sustainable. It expanded port facilities andraised productivity, and port traffic will grow in conjunction with the economicdevelopment of the Tianjin area, as well as the Tianjin-Beijing corridor and the country.Further, TPA is a stable entity with enough financial resources to maintain and operate theport efficiently. Moreover, with the modem equipment and extensive training providedunder the project, TPA has the potential to increase the port's productivity even further andprovide services at competitive costs.
E. BANK PERFORMANCE
36. The Bank's performance in identifying issues and preparing the project wasthorough and timely: The project was identified in June 1984 and appraised in June 1985.Bank staff resources were used efficiently (130.4 staffweeks), both until appraisal andduring supervision with an annual average input of 9.1 staffweeks, including all specialtiesthroughout the duration (see Table 12, Bank Resources). Also, it gave adequateconsideration to the design of the wharves (all 11 berths were designed in a way that theycould be converted to handle containers).
37. However, its performance could have been better if it had more carefullyassessed the training needs during appraisal: while the SAR provided for a comprehensivePort Training Center for the entire country, the plan has not fully materialized.
38. Regarding procurement, the Bank took a consistent position and providedappropriate instructions and guidance, when necessary.
F. BORROWER PERFORMANCE
39. In general, the Borrower's performance was good and preparation andimplementation were adequate. Pilot reforms decentralized the administration of Tianjinport, provided it with financial autonomy and separated the major construction works fromdaily port administrative functions by the establishment of an independent entity (THCDC).Both TPA and THCDC succeeded in implementing the reforms. As shown in Table 10,
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Part II, covenants were mostly met. The Borrower's performance, therefore, wassatisfactory.
40. Although operations are satisfactory, the Borrower will need to closelymonitor the activities of the new east pier, with its advanced systems of managinginformation and equipment, to determine the level of increased efficiency.
G. ASSESSMENT OF OUTCOME
41. This project is assessed as satisfactory since it achieved all the majorobjectives without any shortcomings.
42. The net present value is positive, Y 487.2 million against Y 310.1 in theSAR (see para. 33), when flows are discounted at 12 percent for the major portion of theinvestment.
H. FuTURE OPERATIONS
43. The project has provided the port with the capacity to handle traffic up toaround the year 2000. It is important for authorities to prepare the next phase of thedevelopment since planning and construction will take several years; any delay that willlead to congestion will be a great loss to the national economy.
44. The efficiency of the port as well as its financial performance will need tobe monitored in the future; several indicators of port productivity, such as ship waitingtime, cargo handling volume per day per vessel (as indicated in para. 13), and moves(load/unload) of container boxes per hour per crane, can be used. These will be availablefrom the statistics provided by TPA.
45. TMG as well as TPA have asked the Bank to assist in financing a follow-upproject for port expansion. The Bank has proposed that it include various modes oftransportation that interface at the port so that maritime traffic will be considered alongwith road and railway linkages. Discussions between GOC and the Bank are underway.
I. KEY LESSONS LEARNED
46. The key lessons from the implementation are:
(a) Decentralization of control over China's port system can be carried outsatisfactorily. An autonomous corporation for port construction (THCDC)proved viable when staffed by competent professionals. TPA and THCDCperformances were quite satisfactory.
(b) Port decentralization now needs to include tariff setting; tariffs are stillunder Government control, and operating costs cannot be fully reflected.Also, TPA needs to pay more attention to improving productivity byintroducing more competition among corporations that operate at terminal;
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(c) Flexibility in the project design, such as that of the wharf, which allowedit to be converted to a container terminal, proved well-advised; and
(d) Procurement of goods took longer than expected (more than six months) dueto the country's dual-evaluation process; in the future it could be shortenedif evaluation procedures were simplified or the meetings were bettercoordinated. Government effort is under way.
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PART II: STATISTICAL ANNEXES
Table 1: SUMMARY OF AssESsMENTs
A. Achievement of objectives Substantial Partial Negligible Not applicableMacro policies xSector policies xFinancial objectives xInstitutional development xPhysical objectives xPoverty reduction xGender issues xOther social objectives xEnvironmental objectives xPublic sector management xPrivate sector development xOther (specify) x
B. Project sustainability Likely Unlikely Uncertainx
HighlyC. Bank performance satisfactory Satisfactory Deficient
Identification xPreparation assistance xAppraisal xSupervision x
D. Borrower performancePreparation xImplementation xCovenant compliance xOperation (if applicable) x
E. Assessment of outcome x
- 14 -
Table 2: RELATED BANK LoANs/CREDrIS
Loan/credit title Purpose Year of approval Status
Preceding operation1. Three Ports Project expansion 1982 completed on 6/30/88
Following operations1. Huangpu Port Project expansion 1987 completed on 12/31/942. Dalian Port Project expansion 1988 completed on 12/31/933. Ningbo and Shanghai
Ports Project expansion 1988 to be completed on 12/31/954. Xiamen Port Project expansion 1988 completed on 3/31/95
(a) Purpose as defined at appraisal. Analyzing the source of sedimentation,evaluating sedimentation problems at the project area and providingmitigation measures. Determine if dredged material dumped at the site wouldreturn to the dredged channel and basin in the future.
(b) Status. Satisfactorily completed in December 1989.
(c) Impact of study. The proposed dumping area was evaluated appropriately.Dumped dredged material would not return to the basin and channel. Thiswas confirmed by periodic field observations during implementation.
2. Development of Operations Control and a Management Information System
(a) Purpose as defined at appraisal. Developing a computer managementsystem covering a wide area of TPA activities: planning, berth operations,cargo transportation, financial, payroll, personnel management, equipmentmanagement, fixed asset evaluations, documentation, and engineering.
(b) Status. Satisfactorily completed in August 1992.
(c) Impact of study. The system was established satisfactorily and is nowoperational (it can also link with the Dongfang container company's system).
- 20 -
Table 8a: PROJECT COSTS
Planned Planned Actual ActualLocal Foreign Total Local Foreign Total Local Foreign Total Local Foreign Total------ (Y'000) -($'000) -(Y'000) ---------- ------ ($ 000) --------
Domestic financing (TPA and Government) 152,000 191,721
Total 282.000 321.721
Table 8c: ALLOCATION OF LOAN PROCEEDS
Category Original Final Actualallocation allocation disbursements
Ln. Ln. Ln.($'000) ($'000) ($'000)
1. Civil Works 50,000 46,0002. Goods 51,000 81,6003. Consultants service
& training 3,500 2,4004. Unallocated 25,500 0
Special Account
Cancellation - -
Total 130. 130.000
- 22 -
Table 9: ECONOMIC COSTS, BENEFIT AND MAJOR FINANCIAL INDICATORS
SAR ICR
Total Traffic (1993): 33.9 34.6Of which: General Cargo (min. ton) /a 9.9 11.6
Construction Materials (mln. ton) 1.5 1.2Container ('000 teu) 465 482
Financial (1992, in %):Return on average net fixed assets 8.8 15.4Operating ratio 42.4 5.6Debt service coverage 1.8 4.7Debt/equity ratio 46/54 10/90Current ratio 19.2 5.7
Economic (1994 prices):Total cost (million Y) 1,002.55 1,904.38NPV (million Y) 639.43 487.20Economic rate of return (in %) 19.20 15.70
/a Including timber traffic.
- 23 -
Table 10: STATUS OF LEGAL COVENANTS
Agree- Section Status Original Revised Description of Covenant Comnmentsment Date Date
Loan 2.02(b) ok 10/16/86 Borrowers to openspecial account.
Project 4.01(a) ok 10/16/86 TPA shall maintainproper records andaccount.
4.01(b) ok TFA shall have accounts Audited financialaudited and furnished to reports have beenthe Bank not later than received on timesix months after end of and reviewed by thefiscal year. Bank.
Bank 4.03(a) ok By December 31 of each TFA has submittedyear, prepare and furnish the Five-Yearto the Bank a financial Rolling Financialplan for each of the next Plan to the Bankfive years. before December 31
Supervision IV 12/90 2 5 EGR,FA 2 3 M (con-struction
delay)
Supervision V 02/92 1 5 EGR 2 2 -
Supervision VI 09/92 2 5 EGR,EC 2 2
Supervision VII 03/93 2 1 EGR,OP 2 2
Supervision VIII 09/93 1 1 EGR 2 2
Supervision IX 11/93 2 4 EGR,EC 2 2
a I = problem free or minor problems; 2 = moderate problems; 3 = major problems./b 1 = improving; 2 = stationary; 3 = deteriorating./c M = Management; P = Procurement.
-25 - ANNEX 1
ANNEX 1: FINANCIAL ANALYSIS
Table 1.1: TIANJI PORT AuTHoRiTY: LNCOME STATEMENT(December 31, Y'OOO)
Debt service coverage 33.2 32.1 40.3 26.5 6.0 4.7 5.1
Source: Tianjin Port Authority and Bank staff.
Dec-94
- 28 - ANNEX 2
ANNEX 2: ECONOMIC ANALYSIS
A. TRAFFIC
1. As shown in Table 2.1, the overall traffic of the port is increasing steadily.The actual total traffic in 1993 was almost the same as the SAR forecast. However,general cargo and container traffic were higher than the estimates and are summarized asfollows.
(1) General cargo traffic (including timber traffic).(2) Container traffic ('000 teu); 1 teu = 10 ton.(3) Construction materials.
2. Despite the severe economic recession in 1990 and 1991, the average annualtraffic growth of the port during 1985-1993 still shows an increase of 8.4 percent per year,compared to the estimated 9.0 percent in the SAR. The actual traffic in 1985, the firstforecast year, was 6.5 percent higher than the SAR estimate. The latest figure (1993) was2.1 percent higher growth than forecast. Based on the economic activities of the area (anewly developed special economic zone (SEZ) is located adjacent to the project site), theincrease in port traffic for the next decade (1995-2005) is estimated to be approximately5.6 percent per year which is slightly higher than the SAR estimate of 4.7 percent.
3. General cargo traffic. Traffic in 1993 was higher than the SAR estimateby 17.2 percent. For the last four years (1990-1993), the traffic growth rate was 19.5percent per year which was much higher than the SAR estimate of 1.7 percent. Thus, the
- 29 - ANNEX 2
port needs the additional general cargo berths to meet demand. TPA has proposed theconstruction of two of additional general cargo berths plus three multipurpose berths(which may be converted to container berths in the future) for Bank financing. The Bankis reviewing this proposal.
4. Construction material traffic. Most of the construction material (sand,stone, brick and tile) is shipped from domestic sources to meet local demand, particularlyfor the development of the port and SEZ. In 1993 traffic was lower than the SARprojection by 20 percent; based on the current development plan, it is estimated that trafficmay continue to be lower than the SAR estimate.
5. Container traffic. The container traffic in 1993 was 16.4 percent higherthan the SAR estimate. It appeared that container traffic in 1994 increased by about 26percent over 1993. The growth of the container penetration ratio, however, isconcentrated on foreign trade, particularly foreign incoming traffic, which increased from24 percent in 1985 to 71 percent in 1993. For domestic cargo, the containerization ratioalso increased from 0 percent in 1985 to 13 percent in 1993. Both foreign-bound anddomestic-bound container traffic increased substantially. The share of the latter, however,was still negligible (3 percent) in 1993. The container penetration ratio of the port can besummarized as follows:
Container Penetration Ratio in Tianjin Port(Percent)
6. The rapid growth of foreign incoming containerized cargo represents thecurrent cargo handling trend for international sea transport. Today, many internationalports only accept containerized cargo, and this requirement will force the port to expeditethe containerization of its foreign outgoing traffic. The development of domestic containertransport has fallen behind due to the lack of adequate investment in transport facilities forthe domestic users. Since improving domestic container handling will involve very largesums of capital, including the participation of many entities (port, road, highway, urban
-30 - ANNEX 2
construction, bridge, electric power, trucking, services, etc.), it is estimated that progressin this area will be rather slow in the foreseeable future.
B. SHIP TImE ANALYSIS
7. General Cargo Carriers. When comparing 1985 to 1993, general cargocarriers spent an average of 7.9 days and 5.4 days, respectively, in the port, of which shipwaiting time (nonproductive time plus weather stoppage) accounted for 5.8 days and 3.6days, respectively. During the same period, the average working time per ship (productivetime at berth) decreased from 2.1 days to 1.8 days due to improve handling. Despite thehigher traffic demand, the decrease in ship waiting time, from 4.6 days to only 0.5 days,reflected that if the project had not materialized-adding critical capacity-ship waitingtime would have been much larger (Table 2.2).
8. Construction Material Carriers. Between 1985 and 1993, the average portdays per ship decreased from 2.0 days to 1.5 days. Despite the fact that average shipmentsize increased from 3,700 tons to 5,800 tons, the average (productive) time needed tounload a ship did not change (0.7 days per ship). Installation of the new equipmentimproved not only the efficiency of the work but also maximized the availability of theequipment. The nonproductive time, for example, decreased from 1.2 days in 1985 to 0.8day in 1993 (Table 2.2).
9. Container Ships. Although the number of container ships visiting the portincreased more than three and a half times from 1985-1993, the average port days per shipdropped sharply from 4.7 in 1985 to 1.5 in 1993. With the project, nonproductive time(due to the port) also dropped sharply from 3.5 days to 0.8 days (Table 2.2).
C. BERTH OPERATIONS
10. The operating data for general cargo and container berths also differ fromthe SAR estimates. Detailed operating data used for the economic re-evaluation of eachproject berth are shown in Table 2.3, and highlighted as follows:
11. All costs related to the completion of the facilities planned under the projectwere included in the project economic re-evaluation. All inputs and outputs were evaluated inconstant 1994 economic costs (Table 2.4). Financial costs were converted to economic costs byshadow pricing each berth's input categories. Conversion factors for each input category arebased on estimates determined in completed Bank studies.
12. The overall conversion factor is 0.94, of which the construction materials' berthis 0.92, container berths are 0.95 and general cargo berths are 0.94. The factors derived for thevarious cost items were applied to annual project expenditures to obtain the stream of projecteconomic costs (Table 2.5).
13. In the SAR, the overall effect of shadow pricing project costs was thateconomic costs were 18.3 percent higher than the financial costs, and total economic costs were90 percent higher than the SAR estimate (at constant 1994 prices).
ICR: Financial - current 1,069.44Economic - 1994 constant 1,094.38
ICR/SAR (Economic, 1994 constant) 1.09
Economic Benefits
14. The economic analysis primarily focused on the benefits derived from relievingcongestion in the port. Details of the traffic forecast are shown in Table 2.1. The project willyield quantifiable benefits in the form of savings in cargo handling coats, ship time (both waitingand operating time), and cargo time (Table 2.6).
15. Savings in Cargo Handling Cost. Savings from cargo handling were relativelysmall when compared to total savings. These were derived from the direct costs of cargohandling on the new facilities. Without the project, the only way traffic in excess of berthcapacity could have been handled would have been by offshore unloading (called lightening)-atmuch higher costs. It is estimated that these costs would be three to four times greater than
- 33 - ANNEX 2
normal handling costs (see Table 2.7 for detailed estimates of savings). This alternate methodof unloading was assumed for cargo tonnage in excess of berth capacity at 95 percent occupancy.Savings in handling costs have been converted to economic benefits by shadow pricing the maincost components of normal handling and offshore unloading. Conversion factors of 1.05 forberth handling and 1. 1 for offshore unloading were used; these factors were estimated in aprevious Bank study.
16. Savings in Ship Time. These include reductions in ship time waiting for berthsand working at berths due to improved cargo handling. Estimates of the savings in waiting timedue to the project are shown in Table 2.8. Ship costs used for the economic evaluation are atthe low end of the model developed by the Bank. The annualized ship resale value, plusoperating costs, was used to calculate project benefits. It is assumed to reflect the present stateof the shipping industry and gives a slightly lower return than the annualized replacement value.
17. Savings in Cargo Time. These also apply to the interest saved on the valueof the cargo. For domestic cargo, the marginal source of working capital would be loans fromthe People's Construction Bank of China at 10-12 percent interest. For foreign cargo, the higherforeign exchange working capital needed would require more foreign borrowing, and it isassumed that this would be at China's marginal cost of capital of approximately 12 percent.Roughly 22 percent of all cargo passing through Tianjin port involves domestic trade. Interestsavings have therefore been calculated assuming an average rate of interest of 12.0 percent peryear.
18. Total project benefits for the items discussed above are presented by year inTable 1.8. The major project benefit would be in ship time savings. These savings wouldaccrue first to ship owners and could be passed on to cargo owners. All the ships andconstruction materials are Chinese owned. As for general cargo and container traffic, the vastmajority of ships are either Chinese-owned (COSCO) or Chinese-operated; it is expected that 90percent of the project benefits for such traffic will accrue to China directly.
E. OVERALL ECONOMIC RE-EVALUATION AND SENSITIVITY ANALYSIS
19. Table 2.9 sets out the re-evaluated economic rate of return (REIRR), netpresent value (NPV) and sensitivity calculations for the entire project. The overall REIRR is15.7 percent. Compared with the SAR, the sensitivity of REIRR and NPV to variations incosts and benefits are summarized as follows:
-34 - ANNEX 2
SAR ICR
Best estimate of rate of return (%) 19.2 15.7NPV (12%, million Yuan) 310.1 /a 487.2
15% increase in costs and best estimateof benefits (%) 16.9 14.3NPV (12%, million Yuan) 234.2 /1 324.8
15% decrease in benefits and best estimateof costs (%) 16.6 14.0NPV (12%, million Yuan) 187.7 /L 251.7
15% increase in costs and 15% decrease inbenefits (%) 14.5 12.7NPV (12%, million Yuan) 111.7 /L 89.3
/l January 1986 prices.
ra3
Table 2.1 a: Port Traffic (1985-1993) and Forecast (to 2010)('000 tons)
Table 2.1 b: Port Trafric (1985-1993) and Forecast (to 2010)('000 tons)
-------- --------- … … … *9t2……-1-----… 191 … … … 2000 … … 2001--- .. 2010…----in O,.t Total On Cot Total I. ck. Total In Cot Total tn 0.t aotal 1n Out Totsl in out Total In OtL Total In Out Total
/1: There are two separated opersting districts in TPA; (a) river berths for the smaller vessels and(b) sea berths for the ocean going vessels (the project area).
Dec-94
- 38 - ANNEX 2
Table 2.2: Tianjin Port Authority: Ship Time Analysis(Actual ship days per ship)
General Cargo ConstructionShip Container Ship Material Ship Whole Port
Notes:(i) theoretical daily berth capacity = cranes per berth x average crane productivity per hour x average working hours per days.(li) theoretical annual berth capacity = theoretical daily berth capacity x berth operating days per year.(ill) maximun annual capacity per berth = theoretical annual berth capacity x maximun berth utilization.
/1. One TEU = 10.00/_2. Equivalent to 14,tons./_3. Equivalent to 10,000 dwt per ship/ 4. Figures in the table are the costs for normaL berth handling. If cargo traffic exceeds 95X berth occupancy rate, additional
cargo will be handled by lightering at roughly three times the costs for normal berth handling.for lightering operations, throughput capacity is taken as 50X of normal berth throughput capacity.
a. Actual ship berth day. 3,744 4.204 53355 4.987 4,426 4,210 5.522 6.137 6,3J4e. Ship vaiting days 0 0 214 50 0 0 221 1,166 2.653C. Ship lightering days 0 0 0 0 0 0 0 0 496
Total ship port days 3.746 4,204 3.569 5,037 4.626 4,210 5.743 7.305 9.533
Proposed Berths
17 erths (umber) 6 6 6 6 4 T2. Traffic ('000 tons) 2,204 2,045 1,540 2.440 2,712 2.9313. ; Al hbip berth days required 1,449 1,363 1.240 1.627 1.J0 1.9544. Ainai ship berth days available 1.980 1,950 1.980 1,950 1,990 1,980S. Borth occupancy rate (2) 74 69 63 *2 91 (95)4. Waiting tie queuing factors 0.01 0.00 0.00 0.04 0.19 0.407. Awual total ship port days.
a. Actual .hip berth days 1.469 1.363 1,240 1,627 1,80I 1,561b. Ship waiting day. 15 0 0 65 344 782C. Ship ligbtering days 0 0 0 0 0 144
Total Ship port days 1,484 1,363 1,240 1.692 2.152 2.809
notess Ci) *aal ship berth days required * trafficitheoretical daily capacity per berth.(ii) a*ual ship berth days available * umber of bertbh a berth operating days per year.(iii) berth occupancy rate - anusal ship berth days required / ar*usl *bip berth days available.(iv) waiting tim queuing factors are fra Port DOvelopmant. UNCTA0 1978. and berth throughput, UNSCTAD 1945.(v) *MuAal Ship vaiting days - anual Ship bertb days required a waiting time queueing factors.
/1- Traffic vwld *eaeed the practical capacity of these bertha. For the purpose of the econoic evaluation it hba beenassued that vwys will be found, e.g., through lightering. to mov* the traffic through the port vith waiting timesnot exceeding those corresponding to 932 berth occupancy rate.
Sources, TPA and Back staff.
Dec-94
- 43 - ANNEX 2
Table 2.6 b: Cargo Handling Without and With The Proposed Berths(Container Berths)
a. Actual sbip berth days 191 226 262 320 405 48S 659 90d 912b. Ship waiting dsys 0 00 5 33 193 990
b. Sip lightering days 0 0 0 0 0 0 0 0 '°
Total ship port days 191 226 262 320 405 493 *92 999 1,9U2
lNotes i) *aeual sbip bertb days required * traffic/theoretical daily capacity per berth.(ii) annual ship berth days available * number of berths x berth operating days per year.(iii) berth occupancy rat * anmual ship berth days required / annual ship berth daye available.Civ) waiting time queuing factors are from Port Dev:lopamnt. UNCTAD 1976 and ; Srth througbput. UNCTAD. 1965.lv) annal ship waiting days * annual ship bertb required waiting tiA qususg factors.
/ 1. Include foreign (in/out). loaded and septy containers.-2. Traffic would ezceed the practical capacity of these berths. For the purpose of the economic evaluation it has 'bee
aseum1'd that ways illr be found, e.g.. through ligbtering. to move the traffic through tbh port witb waiting timsnot sceeding ttoes corrsponding to 951 berth occupancy rate.
Sources. TPA and lank staff.
Drec94
- 44 - ANNEX 2
Table 2.6 c: Cargo Handling Without and With The Proposed Berth(Constmction Materials Berth)
I Sertbh (miner) I 1 I I I I I T T2. Traffic ('000 tones) 362 404 1.056 $43 606 300 1.100 1.710 2,0003. Annal shp brth days required 117 *1 210 170 122 60 222 341 *034* Al ship barth days availzble 320 320 320 320 320 320 320 320 3205. Berth occupancy rate (Z) 37 23 66 53 3d 19 69 (93) (91)6 Vditing t qu fctors 0.20 0.09 0.94 0.43 0.21 0.05 0.99 9.20 9.207. A total shit part daysg
a. Actual ship berth dsy 117 A1 219 170 122 s0 222 304 304b. Ship waiting days 23 7 206 77 26 3 220 3.174 3,70bc. Ship lightering day 0 0 0 0 0 0 0 52 19S
Total ship port days 140 *S 425 247 146 63 442 3.560 4,210
C. WIlS P10JET
rxistiW Bertha /_2
1. Serthb (tu ber)2. traffic ('000 tos)3. Amal ship bertb days required4. d1al ship berth days available5. berth occupancy rate (Z)6 Vaiting time queuing factors7. Anual total ship port days.
a. Actual bhip berth daysb. Sbip waiting days4. thip lightering days
Total skip port days
Preposed Bertha
Z. I I I I I I I T T2. Traffic ('000 tons) j82 404 1.0I6 $45 606 300 1.100 1,710 2.0002. AmaL ship bertk days required 110 76 205 159 114 56 207 322 3774. £aal ship berth days available 320 320 320 320 320 320 320 320 320S. Nerth occupancy rate (<) 34 24 64 50 36 1J 63 (95) (93)6. Waiting time queuing factors 0.16 0.05 0.77 0.39 0.16 0.03 0.50 9.20 9.207. na.al total ship port days
s. Actual ship berth days 110 76 205 159 114 56 207 304 304;. Ship watting days 1 6 156 62 21 3 166 2.962 3,466e. Ship lightering days 0 0 0 0 0 0 0 36 146
Total ship port days 125 *2 363 221 133 59 373 3,302 3.915
*test M a) a*nal ship bertb days required - traffic/thsoretIcal daily capacity per berth.(it) a*al sbip berth days avilable - umber of berths x berth operating days per year.(itt) berth occupancy rate - annual ship berth days required / annual ship berth days available.(iv) waiting tim queuing factors are from Port Development. VHCTAD 1975. and berth throughput. UNCTAD 1985.(v) a*al ship waiting days - anral ship berth days required a waiting tie queueing factors.
I t Traffic would exceed the practical capacity of tbese bertb. For the purpose of the econoic evalustion it has beenseawsed that vays wil be fourd. e.g., through ligtering. to move the traffic through the port With WaiLing tinesnot exceeding those corresponding to 951 berth occupancy rate.
/2. The existing berth ts return to general cargo handlzig in 1990.
Total 4.59 3.39 9.14 7.10 5.09 2.52 9.24 17.80 25.26
E. Nst loading/unloading savings (nil. TI 0.00 0.00 0.00 0.00 0.00 0.00 0.00 4.89 4.65
Notess 1. The convesrion factors for handling cost ars, (a) At berths 1.051 and (b) Lightering 1.10.2. Lighteriukg costs ars tksn to be three tiass handling costs at berth.
Ports: Loading/unloading savings 0.00 0.00 0.00 1.99 0.00 0.00 190.52 402.80 525.75Ships port days savings 7.82 13.76 23.87 117.68 68.91 91.84 505.56 564.50 437.21Cargo port days savings 0.02 0.03 0.10 32.06 13.68 10.50 115.17 128.44 99.63Less:Benefits accruing to foreigners (10X) 0.77 1.37 2.17 15.09 8.23 10.23 80.87 108.65 105.33
Total 7.07 12.42 21.80 136.64 74.36 92.11 730.38 987.09 957.26...... Su .= =n... . M a= US.. . ..... 5 * ....... massSS ....... 53 5 . .
Notes: 1. Opportunity cost of capital for cargo is assumed to be 12.00X.2. 50% In the first year, 75% the second year and 100% In the third year.
Sources: TPA and Bank staff.
Dec-94
T3
Table 2.9: Economic Rate of Return and Sensitivity Analysis(Y million, 1994 prices)
-a se Case ------------- ------- Case 1- ------- ------- Case 2- ------- --------Case 3-----------------costs------- Total Net Net Net NetCapital Paint- Bene- Cash Costs Benefits Cash Costs Benefits Cash Costs Benefits Cash
Year invest. enance Total fits Flow (*15%) Flow (-15X) Flow (+151) (-15X) Flow
ERR = 15.7 X 14.3 X 14.0 X 12.7 XNPV (12%) * 487.2 324.8 251.7 89.3
/1: Major maintenance.
Dec-94
- 48 - Appendix A
APPENDIX A: PREPARATION MISSION'S AIDE MEMOIRE
(November 6-17, 1994)
1. A World Bank mission comprising Messrs. T. Tsutsumi and H. K. Yenvisited Tianjin Port from November 6 to 17, 1994, to prepare the ImplementationCompletion Report (ICR). The mission wishes to thank the officials of the Governmentof China (GOC), Ministry of Communication (MOC), as well as the management and staffof Tianjin Port Authority (TPA) and Tianjin Harbor Construction and DevelopmentCompany (THCDC) for the courtesies and cooperation extended to it during this visit.
2. This Aide-Memoire summarizes the agreements reached with TPA/THCDCofficials on the preparation of the ICR. The agreements of the mission, as incorporatedin this Aide-Memoire, are subject to review and confirnation by Bank management.
The View of the Bank and TPA/THCDC
3. The Bank mission and TPA/THCDC have the same view on the projectimplementation as prepared below.
4. The project was satisfactorily completed on October 31, 1994, except forfinal delivery of two quay-side container cranes which is expected in March 1995.However, the Bank loan in the amount of US$130 million has been fully used up inNovember 1994. The contract price for two quay-side cranes was about US$4 millionhigher than TPA expected. About eighty percent of the contract works has beencompleted, thus all the loan amount (US$130 million) could be fully disbursed.
ICR Preparation
5. The Bank mission started preparation of the ICR from early September1994, with the request to TPA/THCDC to provide the necessary information and data.The mission received draft information and data and prepared an outline of the ICR beforedeparture from headquarters on November 1, 1994.
6. The mission visited the project site and discussed with TPA/THCDC thepreparation of the ICR. The mission has obtained necessary information and reachedagreements on the actions to be taken as follows:
(a) TPA/THCDC will view the draft ICR left by the Bank ICR mission;TPA/THCDC will send their comments, if any;
- 49 - Appendix A
(b) Bank management will review and comment on the agreement betweenTPA/THCDC and the Bank ICR mission. A revised draft ICR will be sentto the Borrower, MOC and TPA/THCDC (to be confirmed by MOC), byFebruary 10, 1995;
(c) TPA/THCDC's comments, as well as their own evaluation, will be sent tothe Bank by February 28, 1995; and
(d) the Bank will finalize the ICR and send to the Board by April 30, 1995.
1. The East Pier Project (First Phase) of Tianjin Port is a major project in theport and the first port project in China. World Bank Loans were used for large civilconstruction and procurement of equipment through ICB. It also introduced the projectsupervision system. The project officially commenced construction in May 1987. Thesouth side berth and its accessories were completed in November 1990; the north side berthstarted construction in May 1990 and was completed on 15 October 1993. It was reviewedand formally accepted by the State Acceptance Committee on 12 December 1993 to beginofficial operation.
2. The project design is reasonable in general layout and function. Thehandling equipment and structure are advanced and reliable. In general, project objectiveswere achieved on its completion and will greatly expand Tianjin Port's capacity in cargotraffic.
3. Construction on the silt beach area adopted large amounts of moderntechniques to achieve effectiveness. In store yard construction, new technology of vacuumpre-loading and plastic drain for consolidation were used. The geologic condition of theproject site was greatly improved by reinforcing the soil of a large area (800,000 m2 )-thefirst time such a technique was used in China. Construction of the south side wharvessuccessfully applied the method of deep mixing (MDM) (also for the first time) for thefoundation structure. In order to improve the wharves' structure, the advanced techniquesof MDM were also applied to the north wharves under the approval of the World Bank;thus, the original design of pile structure was modified to caisson gravity type whichresolved a long-standing problem in wharf construction in Tianjin Port and willsignificantly influence future port construction. Although the modification has resulted ina one-year delay, this should be considered worthwhile and successful because that difficulttechnical problem has been settled. Tianjin Port is grateful to the World Bank forextension of the closing date.
4. Construction of the following components such as 110 kilovolt substation,communication center (C Station), VTMS, sewerage treatment plant, computer managingsystem and training center under this project have greatly enhanced the comprehensivecapacity and function of Tianjin Port.
5. Procurement of over 100 units of handling' machines, port boats and othersystems were carried out strictly in accordance with the Guidelines set by the World Bank
- 51 - Appendix B
through ICB. It provides a solid foundation for the development and traffic increase ofTianjin Port so that it will enable the port to be an international modern one.
6. The method of sino-foreign cooperation and the Chinese supervisingconstruction was adopted. Project supervision for civil works on the south side wharvesand center of the East Pier was jointly managed by Tianjin Harbour Construction andDevelopment Company (THCDC), Overseas Coastal Area Development Institute (OCDI)from Japan and SPECS of Singapore; the north side wharves were managed by THCDCalone. Consultant service by foreign experts, construction supervision and local andoverseas training enabled technical and management staff to widen their view, learn andobtain some international practice, advanced technology and management experienceswhich have enhanced the staff's ability. Therefore, project quality was ensured.
7. Particular attention was given to environmental protection. In theconstruction period, environmental protection facilities such as the sewerage treatmentplant, smoke extinguisher, dust and firefighting system were designed and constructedwithin the structure of the whole project and with the approval of the Tianjin EnvironmentProtection Bureau. There was no significant negative impact to the local environment.
8. Equipment procurement under this project was executed by an experiencedautonomous department-Tianjin Port International Tendering Office which comprises veryhigh level experts. A project manager was responsible for implementing the project'sphysical aspects. The project manager chosen was the best senior engineer with richexperience, which ensured smooth project implementation and satisfactory results.
9. The project design was basically undertaken by the Chinese design institute(the First Design Institute of Navigation Engineering of MOC). In general, the design wasa success. The design institute made a great effort to ensure the satisfactory execution ofthe project.
10. Technical documents for equipment procurement were prepared by TianjinPort Authority, THCDC and the Design Institute with consultant service from SPECS ofSingapore, Kruger of Denmark and Compass from Germany. Some reliable and proventechniques were incorporated in the well-drafted technical specifications which fullycomplied with local conditions. The tendering work was successful.
11. In accordance with the port master plan and development needs in theproject period, two quayside container cranes and three rubber-tired gantry cranes wereprocured with funds saved from the Bank Loan (plus some amount from local sources).The new south side berth was used successfully to develop container transportation. Now,Tianjin Port has become the first seaport in China to accommodate fourth-generationcontainer ships.
12. The south side wharves were completed and accepted by the state inNovember 1993. Since December 1990, handling equipment has operated normally andprovided benefits. The north side wharves were completed in October 1993, and accepted
- 52 - Appendix B
in December 1993. The north side handled 10,330,000 tons in 1994 (since it beganoperating in January 1994). The smooth completion of the project fully showed that theproduction capacity of Tianjin Port has been strengthened. This is a successful project.
13. Generally, the project was implemented strictly following the SAR. Thewharves, storeyard, power supply, lighting system and handling machine were completedor delivered in the contracted period. Based on the four years' operation, the procurementof project facilities and machines is considered satisfactory. But the delivery of boats suchas oil boats, water boats and tug boats was delayed due to the availability of the shipyardspace; and procurement of two quay-side container cranes, with cost savings, was delayedin delivery due to the lack of shipyard space of the subcontractor (which was assigned forother large contracts).
14. Project objectives for TA and training were achieved with satisfactoryimplementation in training and study, and construction of a training center. Delays inconstruction and procurement in the training center occurred because TPA had difficultiesin finalizing the role of training centers.
15. Due to reasons beyond TPA's control, bid evaluations required a long period(average over six months) which prolonged the procurement.
Section B
16. The first part of the ICR drafted by the World Bank is comprehensive. Itdescribes completely all the major items of the project executed and the analysis providedis mainly correct and complies with the actual conditions.
17. With respect to the data of each item in the list of ICR, Part III, weacknowledge that they are correct and fully show the overall situation.
18. With regard to the delay in procurement, we agree, in principle, with thestatement by the World Bank; the reason for delay in the delivery of container cranes wasthat the subcontractor was assigned to other large contracts.
Section C
19. From project appraisal to reimbursement deadline, the World Bank was verypositive and effective. The Tianjin Port Authority and Tianjin Harbour Construction andDevelopment Company appreciates the efforts of all officials and experts from the WorldBank who participated in this project. We were deeply impressed by their strong sense ofresponsibility, scientific management and concern for the project.
20. During the whole implementation period, we have kept a close cooperationand mutual respect with the Technical Division, Communication Division, andDisbursement Division of the Bank. Especially with the guidance on all aspects grantedby the Bank's experts, TPA and THCDC overcame various difficulties in project executionand completed the project satisfactorily.
- 53 - Appendix B
21. Each site supervision mission from the World Bank had a significant impacton project execution. They inspected the site situation twice a year and collected first handinformation, resolved problems in the construction to accelerate the effort by strengtheninga mutual understanding and trust so that an easy understanding could be reached. TheBank mission gave us great support on using savings to procure container cranes, etc. andespecially on extending the closing date and reallocating the loan. The Bank staff'sinstruction, understanding and quick response to our request facilitated implementation.
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