RETURN TO RESTRICTED JEPORTS DESK Report No. PTR-48a WITHIN FLE COPY ONE WEEK This report was prepored for us within the Bonk and its offlliated organizations. They do hot occept responsibility for its accuracy or completeness. The report may not be published nor may it be quoted os representing their views. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT INTERNATIONAL DEVELOPMENT ASSOCIATION APPRAISAL OF THE PORT OF TAMATAVE PROJECT MALAGASY REPUBLIC May 25, 1970 Transportation Projecte Department Ourrency Equivalents US$1.0 a FHG 277 (Malagaay franc) FMG 1 a US$0.0036 Fiscal Year January 1 to December 31 Weights and Measuress Hetric 1 metric ton - 2,205 pounds (Ibo) 1 kilometer - 0.62 miles (mi) 1 meter - 3.28 feet (ft) i oubic meter - 1.31 cubie yards All depths of vater are in moters below low vater level Abbreviations BCEOM - Bureau Central d'Etudes Pour Les Equipements d'Outre Mer BECEKA - Compagnie du Chemin de Fer du Bas - Congo au Katanga NCHP - Compagnie Navale et Commerciale Havraise Peninaulairo SOREAH - Societe Grenobloise d'Etudes et d'Applications Hydrauliques SORCA - Societe de Recherche Operationnelle et d'Economie Appliquee TPA - Tamatave Port Authority MALAGASY REPUBLIC APPRAISAL OF THE PORT OF TAMATAVE PROJECT TABLE OF CONTENTS PaRze SUMMARY .......... .........* **................ ....... 1. INTRODUCTION ......................................... ...... ...... 1 2. BACKGROUND ........... 1 A. General .... ............................ .* .. .. . 1 B. Transport Sector .. ........ . . . . . . . . . . . . . . . .. . . . . . . 2 C. Transport Coordination ............................. 3 3. PORT OF TAMATAVE EXISTING ORGANIZATION, FACILITIES AND OPERATIONS ......... 4 A. Organization ........................................ 4 B. Facilities ......... e * * * * * * * ...... *.............. ............... 5 C. Operations .......................................... 6 4. PROPOSED TAMATAVE PORT AUTHORITY (TPA) ................... 8 . TH PRJECT .................. .... . 10 6. ECONOMIC EVALUATION ............ ........... .... 13 A. Traffic .................... * ... 13 B. Costs and Benefits .............. ..14 C. Conclusions ....15 7. FINANCES ..................o.... 15 A. Rates and Charges .. ...... ...... 15 B. Present Finances . ....o ...1........*..... .16 C. Future Finances ........ .O..*. .... et ........ ... 17 8. RECOMMENDATIONS ........ ............. 21 This report has been prepared by Messrs. Haker (Economist), Higginbottom (Engineer) and Jones (Financial Analyst), members of the appraisal mission which visited Malagasy în October 1969. -2- ANNEXES 1. Description of the Existing Port 2. Existing Mechanical Handling Equipment 3. Organization Chart - TPA 4. Details of the Proposed Project 5. Economic Evaluation TABLES 1. Distribution of Dry Cargo Traffic by Main Origin and Destination - 1967 2. Dry Cargo Traffic by Main Types (1967) 3. Cargo Movement 1952-1968 4. Traffic Forecast 1970-1979 5. Ship Waiting Time as a Function of Capacity Utilization and Number of Berths 6. Expected Development of Productivity 7. Economic Costs of Project Components 8. Cost-Benefit Calculations 9. Port Operations Section - Revenues and Expenditures 1964-1968, Estimates 1969 and 1970 10. Port Directorate - Revenues and Expenditures 1967 and 1968, Estimates 1969 and 1970 11. Forecast Revenues and Expenditures, 1971-1978 12. Estimate of Cash Flow 1971-1978 13. Pro Forma Balance Sheets 1971-1978 14. Pro Forma Statements of Earned Surplus 1971-1978 MAPS 1. The Malagasy Republic 2. Port of Tamatave and Approaches 3. Port of Tamatave Improvements MALAGASY REPUBLIC APPRAISAL OF THE PORT OF TAMATAVE PROJECT SUMMRY i. Tamatave is Malagasy's most important port. In 1968, 463,000 tons of general dry cargo were handled there, comprising roughly three- quarters of the island's importa and one-third of its exports of dry cargo. During the firat six months of 1969, traffic reached an annual rate of 530,000 tons of dry cargo and 640,000 tons of petroleum. Dry cargo traffic is forecast to reach 820,000 tons in 1974. This sharp increase results from the opening in 1969 of a chromite mine, being served through Tamatave, estimated to produce 160,000 tons of ore for export by 1974, and the development of Tamatave's hinterland, the most populous and economically productive area of the country. ii. Tamatave's physical facilities are deficient. Although a 450 meter breakwater protects the port, certain ocean conditions create sufficient disturbance within the harbor to affect ship mooring and cargo-handling operations. Quay aprons are narrow, transit sheds and warehouses are small, badly designed, poorly located and usually unsuitable for the use of modern cargo-handling equipment. The discharge and loading of petroleum products, effected in the main area of shipping movement, creates considerable hazards. iii. Port operations are inefficient. This is partly due to the deficiencies referred to above but also to the present system of port administration: the lack of a suitable policy-making body -- the divided responsibility for port management -- the uncoordinated maintenance and port planning arrangements - and the lack of financial autonomy are all unsatisfactory and need to be changed. iv. The project is designed to remedy the present physical deficien- cies of Tamatave and provide adequate facilities to handle traffic projected until about 1979. It also provides that the Government will establish a Tamatave Port Authority (TPA) by the end of March 1971, with adequate ad- ministrative and financial autonomy to direct facilities, staff and opera- tions of the port. The proposed Credit vould finance the provision of staff to occupy key positions in TPA for three years, and provide staff training; consultants' services would alseo be provided to revalue assets and review port tariffs. v. Under a Bank Technical Assistance grant made in May 1968, two French consulting firme (SOGREAH and BCEOM) carried out studies for the development of Tamatave port. The proposed project would implement phase one of their master plan. It comprises an extension of the existing break- water, construction of two new berths, provision of a new deepvater tanker mooring and mechanical equlpment, consultant's services for final engineer- ing design, supervision and the technical assistance referred to above. - il - The total estimated cost is FMG 4,460 million (US$16.1 million), exclud- ing local taxes on construction work. The Credit would be for FMG 2,650 million (US$9.6 million) and cover the estimated foreign exchange component (60%). Contracte would be awarded on the basis of international competitive bidding. vi. The evaluation of economic conte and benefits shows that the project in justified both in size and timing. It is expected to produce a first year economic return of 19%. vii. With reasonable increases in port charges, adoption of which is a condition of effectiveness of the proposed Credit, TPA will be financially viable and able to provide an estimated US$1.8 million equivalent for the project. The balance of US$5.4 million equivalent, which includes US$0.7 million for local taxes on construction work, vill be provided by the Gov- erument. viii. The project ls suitable for an IDA Credit of US$9.6 million equivalent to the Government of Malagasy on the usual terme. The proceeds vill be relent to the proposed TPA for a term of 24 years including a four- year grace period with interest at 3/4 of 1% per annum during the grace period and 7% per annum thereafter. MALAGASY REPUBLIC APPRAISAL OF THE PORT OF TAMATAVE PROJECT I. INTRODUCTION 1.01 In late 1966, a project identification mission visited Tamatave and recommended hydrological, economic and preliminary engineering studies and the preparation of a Master Plan for port development. In May 1968, a Bank Technical Assistance grant for US$196,800 vas made to the Government and subsequently a contract to carry out this work vas let jointly to BCEOM and SOGREAH, French consultants. They submitted a provisional report in March 1969 and a final report in November 1969. 1.02 The project now appraised covers the first development phase largely as proposed by the consultants, including extension of the break- vater, construction of a new berth and reconstruction of an existing berth, new transit sheds and warehouses, provision of mechanical equipment, a new deep-vater mooring for petroleum tankers and other minor improvements. Provision is made for consultants' services for final engineering and supervision, for assistance in revaluing port assets and carrying out tariff studies and technical assistance in forming a new Port Authority. The total cost of the project ïs estimated at US$16.1 million equivalent excluding local taxes on construction work; the proposed credit is for the foreign exchange component, US$9.6 million equivalent. 1.03 Previous lending to the Government of Malagasy for transportation has been an IDA Credit (90-MAG) effective October 1966 for US$10 million, and a joint IDA-BANK operation (134-MAG and 570-MAC) effective April 1969 for US$8 million (US$4.5 million IDA), both for highways. Although work financed under 90-MAG started slowly, it is now progessing satisfactorily. 1.04 This report is based on the BCEOM and SOGREAH report and the findinge of an appraisal mission to the Malagasy Republic in October 1969, composed of Messrs. F. Higginbottom (Port Engineer), E. Haker (Economilt), and H. Jones (Financial Analyst). 2. BACKGROUND A. General 2.01 The Malagasy Republic, the third largeat island in the world, lien in the Indian Ocean, 400 km off the southesat coant of Africa. With an area of 592,000 km2, it is as large as France and the Benelux countries combined. Population vas approximately 6.5 million in 1968 and is growing at about 2% per annum. The climate is mainly oemi-tropical with heavy rainfall and periodic cyclones. - 2 - 2.02 In 1966 GNP was US$620 million equivalent and has been increas- ing at 3% per annum; GNP per capita is about US$100. Agriculture accounts for 32% of GNP, industry 11%, transport 10%, the remainder consists of commerce, services and government administration. B. Transport Sector 2.03 Malagasy lacks an adequate inland transport system. The northern part of the western regions has no all-weather connections with the rest of the island; the links with the southern region are merely trails. This is due not only to the low population density and limited economic develop- ment of much of the island, but also to high construction costs caused by the rugged topography and the scarcity of suitable construction materials. 2.04 The main traffic flows are between Tamatave, the principal port, and Tananarive, the capital, situated on the central plateau; and between Tananarive and Fianarantsoa to the south. Highways 2.05 The road network totals about 30,500 km including about 8,500 km of primary roads of which only 3,000 km are paved. In 1966 there were some 45,000 vehicles in the country. Traffic on the primary road network has been growing at 6% per annum for the past five years. Railways 2.06 The Malagasy Republic has four railway lines, totaling 860 km. The railways carried about 2.2 million passengers and 570,000 tons of merchandise in 1967. Since 1960, passenger traffic has been growing at about 4% per annum and goods traffic by 5.5%. The traffic is unevenly distributed and only the 379 km Tamatave-Tananarive line carries any signi- ficant volume. The railways are government-owned and do not enjoy financial or administrative autonomy. They have recently been studied in detail under a UNDP grant by the Belgian Consultants SORCA and BECEKA. The study recommends sweeping organizational reforms, a basic overhaul of tariff policy, the closing of one of the four lines and the abandonment of passenger service on two others. These recommendations are being considered by the Government. Air Transport 2.07 The size of the country and the relative isolation of various regions makes passenger air transport important. In 1967 there were 45 airfields served regularly; all but 13 are rudimentary with unpaved runways which may be closed during bad weather. Tananarive and Majunga airports can accommodate long-distance jet aircraft. -3- Ports 2.08 Coastal shipping is important as the only means of transporting merchandise between many areas. Ports play an important role in the trans- port system, handling most of the foreign trade and linking the main regions by coastal shipping. The 4,000 km coastline has 23 ports. The four principal ports are: Diego Suarez in the north, Majunga in the west, Tulear in the south and Tamatave in the east; in 1968 they handled 85% of the island's international trade and 60% of its coastal traffic. The other 19 ports are merely open roadsteads where ocean-going ships may stop for some time, at considerable cost, to transfer cargo by lighter. 2.09 Tamatave, the most important port, handles about 75Z of the island's importe, 35% of exporte and 20% of coastal trafflc. In 1968 it handled 463,000 tons of general dry cargo and 674,000 tons of petroleum products. Tamatave's hinterland extends about 1,000 km along the eastern coast; Tananarive 300 km from the sea, i at the apex of this area which includes the provinces of Tananarive and Tamatave. These are the most populous and economically productive areas, vith one-fifth of the country's total land area and two-fifths of its population. Agriculture i well- developed in both provinces. They produce significant proportions of the country's rice, maize, coffee, cloves and bananas; i.e. all the important Malagasy crops with the exception of sugar cane, vanilla, and raffia. More than 50% of the country's industrial actlvity is concentrated there and the two principal minerals, graphite and chromite are mined. The hinterland consumes a major portion of the country's importe. C. Transport Coordination 2.10 Competition among transport modes is qulte limited. A projected circumferential littoral road now exists in only a few sections, so coastal shipping is complementary rather than competitive with inland transport, and is likely to remain so for many years. A similar complementary rela- tionship exista between land and air transport in most cases. Competition between road and rail is practically non-existent: the road between Tamatave and Tananarive has been neglected in order to protect the railway from road competition. Protecting the railway in this fashion eliminates the incentive to increase efficiency and its operating costs are very high. However, the Government's policy in this regard is changing. Savings from Credit 90-MAG are being used to finance feasibility studies of roads between Tamatave and Tananarive, Lake Alaotra and Fenerive and Tananarive and Fiana- rantsoa, all competitive with the railway (see IDA R69-76). 2.11 Investments in the transport sector during the proposed Second Five Year Plan 1970-1974 are expected to amount to about FMG 41.0 billion (US$150 million equivalent) of which 60% would be for roads. The realiza- tion of this forecast depende heavily on the availability of foreign assis- tance. - 4 - 2.12 The Government 18 avare that the present port system is inefficient and, during the 1970-1974 Plan, expects to make substantial progrees in concentrating international trade at the four main ports using coastal ship- ping from secondary and smaller ports. A second objective, to close some of the minor ports and consolidate coastal traffic, can be achieved only when roads are available to provide an alternative outlet. 3. PORT OF TAMATAVE EXISTING ORGANIZATION, FACILITIES AND OPERATIONS A. Organization 3.01 There is no satisfactory body responsible for developing port policy. An Admînistrative Council meets once a year for budget approval and also if required by special circumstances. The Council is compoBed of the Port Director, 12 representatives of Government agencies, four of port usera and two of the National Railway. The Council is too large and does not meet frequently enough to formulate policy or to give satisfactory policy direction to port management. 3.02 Management is in the hands of two independent agencies; the Port Directorate (Directorate) and the Port Operations Section of the National Railways (Operations Section). Both are responsible to the Ministry of Equipment and Communications (the Ministry), but through entirely separate channels: i) The Directorate la headed by the Port Director who reports directly to the Ministry. It has an administrative division, a harbor master's department controlling ship movement and pilotage, and a works division for maintenance and minor improvements. The Directorate has some 250 employees; and ii) The Operations Section's Director, who is independent of the Port Director, is responsible to the Ministry through the Director of the National Railway. This section undertakes all cargo-handling from ship's hold to sheds and warehouses, and delivery to rail wagon or consignee's vehicle. It owns and operates all mechanical cargo-handling equipment, quay cranes, lighters, and towing tugs, and an equipment mainte- nance and repair section. It has approximately 2,000 employees. 3.03 It will be seen that the main section of port management is in effect controlled by the National Railway and consequently is more oriented to rail than to port operations. There is a lack of competent direction of port operations, equipment and operating methods are inadequate, and labor productivity is low. -5- 3.04 Each agency has its own civil engineering maintenance department. Their work is uncoordinated and for this reason costly. Neither agency is equipped to carry out the planning or design of port extension. This work is undertaken in Tananarive by the Ministry. 3.05 Both sections of the port lack financial autonomy. The annual operating and capital budget of the Directorate is included with those of the other Malagasy ports as a separate annex (Port's Budget Annex) of the State Budget. Surpluses accrue to the Government; transfers between budget categories and supplementary appropriations require the approval of the Minister of Finance. This procedure is time consuming and prevents adequate flexibility to meet unforeoeen expenses. The budget of the Operations Section is part of the budget of the National Railway. It is a separate annex of the State Budget and the same procedures must be followed for supplementary appropriations and transfers as in the case of the Directorate. Surpluses are divided equally between the Port's Budget Annex and the National Railway (see also para. 7.01). Neither section can retain funds for development or to build up reserves for contingencies. As a result, capital expenditures tend to be related to the financial position at the moment rather than to the needs of the port. 3.06 The Directorate prepares no balance sheets and merely lista receipts and disbursements on a cash basis with a comparison against budget estimates. Thé accounts of the Operations Section are not prepared on a commercial basis: balance sheets are drawn up but no depreciation vas provided until 1968 and income accounts are kept on a cash basis. Ex- pensive computer equipment i rented to prepare payrolls, trial balances, apare parts inventories, traffic statistics summaries and costing. The computer unit works well under a Technical Assistance Officer; however, he follows the instructions of the Accountant, who lacks experience, 80 that output is of limited value (the coat analysis) or of poor quality (the traffic statistics). Thus, management decisions are liable to be based on poor or misleading information. 3.07 The lack of a suitable policy making body -- the divided respon- sibility for port administration -- the uncoordinated maintenance and port planning arrangements -- and the lack of financial autonomy are all unsa- tisfactory and need to be changed. This need will increase when the pro- ject works are completed and the responsibilities of all sections are correspondingly greater. Arrangements for the proper coordination and planning of port development, operations and finances are outlined in Chapter 4. B. Facilities (see bfap 3) 3.08 Details of port facilities are given in Annex 1. While the port i protected by a 450 m breakwater, under certain conditions ocean swell adversely affects the mooring and cargo operations of ships. Prin- cipal facilities comprise three deep-water and two coaster berths. Ex- cept on Pier C, quay aprons are narrow and the transit sheds are small, double storeyed buildings unsuitable for modern cargo-handling equipment. A new shed for transshipment traffic is being constructed behind Pier B. Some 300 m from the piers, there are 12 warehouses of which 11 are small and unsuitable for modern equipment as their floors are not level with the adjacent road. Stacking areae are adequate but, except for those on Pier C, are also some distance from the piers. One area has recently been converted to a container park and another is used for imported vehicles. 3.09 Petroleum products are diacharged and loaded through a tanker mooring off Pier B, connected by direct land-line to the refinery. Dis- charging operations create a considerable hazard as the mooring is in the main area of shipping movements. A new mooring away from the main port area, and a connecting land-lîne are included in the project. No ship- handling tugs are presently available, but one is being acquired. 3.10 Chromite ore is stockpiled in the port and loaded at Pier C by large buckets. A mechanical handling system and a ship-loader are being installed to replace the present temporary system. 3.11 Details of available cargo-handling equipment are given in Annex 2. There is an imbalance between available tractors in good condi- tion and trailers and a great shortage of cargo pallets; additional new equipment will be needed for the proposed new berths. 3.12 Road and rail access to the port is generally adequate. Exclud- ing coastal traffic, the railway moves about 80% of total traffic. Any change from the present rail-oriented movement of cargo would present no difficulty. 3.13 The port includes an area occupied largely by railway sidings, where trains from the port are marshalled, rails and other materials imported for the National Railway are stored, and additional small ware- houses leased to the Chamber of Commerce are located. This area is too far from the berthe to be of any value for normal port operations and is not required for future development (para. 4.05). C. Operations Labor 3.14 The Operations Section's employees include about 700 permanent and 650 temporary dockers. The permanent dockers include about 200 who are in effect semi-retired. - 7 - 3.15 Dockers are organized into gangs of 30 divided into three groupe, each with a foreman, for cargo-handling from ship to shore, from ship's side to shed and inside the shed. Theoretically, some 34 gangs are avail- able; 21 for the first shift and up to 13 for the second, the latter allo- cated on priority of ship's arrival. In fact, due to absenteeism and ill health, no more than 29 gangs have been available in recent yeare. The cost of gangs used on these two shifte le included in the cargo-handling rate; a third, overtime shift can be worked at the ship's expense. 3.16 The labor force ie inadequate to provide full service to the ships using the port and the tonnage handled daily suffers correspondingly; this position is further complicated by low output due to lack of experience, knowledge and drive in foremen and a general lack of training in modern cargo-handling techniques. Additionally, cargo tallying procedures are deficient which further slows handling. A comprehensive training program is necessary, particularly in view of the increased cargo to be handled in the future. Additional gangs vill be needed and adequate labor is reported to be available for training. 3.17 The Government has agreed that a training program embracing all phases of cargo-handling, including labor and supervision, will be submitted for the Association's approval by September 30, 1971 and started not later than April 1, 1972. Technical assistance for this training is included in the project. Cargo Movement 3.18 The normal flow of traffic through the port is presently inhibited by several factors. Except on Pier C, the transit sheds are unsuitable for receiving cargo direct from the ship se that much cargo is moved long distances to sheds. This also applies to transehipment cargo. Pallets cannot be used effectively because forklift trucks cannot be employed inside the sheds, thus all loading and unloading muet be done by hand, except on the open areas. As already mentioned, the aprons on Piers A and B are narrow, making movement of mechanical cargo-handling equipment diffi- cult and inefficient. Equipment operating methods are poor, and are poorly directed. 3.19 The proposed project will provide new transit sheds and a new transshipment warehouse and reduce unnecessary cargo movement. The shed now in the course of construction behind Pier B, intended for transshipment traffic will also improve the present situation. However, in the location in which it is being built, it will interfere vith traffic flow from the transit shed proposed for Pier B and will have to be moved when the trans- shipment warehouse included in the project ie available. The Government has agreed that the shed will be relocated. - 8 - 3.20 The transit shed on Pier C was provided by Compagnie Navale et Commerciale Havraise Peninsulaire (NCHP) and its nhips have priority at this pier. This occasions unnecessary ship movements and disrupts port operations. The Government has undertaken to arrange for the termination of the company's priority right at Pier C upon completion of the project. 3.21 Lighterage operations are usually limited to handling coastal traffic and are not a significant part of operations. Container traffic is presently limited ta small containers of about five tons capacity. It is not antlcipated that standard 20 ft containers will be used for Malagasy's foreign trade for a considerable time. 3.22 Cargo iL permitted a free storage period of Il days after dis- charge in the transit sheds and can be moved to warehouses only after a further four days. Agreement was reached that by the time the project is completed the free period will be reduced to five days and that transfer from transit sheds to warehouse can be tndertaken at the consignee's expense immediately thereafter. 3.23 An analysis over a period of six months in 1967 indicated that 33% of time spent by ships waiting alongside the berths, some 40 days, was spent waiting for export cargo. This should not normally occur, and is due either to an inability to locate cargo due for shipment in the various sheds, or to late delivery of the cargo to the port. Provision of an export cargo warehouse in the project will permit centralized storage of cargo forwarded in advance. Custome 3.24 Custome officials now work only from 0800 hours to 1200 hours and from 1400 hours to 1800 hours. The port's working hours are 0700 hours to 2100 hours. Deliveries are therefore not possible from certain sheds during six working hours and ships must pay overtime for maintaining essential sheds in operation. Assurances have been obtained from the Gov- ernmnent that Customs officers will work hours consistent with the port's operations, without additional charge to port users. 4. PROPOSED TAMATAVE PORT AUTHORITY (TPA) 4.01 The new facility will alleviate the physical problems of the port and the proposed training program will improve port operating methode. However, for the reasons outlined in paragraph 3.07 the full benefit of these improvements can only be obtained if port development, operations and finance are properly coordinated. The Association considers this can best be achieved by creating an autonomous port authority for Tamatave, and after experience has been gained, consideration should be given to forming a National Port Authority. 4.02 An outline of the agreed functions of TPA is given below. Details of its organizational structure are given in Annex 3. TPA will have: i) full responsibility for all functions necessary for efficient import and export of goode through the port, except Customs clearance; ii) adequate financial autonomy to enable it to generate funds required to meet all necessary operating expenses, cover debt service, and contribute to the financing of improve- ments; and iii) adequate administrative autonomy to formulate port policy in regard to employment, shipping movement, cargo receipt, dispatch, and storage; movement of all transport vehicles in the port area, and other necessary matters. 4.03 To achieve the above objectives, TPA vill have: a) a Board of Directors to formulate port policy comprising a Chairman and repreeentatives of the Government, the regions served by the port, shipowners, port users, merchants and labor, in reasonable proportion. Appointments vill be approved by the Minister; b) a Director General appointed by the Board and responsible for day-to-day management. He will be an ex-officio non-voting Board member; and c) a line management structure of specialist departmental heads each responsible to the Director General and appointed by the Board on his recommendations. 4.04 The Government has agreed that an autonomous Authority vill be set up responsible to the Minister of Equipment and Communications. The powers and organization of the Authority were discussed with representatives of the Ministry in October 1969 and the Association'8 views on the required legislation vere sent to the Government in December. A copy of draft legis- lation has been received which gives an appropriate degree of autonomy to the proposed TPA. It ie an agreed condition of effectiveness of the Credit that this legislation and regulations shall have been enacted. It was also agreed that TPA will be established in a form acceptable to the Association and the new Director General appointed (para. 4.06) by April 1, 1971, fail- ing which credit diabursements above US$400,000 would be suspended. - 10 - 4.05 A study will be needed to determine the replacement and depreciated value of the port's fixed assets in order to produce an opening balance sheet for TPA. Provision for financing such a study is included in the project. In this connection, the Government agreed that the present bound- aries of the port will be changed to reduce the area of land presently oc- cupied (Map 3 and para. 3.13). 4.06 The Government and the Association consider that the top manage- ment of the New Port Authority must have considerable experience in port administration, operation and finance. It has therefore been agreed that initially TPA's Director General and the new Chief Accountant and Chief Traffic Manager be technical assistance appointees with suitable local counterparts; provision for such technical assistance for each post for a three-year period has been included in the proposed project. Similar provi- sion has also been made for a Chief Training Officer and two assistants (para. 5.09). The Director General will be appointed and make recommenda- tions for the other appointments as soon as possible; they and the required counterpart staff will be acceptable to the Association and the Association will be consulted on their replacements in due course. 5. THE PROJECT 5.01 The project consists of the first phase of the Master Plan for the port of Tamatave, which was developed as a result of the hydrological, engineering and economic studies previously referred to (para 1.01). Its principal elements are extension of the breakwater and improvements and extensions to existing piers; a few minor amendments have been made such as the addition of two warehouses, variations in road and rail layout, and the surfacing of some stacking areas. The present acheme is expected to cover requirements until about 1979. Technical assistance in management and accounting is also included. The Master Plan provides for future extensions, the phasing of which will depend upon future traffic growth. 5.02 The project items and their estimated cost are indicated below and described in detail in Annex 4. - il - (FMG Millions) (US$ Millions) Fgn Local Foreign Total Local ForeiRn Total Exc. 1. Breakwater Ext. 900 600 1,500 3.25 2.17 5.42 40 2. Ext. to Pier C and improvements to Pier B 290 450 740 1.04 1.63 2.67 60 3. Transit Sheds and Warehouses 125 205 330 0.45 0.74 1.19 60 4. Cargo-handling Equipment incl. quay cranes 10 250 260 0.04 0.90 0.94 - 5. Deep-water Tanker Mooring, Sea-line, Fire-fighting equipment 30* 270* 300* 0.10* 0.98* 1.08* 90* 6. Improvements to stacking areas, roads and railway tracks 65 65 130 0.23 0.24 0.47 50 7. Consulting Services (a) Engineering 20 220 240 0.07 0.80 0.87 - (b) Technical Assistance, Asset and Tariff studies 40 140 180 0.15 0.50 0.65 - 8. Contingencies (a) Engineering 210 270 480 0.75 0.98 1.73 _ (b) Price Escala- tion 120 180 300 0.42 0.66 1.08 Subtotal 1,810 2,650 4,460 6.50 9.60 16.10 60 Land-line to be financed by petro- leum companies 95* 155* 250* 0.34 0.56* 0.90* Total Project Cost 1,905 2,805 4,710 6.84 10.16 17.00 *See paragraph 5.04 - 12 - Cost Estimates 5.03 The cost estimates are based on preliminary engineering designs and are realistic; those for the breakwater are based on previous contract prices and include an allowance for possible storm damage during construc- tion; those for the remaining construction items and for equipment and con- sulting services are in line with prices obtained recently for similar contracts. 5.04 The total cost of the deep-water tanker mooring, sea-line, land- line and fire-fighting equipment is FMG 550 million. The cost of the land-line (FMG 250 million) is to be provided by the companies owning the refinery. It has been agreed that construction of the tanker mooring will not commence until appropriate arrangements acceptable to the Association have been made for financing the land-line. 5.05 Engineering contingencies are 15% on all civil engineering con- struction works to be carried out with credit funds, 5% on cargo-handling equipment, and 10% on technlcal services; price escalation of 3% per annum was allowed on the estimated expenditure over the period mid-1970 to December 1973. The project will be subject to a 6% local tax on construction and con- sulting services. This tax, estimated to total FMG 202 million, has been excliided from the cost estimates but included in the financial forecasts. 5.06 The estimated overall foreign exchange component of the project, excluding the cost of the land-line and local constructLon taxes, is about 60%. Local Currency Costs 5.07 Excluding the cost of the land-line to the refinery, some FMG 500 million of the local currency cost of the project will be provided by TPA, and the balance of FMG 1,495 million will be provided by the Govern- ment (para. 7.13). Procurement 5.08 Contracts for procurement of equipment and execution of civil engineering and other works to be financed under the credit, will be let in accordance with the Association's procedure for international competi- tive bidding. Consultant Services 5.09 Consulting Engineers -- BCEOM (French) -- have been employed to prepare the Master Plan for the port and have carried out some preliminary engineering. It is logical for these consultants to undertake final engi- neering, prepare contract documents and supervise the work, as is the Government's intention, on terms and conditions acceptable to the Associa- tion. Reference has previously been made to the technical assistance re- - 13 - quirements of the project (para. 4.06). Consultants vill al8o be required to revalue port assets and carry out tariff studies (para. 7.19). Diabursement Procedure 5.10 Disbursement will be made to finance (a) the foreign exchange component of civil works for the breakwater and pier construction, for improvement to existing piers, stacking areas and road and rail layout, on the basis of an agreed percentage; (b) for the c.i.f. cost of cargo-handiïng equipment; and (c) the foreign exchange cost of consultant services and technical assistance. The works are expected to be completed in about three and a half years. Assuming the Credit l8 effective by October 31, 1970, the estimated disbursement schedule is: US$ Million 1970 0.20 1971 1.60 1972 4.10 1973 3.70 Total 9.60 Excess Funds 5.11 Should the full amount of the Credit not be expended on completion of all items in the project, it is recommended that consideration be given to extending the technical assistance which the Association vill finance. This should be subject to a satisfactory report by Association supervision missions on the effectivenesa of the program. 6. ECONOMIC EVALUATION A. Traffic 6.01 The economy of the Malagasy Republic is highly dependent on foreign trade. Handling 35% of the country's exporte and 75% of its imports, Tamatave is by far the island's most important port and plays a key role in the development of agriculture, commerce and industry. 6.02 In 1967, traffie through Tamatave amounted to 391,000 tons of dry cargo of which 68,000 tons was coastal and transshipment traffic, and 617,000 tons of petroleum products (Table 1). Figures for 1968 vere 463,000 tons of dry cargo and 674,000 tons of petroleum products. Results for the first six months of 1969 indicate a total volume of 530,000 tons of dry cargo for the whole year. Traffic forecasts were prepared by the consult- ants. They are realistic and with some minor modifications, have been used in the economlc evaluation (Table 4). - 14 - 6.03 General dry cargo traffic, excluding rice, bananas and fertilizer, is expected to grow at about 4% per annum between 1968-1974. This rate is somewhat below the post-independence annual trend of 5.5% but is consistent with the planned GNP growth of 4% per annum during the second Five Year Plan Period (1970-1974), and the expected growth rate evaluated by the recent Bank Economic Mis£ion. The traffic in a number of specific commodi- ties, chromites, rice, fertilizer imports, bananas, and petroleum products, discussed in Annex 5 is expected to grow at substantially higher rates during this period. 6.04 These developments are expected to increase dry cargo traffic from 463,000 tons in 1968 to abut 820,000 tons in 1974. Thereafter, it is estimated to grow at 5% until the end of the decade. Petroleum products are expected to reach ir0 million tons in 1979. B. Costs and Benefits 6.05 The project is deslgned to increase the capacity and improve the onerating efficiency of the port. Its principal benefits will be: i) faster turnarolind time for ships in port; ii) reduction in anticipated ship-waiting times, which will rise sharply if port capacity îs not increased; and iiî) reduction in shipping costS for petroleum products. 6.06 For the purpose of the economic analysis, four major components (Table 7) of the project were considered separately: Component 1: consists of those investments aimed at increasing the productivity of existing berths; the widening of berth B, with a new transit shed, two warehouses, stacking areas, mechanical equipment, and improved road layout. Component II: extension of the breakwater by 150 m which would be the required extension to enable Pier C to be extended by 75 m, and increase its capacity to two deep-water berths; ancillary works such as transit shed, handling equipment and minor lmprovements to roads and stacking areas. Component III: the remainder of the breakwater extension, 75 m, to give 225 m total length, extension of Pier C by a further 170 m, i.e, one additional berth, one transit shed, and related cargo-handling equipment. Component IV: provision of a new offshore buoy berth for handling petroleum products, and its related land-line to the refinery. - 15 - As explained in Annex 5, the criterion adopted for the economic justification of the project is the firet year economic return. For the project as a whole, the first year return is 19% in 1974. The results for the four major components are as follows (see also Tables 5, 6 and 8 and Annex 5): Component I 41% II 18% III 10% IV 16% The internal rate of return, calculated over the expected economic life of the project, would only be lower than the first year return of 19%, if traffic were to fall and remain below the firet year level. This is not expected to happen. 6.07 The firet year economic return for Component III is 10Z. Our best estimate is that the opportunity cost of capital in Malagasy is un- likely to be higher than this. This component therefore appears to have a marginal value on the basis of the criterion chosen for project evalua- tion. A probability analysis was therefore carried out in order to assesa the effect of changes in key parameters on the economic return. The effect of changes in the following elements were analyzed; (a) the coat of the investment; (b) traffic; and (c) productivity. According to this analysis (Annex 5) there is a substantially higher probabilîty that the first year return will exceed, rather than fall below, 10%. This component is there- fore economically juatified at this time. C. Conclusions 6.08 The evaluation of costs and benefits shows that the proposed project is economically sound and well justified in size and timing. Although benefits will accrue, in the first instance, mainly to the ship- ping industry, an island economy such as Malagasy's cannot afford to neglect its ports. Insufficient port facilities would certainly result in surcharges on ocean freight and consequent reductions in the country's capacity to earn foreign exchange. The project, therefore, constitutes an important contribution to the economic development of the Malagasy Republic. 7. FINANCES A. Rates and Charges 7.01 Prior to 1968 the Directorate received only lump sums annually from the Chamber of Commerce for rental of certain warehouses in the port, and FMG 20 million from the National Railway. In January 1968 it started charging: ships for pilotage, tugs and berthing; consignees for merchan- - 16 - dise loaded and discharged; and passenger3 for boarding and dis2mbarking. Under the 1968 contract by which the Railway operates the port, the Directorate now also receives one-half of the annual eurplus cash revenues of the Operations Section. 7.02 The Operations Section charges consignees for loading, discharg- ing, transshipment, storage and equipment rental. Ships are charged for repairs, water and supplies. The prenent charges vent into effect in 1962. 7.03 Total charges levied by the port for general cargo imports average FMG 1,225 (US$4.40) per ton; export charges average FMG 900 (US$3.25) per ton. Tarlffs are not cost-based; charges levied on shipe are -ery low and there is some tendevcy to favor exporta by means of low port charges. The general level of charges is not high and there is scope for increases to improve the financial position of the port; comparable East African Plarbours Corporation charges are equivalent to about US$10.50 for imports and US$7.00 for exports. B. Presant Finances Past Earnmnge 7.04 Table 9 shows the income account of the Operations Section on a cash basis for the years 1965 through 1968, the firet six months of 1969 and budget estimates for 1969 and 1970. Increases in operating coots in 1965 and 1966, mainly wage increases, vere not compensated by increased charges, and the operating ratio increased from 71% în 1965 to 95% in 1967. Increased traffic was handled in 1968 and 1969 with a lesa than proportionate increase in personnel and other costs, and the operating ratio improved in 1968 and 1969 to 91% and 84% respectively. 7.05 Table 10 shows the income account of the Directorate for 1967 and 1968 and the first six months of 1969 and budget estimates for 1969 and 1970. 7.06 To give some idea of the operating results of the port as a whole the combined results of both sections for 1967, 1968 and the firet six montha of 1969, as well as budget estimates for 1969 and 1970, are summarized in the table below: (FMG Millions) (6 mos) (estimates) 1967 1968 1969 1969 1970 Operating Revenue 504.4 681.4 403.5 811.4 805.4 Operating Expenses 510.4 605.3 332.6 670.3 676.8 Net Operatîng Revenue (Deficit) (6.0) 76.1 70.9 141.1 128.6 Interest Charges 0.9 0.9 o-4 0-9 3-5 Net Income (Deficit) (6.9) 75.2 70.5 140.2 125.1 - 17 - If 1969 depreciation were calculated on a realistic basis it would be about FMG 110 million more than the amount included in operating expenses, net income would be about FMG 30 million and the rate of return on the estimated value of fixed assets would be only about 1%. As outlined in paragraph 7.09 below, an immediate increase in port charges is needed to produce a reason- able rate of return on the investment in port facilities and generate a significant cash contribution to the cost of the project. As shown, it is expected that the earnings performance achieved in the first half of 1969 will be maintained through 1970. Balance Sheets 7.07 The Directorate prepares no balance sheets. Those of the Opera- tions Section reflect investments in fixed assets at original cost (no de- preciation was recorded until 1968), give very little information on the financial position and have therefore not been reproduced here. The only long-term debt in FMG 88.3 million (US$0.3 million) to Caisse Centrale de Cooperation Economique. It ls repayable by the year 2001 vith 1% interest per annum. C. Future Finances General 7.08 As described in Chapter 4, the Government is to establish a port authority to take over the staff, operations, assets and liabilities of the Directorate, and Operations Section. It was assumed that TPA would commence operations April 1, 1971. The financial projections made for TPA are discussed below: Proiected Earnings 7.09 Table 11 gives the projected TPA income account for the period 1971-1978; assumptions underlying the projections are detailed in the appended notes. On the expenditure side, allowance has been made for increases in labor and material to handle the increased traffic and main- tain the expanded port facilities, offset by economies from increased productivity and the higher scale of operations. No allowance is made for anticipated increases in the prices of labor and material, since these are assumed to be offset as necessary by tariff adjustments. On this basis, anticipated total operating expenditure vill increase by about 40% in the eight-year period while dry-cargo tonnage should increase by about 55%. 7.10 Revenue projections are based on the traffic forecast (Table 4) and the present schedule of charges, increased (except for petroleum prod- ucts, for which a new, cost-based tariff was estimated) as follows: - 18 - (a) 12-1/2% as a condition of effectiveness of the Credit to yield a 7% rate of return on the investment in port facilities by 1972; and (b) A further 12-1/2% increase when the project facilities come into use to offset the increased depreciation and maintenance costs of the new facilities and yield a satisfactory return on average net fixed assets in use. 7.11 On these bases the forecast income account (Table 11) may be summarized as follows: (FMG Millions) Net Net Operating Operating Interest Revenue Net Revenue Ratio Charies Surplus Taxes Income 1971 (9 months) 85.6 86 5.4 80.2 42.3 37.9 1972 175.6 83 10.9 164.7 61.2 103.5 1973 220.2 80 18.7 201.5 65.3 136.2 1974 269.0 80 22.4 246.6 80.8 165.8 1975 238.1 82 105.0 133.1 77.6 55.5 1976 336.6 77 184.0 152.6 86.3 66.3 1977 394.1 74 179.1 215.0 91.6 123.4 1978 473.5 71 173.9 299.6 145.7 153.9 Between 1971-1978 the operating ratio is estimated to improve from 86% to 71% which is a satisfactory ratio for ports. Annual debt service would be covered in each year at least twice by cash generated. After the project is completed the rate of return on fixed assets is expected to increase from 4% in 1974 to above 7% in 1978. Cash Flow and Balance Sheet 7.12 TPA's forecast cash flow (Table 12) may be condensed as follows: (FMG Millions) 1971-73 1974-78 Total Requirements Capital Expenditure 4,626.6 375.0 5,001.6 Income and Transactions Taxes 168.8 482.0 650.8 Debt Service 58.4 947.8 1,006.2 Dividends - 159.0 159.0 Increases in Working Capital 31.0 957.8 988.8 4,884.8 2,921.6 7,806.4 - 19 - (FMG Millions) 1971-73 1974-78 Total Availabilities Port's Resources 849.8 2,921.6 3,771.4 Government Contributions 1,495.0 - 1,495.0 External Borrowing 2,540.0 - 2,540.0 4,884.8 2,921.6 7,806.4 7.13 The proceeds of the credit will be relent by the Government to TPA under a subsidiary loan agreement the terms and conditions of which will be acceptable to the Association. The relending terms will be: a 24-year loan, including four years grace, wlth interest at 3/4 of 1% per annum for the firet four years and 7% thereafter. The decision to charge only 3/4 of 1% during the grace period was designed to minimize the Governuient's con- tribution to the coste of the project and to enable TPA to build-up its financial strength. Of the borrowing required in the period 1971-1973 it is estimated that FMG 2,540 million (US$9.2 million equivalent) will be available from the IDA Credit (FMG 110 million - US$0.4 million equivalent - would be disbursed prior to the establishment of TPA); and the Government has agreed to provide FMG 1,495 million as a contribution to its equity in TPA. 7.14 While construction i proceeding only minor capital expenditure outside the project should be required, and during negotiations assurances vere obtained that auch expenditure will not exceed FMG 30 million (US$108,000) per annum without prior approval of the Association. 7.15 Internally generated cash resources in 1974-1978 would be suffi- cient to cover debt service, build-up sufficient cash for working capital and to pay about 50% of the estimated cost of the next major expansion in 1979/1980. In this connection, the Government has agreed that no dividende will be distributed in any year until TPA has met its debt service require- mente and contributed at least 25% of its net operating revenue for such year to a Port Development Reserve Account. 7.16 Balance sheet projections are shown in Table 13 and the assump- tions on which they are based are detailed in the appended notes; pro forma earned surplus statements are given in Table 14. The estimated present values of existing buildings, equipment, floating craft and Pier C were based on historical costs adjusted to allow for price changes since acqui- sition. The values of other exïsting port assets and accumulated deprecia- tion on all fixed assets were estimated by the appraisal team. Additions were at estimated cost. The long-term debts of the Operations Section will be assumed by TPA (para. 7.07). Agreement was obtained during negotiations that approval of the lenders will be obtained prior to the signing of the credit agreement. The results of balance sheet projections are highlighted below: - 20 - (FMG Millions) April 1 December 31 1971 1974 1978 Fixed Assets (net) 2,776.9 6,659.8 5,988.3 Net Working Capital 210.0 464.2 1,198.8 Deferred Expenses 5.0 173.2 - 2,991.9 7,297.2 7,187.1 Debt 242.9 2,751.7 2,476.1 Government Equity 2,749.0 4,545.5 4,711.0 2,991.9 7,297.2 7,187.1 Debt/Equity Ratio 8:92 38:62 34:66 7.17 This indicates a good financial position. Net working capital includes about FMG 800 million (US$2.9 million equivalent) in cash available for reinvestment at the end of 1978. The debt/equity ratio will have declined to 34% of total capitalization allowing sufficient scope for borrowing for the next phase of expansion. Financial Rate of Return and Tariff Covenant 7.18 During negotiations agreement vas obtained that port charges will be increased by 12-1/2% as a condition of effectiveness and that, thereafter, the tariff structure would be progressively revised so that tariffs would more nearly reflect service coats. AisO, by this and other means such as reduction in costs, the Government agreed that the port would earn a rate of at least 4% per annum on the net value of its fixed assets in 1974 and 1975, 5% in 1976 and 1977 and 7% in 1978. 7.19 The consultants' study to revalue fixed assets is expected to take about three months and should be completed by March 31, 1971. There- after costing studies for the purpose of tariff revision will commence. Agreement was reached to review the report and recommendations of the study with the Association and introduce by January 1, 1974 the changes required to achieve agreed financial rates of return (see para. 7.18). Auditing 7.20 The accounts of both the Directorate and the Operations Section are audited by the Accouating Agent of the Ministry of Equipment and Com- munications. This is a Government, as opposed to commercial, audit which offers no assistance in preparing the financial statements or improving accounting procedures. Agreement vas obtained during negotiations that TPA will retain qualified independent auditors acceptable to the - 21 - Association to carry out a commercial audit of its accounts and to furnish the Association such audited statements, reports and other financial infor- mation, in such scope and detail, as the Association shall reasonably request. Insurance 7.21 At present, the port, as a Government organization, has only carried insurance on buildings and their contents. Assurances were obtained that the port would take out insurance with responsible insurers against auch risks and in such amounts as are consistent with sound business practice. This would include insurance against marine, personal accident and other commercial risks. 8. RECOMMENDATIONS 8.01 Satisfactory draft legialation establishing a Tamatave Port Authority has been received from the Government and its adoption by the Malagasy parliament is a condition of the effectiveness of the credit (para. 4.04). An additional condition of effectiveness is a 12-1/2% in- crease in port charges (para. 7.10). 8.02 In addition to the standard Association requirements for bidding and procurement procedures, appointing and retaining consultants and inde- pendent and qualified auditors, the following principal points have been discussed and agreed with the Government: (a) Submission of a training program embracing all phases of cargo-handling for the Association's approval and its subsequent implementation (para. 3.17); (b) Location of new port boundary (para. 4.05); (c) Initial appointment of technical assistance personnel to fill posts of Director General, Chief Accountant, Chief Traffic Manager and Officers to run the Training Program under the proposed Technical Assistance (para. 4.06); (d) Relending the proceeds of credit to TPA on terms and conditions acceptable to the Association and provision of local currency for project works (para. 7.13); (e) Revision of tariffs, after the initial 12-1/2% increase, to reflect costs and achieve agreed financial rates of return (para. 7.18 and 7.19); 8.03 An additional condition is that TPA shall be established and its Director General appointed by April 1, 1971, failing which diabursement of the credit would be limited to US$400,O00 (para. 4.04). - 22 - 8.04 The project constitutes a suitable basis for an IDA Credit of US$9.6 million to the Government of Malagasy Republiç on the usual terms. The proceeds will be relent to the proposed Tafatgve Port Authority for a term of 24 years including a four-year grace period with interest of 3/4 of 1Z per annum during the grace period and 7% per annum thereafter. May 25, 1970 ANNEX 1 Page 1 REPUBLIC OF MALAGASY APPRAISAL OF TAMATAVE PORT PROJECT Description of the Existing Port The existing port is located behind the "Recif de la Pointe" and is further protected by an existing breakwater some 450 m long, based on this reef, and built out in a northerly direction towards the "Grand Recif". Its height i8 generally + five m with tetrapod armoring on the seaward side up to + seven m. The distance from the end of the breakwater to the "Grand Recif" is about 700 m (Map 2). When heavy swells are experienced they break over the top of the breakwater at high water, and to disperse this "overspill" an evacuation channel has been made between the breakwater and Pier C. Access to the port is either via the southern entrance through the gap between the breakwater and the "Grand Recif" with a minimum depth of i1 m, or from the north behind the "Grand Recif" with a minimum depth of 20 m. Mean spring tide range is about one m. The port can be divided into two areas -- the service port and the commercial port. The service port is the original construction and has two basins, one 130 m by 60 m and the other 160 m by 60 m, separated by a jetty 150 m long and 60 m wide. It is used only by lighters and tugs and some fishing vessels. The depth of water available îs two - three m. There is also a amall slipway. The commercial port has three piers which provide three deep- water berths and the coaster berths as follows: Lenpth Width Depth AlonRside Transit Shed Pier A East 100 m) 7.50 m) Double Storey ) 59m ) Pier A West 204 m) 5.50 m) 64 m by 36 m Pier B 180 m 45 m 9.0 m Double Storey 120 m by 20 m Pier C 240 m 10.0 m Single Storey 105 m by 55 m Coaster Berths are locatetd on Pier A West. ANNEX ]. Page 2 The existing oil berth is located at the end of Pier B where both coastal and deep-sea tankers berth stern to the end of the pier; only one vessel can be accommodated at a time. At the foot of these piers is a large service area (190,000 m2) in which all the port sheds other than those on the piers themselves are located. Its center is some 350 m from the foot of Pier A, 275 m from Pier B and 350 m from Pier C. It contains eleven warehouses. Nos. 6 and 7 Tranashipment warehouses Nos. 8, 9, 10, 11 Each 1,300 m2 and very old Nos. 12 and 13 Each 1,350 m2 and in poor condition Nos. 14 and 15 Each 2,000 m2 and in fair condition All these warehouses have their floors one m above road levels. No. 16 is a modern shed of 6,600 m2. Its floor is also raised above road level but mechanical equipment can enter by end ramps. The shed is served by railway. There are also a number of open-stacking areas and some open-sided sheds. The area behind Pier C and north of Shed 16 is used to stock chromite. An overhead conveyor from this area to Pier C and a mechanical loader is in the course of erection. Finally, there is a large area at the southern end of the port containing the exchange railway sidinge for marshalling port trains and some old sheds similar to Shed Nos. 6-15 which are leased to the local Chamber of Commerce. To the east of the service area and south of Shed 16 is a block-making yard which contains a Titan block-setting crane which could be useful for breakwater repairs or construction. March 20, 1970 REPUBLIC OF MALAGASY APPRAISAI, OF TAMATAVh; PORT PeOJECT Operations Section Carigo-Handling Equipraent and Floating Equipment owned as at September 30, 1969 Existing Equipment Units of given Age December 31,1973 New NuMber of Equipment Unit. available to be sup- at end of 1973 TOTAL Over 20 16-20 11-15 10 and lied under under 10 years years years years undbr Credit old Cargo-handling Equiçpnent Tractors 29 1 15 2 il 12 23 Trailers 103 7 68 4 24 40 64 Forklift Trucks 28 - 3 9 16 25 41 Quay Cranes (3 tons ) il 5 6 - - - k "i "t (6 tons) 3 - - - 3 6 9** Stationary cranes (3 to 5t) 5 5 - - - _ Mobile cranes (3 to 25t) 12 3 5 - 4 7 11** Banana-loading equipment 1 - - - 1 1 Floatine Eauivment Tugs 3 - 3 - Launches 6 5 - - Lighters 16 16 - - Dredging Lighter 1 - 1 - * three for each new berth March 20, 1970 * includes one 25 ton crane MALAGASY REPUBLIC APPRAISAL OF THE PORT OF TAMATAVE PROJECT ORGANIZATION - TAM&TAVE PORT AUTHRITY Minister of Equipment and Communications Tamatave Part Authority (12 members) GDirector General Chief Engineer Chief Accountant Chief Traffic Manager Harbor Master Secretary Civil Stores Operations Pilotage Mecha nical Administration Commer cial Buoyage Electrical Training Floatirig | Legal Equipmen t May 25, 1970 ANNEX 4 Page 1 REPUBLIC OF MALAGASY APPRAISAL OF TAMATAVE PORT PROJECT Description of Project Items Breakwater Extension (Map 3) 1. SOGREAH investigated various alternative breakwater lengths in two possible alignments and concluded that an extension of the existing breakwater along its present line by 225 m would ensure undisturbed con- ditions at the existing wharves and permit an extension of 245 m to Pier C and 570 m to Pîer A. The breakwater will be of rock fill type generally to level plus five m with 10 m3 tetrapod armoring on the seaward aide to plus 7 m. Extension to Pier C and lmprovement of Pier B (Map 3) 2. The Master Plan prepared by BCEOM recommenda a 245 m extension to Pier C to provide a total of three berths as the least coet solution for the firat phase development of the port; also, filling behind the existing Pier B s0 that, after demolition of the existing transit shed, the quay apron can be widened. The extended Pier C will have a concrete block quay wall. Under the present project, depth alongside will be 10.5 m; however, it will be designed to be dredged to 12 m. Pier A will not be altered in the present project. Transit Sheds and Warehouses (Map 3) 3. Two new transit sheds -- 105 m long -- are to be constructed on the extended Pier C, and a new shed -- 140 m long -- on Pier B. Each will be 55 m wide, single span. Two new warehouses will al0 be provided, one for transshipment, and one for export cargo; there will al0 be 55 m single span construction but only 70 m and 80 m long respectively due to site conditions. Existing sheds Nos. 12, 13, 14 and 15 will be demolished to enable the warehouses to be built. Mechanical Equipment 4. The mechanical equipment to be provided is detailed in Annex 2, which also indicates the total equipment, available at the end of 1973, which will be under 10 years old. ANNEX 4 Page 2 Deep-water Tanker MoorinR, Sea-line. Land-line. and Fire-FiRhting Ecquipment (Map 2) 5. Tankers now using the port are limited to 20,000 dwt in size. They presently moor in the middle of the harbor, off thé end of Pier B, and constitute a considerable safety hazard. The new tanker mooring buoy will be located north of Tanio Point. It will permit tankers up to 65,000 dwt to be moored and be protected from ocean swells by the "Grand Recif". It will be some 1,350 m off-shore and a 26" sea-line will connect the mooring to the mainland. Depth of water at the new mooring buoy will be 20 m. 6. To connect the new mooring to the existing refinery, it will be necessary to lay a 5.3 km landline of 26" pipe. This is not financed by the credit, but is essential to connect the new mooring with the refinery. 7. Because of the quantities exported, the distance from the refinery to the new mooring, and the need to provide a number of pipelines for various products, the small size coastal tankers exporting refined products will continue to be handled at the head of Pier B. Provision of adequate fire- fighting equipment on this pier is included in the credit. Improvements to Stacking Area, Roada and Railway Tracks (Map 3) 8. The stacking area adjacent to Piers B and C will be resurfaced so that mobile cranes can operate; improvements to roade and railway tracks comprise minor realignments and resurfacing. 9. Consulting services will be provided for final engineering of the project and for its supervision; also to make a valuation of the port's fixed assets and to assist in revising the achedule of port charges. 10. Technical assistance will provide each of the following officers for a three year period: Director General, Chief Accountant, Chief Traffic Manager, Chief Training Officer, and two Assistant Training Officers. May 25, 1970 ANNEX 5 Page 1 REPUBLIC OF MALAGASY APPRAISAL OF TAMATAVE PORT PROJECT Economic Evaluation A. Shipping and Traffic 1. ShippinR During 1967 and 1968 the following ship movements were registered at Tamatave: 1967 1968 Oceangoing vessels general cargo 245 332 tankers 28 31 Coasters general cargo 104 126 tankers 83 90 Total 460 579 Preliminary results for the firet half of 1969 indicate a volume of shipping activity close to the 1968 level. 2. Traffic Three distinct trends can be distinguished for dry cargo traffic since 1952 (Table 3): i) The pre-independence period between 1952-1958 when traffic was static, averaging 370,000 tons per annum; ii) 1959-1961, the last year of colonial rule and the first two years after independence when the annual average dropped to 307,000 tons; and iii) 1962-1968, when traffic recovered at about 5.5% per annum. ANNEX 5 Page 2 These trends are subJect to considerable annual fluctuations, due to the predominance of agricultural commodities in the country's exporta. In the future, theue fluctuations are expected to decrease as the proportion of non-agricultural goode handled by the port increases. In 1967, traffic through Tamatave amounted to 391,000 tons of dry cargo of which 68,000 tons were coastal and transshipment traffic, and 617,000 tons were petroleum products (Table 1). Figures for 1968 were 463,000 tons of dry cargo and 674,000 tons of petroleum products. Resulte for the firet six monthe of 1969 indicate a total volume of 530,000 tons of dry cargo for the whole year. Traffic forecasts were prepared by the consultants. They are realistic and with some minor modifications, have been used in the economic evaluation (Table 4). They vere prepared on the assumption that Tamatave will continue to be Malagasy's principal port, a valid assumption since there are no suitable alternative port sites on the east coast and none of the existing ports are expected to offer Tamatave serious competition. General dry cargo traffic, excluding rice, bananas and fertilizer, is expected to grow at about 4% per annum between 1968-1974. This rate is somewhat below the post-independence annual trend of 5.5Z but is consistent with the planned GNP growth of 4% per annum during the second Five Year Plan Period (1970-1974), and the expected growth rate evaluated by the recent Bank Economic Mission. A number of specific commodities, however, will grow at substan- tially higher rates over this period: (a) Chromites A mine about 200 km northwest of Tamatave started production in 1969 at the rate of 100,000 tons of exportable ore per annum. Production is expected to reach 160,000 tons in 1972. A possible further increase to 200,000 tons by 1974 has not been taken into account. (b) Rice Mainly as a result of an irrigation project recently appraised by the Association in Lake Alaotra, rice exports are expected to increase from the present 20,000 tons to about 80,000 tons in 1974. ANNEX 5 Page 3 (c) Fertilizer Importa The Government expects non-nitrate fertilizer importe to increase from the present 10,000 ton level to 80,000 tons by 1972. While Malagasy agriculture could undoubtedly use even larger amounts of these fertilizers, imports are not expected to exceed 55,000 tons by 1974. (d) Bananas The Second Five Year Plan forecasts banana exports will grow from the present 20,000 to 65,000 tons by 1972. However, because of possible marketing difficulties, the forecasts were reduced to 40,000 tons by 1974. (e) Petroleum Products A refinery has been in operation in Tamatave since 1967 and importe of some 500,000 tons of crude oil and exporta of about 210,000 tons of heavy fuel and 130,000 tons of refined products -- 840,000 tons in all -- are expected for 1970. Due to increased domestic consumption port traffic will drop to 800,000 tons by 1974 but is expected to increase at 5% per annum thereafter. These developments are expected to increase dry cargo traffic from 463,000 tons in 1968 to about 820,000 tons in 1974. Thereafter, it is estimated to grow at 5% until the end of the decade. Petroleum products are expected to reach 1.0 million tons in 1979. B. Economic Analvais 1. Introduction The project is deaigned to increase the capacity and improve the operating efficiency of the port. Its principal benefits vill be: 1) faster turnaround time for ahipa in port; ii) reduction in anticipated ship-waiting time, which will rime sharply if port capacity is not increased; and iii) reduction in ahipping costa for petroleum products. ANNEX 5 Page 4 The extent of future ship-waiting time, as a function of exist- ing capacity and expected traffic growth, has been evaluated by the consul- tants on the basis of a study made by the Port of New York Authority ("Solutions, Methods for Waiting Time Problems," 1958) and the relationships between numbers of berths, berth utilization and ship-waiting times as shown in Table 5. A separate analysis of future ship-waiting time, based on a Queuing Theory Model developed ln the Bank, actually shows higher figures for future waiting time than the consultants' estimates. The following economic analysis, tihich is generally based on the consultants' evaluation of port capacity and waiting time is, therefore, considered to represent a conservative estimate of future port congestion and of the economic benefits to be expected from the proposed project. The calculations clearly show that without additional facilities the port of Tamatave would become completely congested by 1975. With the growth of waiting time and the corresponding increase in shipping costs, demand for port services would be bound to suffer as export markets were lost and imports decreased, so that the penalties for being late in expand- ing capacity would be extremely high. Under conditions of congestion the investment decision is mainly one of optimum timing and the appropriate criterion in this case is the first year economic return. According to this criterion, the return on the investment (including the economic cost of capital tied up during construction) during the first year of operation of the new facilities should be at least equal to the opportunity cost of capital in Malagasy. If this criterion is met no benefits could be gained from postponing the project. 2. Productivity Before evaluating the benefits of the project, the extent to which present port productivity could be improved through managerial and operational reforms, not requiring investments, was assessed. Present productivity per ship day for ocean-going ships averages 348 tons for exports, 472 tons for imports and 245 tons for coasters. These rates are low and can be improved by (a) increasing the number of gangs working the second shift and (b) improvements in cargo-handling techniques. Further, the average size of cargo shipped is expected to increase. The overall result is expected to be a cumulative growth of productivity to 285 tons for coasters, 487 tons for exports and 580 tons for imports by 1974 (Table 6). There is, however, some uncertainty as to whether these producti- vity increases can be achieved by 1974, immediately upon the opening of the new facilities and se soon after the expected establishment of TPA. Never- theless, these productivity figures were used to calculate ship waiting time. ANNEX 5 Page 5 3. Costs and Benefits For the purpose of the economic analysis, four major components (Table 7) of the project were considered separately: Component I: consists of those investments aimed at increasing the productivity of existing berths: the widening of berth B, with a new transit shed, two warehouses, stacking areas, mechanical equipment, and improved road layout. Component Il: extension of the breakwater by 150 m which would be the required extension to enable Pier C to be extended by 75 m, and increase its capacity to two deep-water berthe; ancillary works such as transit shed, handling equipment and minor improvements to roads and stacking areas. Component III: the remainder of the breakwater extension, 75 m, to give 225 m total length, extension of Pier C by a further 170 m, i.e., one additional berth, one transit shed, and related cargo- handling equipment. Component IV: provision of a new offshore buoy berth for handling petroleum products, and its related land-line to the refinery. Component I The economic cost is US$3.4 million (Table 7). These improvements will increase the productivity of existing berths to 296 tons for coasters, 506 tons for exporte and 598 tons for imports (Table 6). For 1974 traffic, ship-waiting time would be reduced by about 1,000 ship days and produce savings valued at US$1.4 million (Table 8). The first year economic return is about 41%. There are two causes for this rather high result: (a) the investments are relatively small; (b) even after the operational and managerial improvements described above, the berth occupancy ratio would still have been 94% in 1974, which means heavy congestion; with the investments under this heading it is expected to drop to 91% causing a relatively large reduction in ahip-waiting time. Component II The economic cost is US$7.5 million (Table 7). It will (a) insure the full protection of the existing facilities from wave action and (b) add one-half berth. As a result of this additional capacity the berth occupancy ratio is expected to decline further, reducing ship vaiting by about 980 ship days, a saving of about US$1,378,000 (Table 8). This gives a firet year of economic return corresponding to 18%. ANNEX 5 Page 6 ComPonent III The economic cost is US$4.5 million (Table 7). It vill add a fifth deep-water berth thereby reducing ship-working time by an additional 324 days (Table 8). The first year economic return is 10%. Our best estimate is that the opportunity cost of capital in Malagasy is unlikely to be higher than this. This component therefore appears to have a marginal value on the basis of the criterion chosen for project evaluation. A probability analysis was therefore carried out in order to assess the effect of changes in key parameters on the economic return. The effect of changes in the cost of the investment, traffic and productivity were analyzed. Investment Costs The upper limit of possible increases in investment cost was taken as +5% and the possibility of reduction as -10%, bearing in mind the contingency allowances already made in arriving at investment costs. Traffic Forecasta The revised traffic forecasts are best estimates. Accordingly there is an equal probability that actual results will fall short of or exceed forecasts by equal amounts. Given the element of uncertainty in even the most carefully prepared forecasts a variation range of + 25% was chosen for the probability analysis. Productivity As a result of increases in the number of gangs on the second shift, and better management it was assumed that productivity will increase by 20% between 1970-1974, although existing evidence suggests that productivity has been static since independence after an initial decline. In view of the rather low existing productivity levels it should not be difficult to achieve the additional 20% but there are substantial doubts as to whether this can be achieved by 1974. For the purpose of the probability analysis it vas assumed that a 20% increase is the upper limit for 1974 and 10% was the lower limit. Taking the more conservative of each one of the three assumptions together a first year return of only 2% vas arrived at which is unsatisfactory. The upper limits combined would result in 100% berth occupancy, which means that an additional berth, not included in the project, would also be justified. However, both these cases are extreme and very unlikely. Assuming a normal distri- bution of probabilities for each of the above factors a mean pro- bability value of 13% was arrived at for the first year economic return for Component III. ANNEX 5 Page 7 Component IV The economic cost of constructing the off-shore mooring facility for tankers is estimated at US$2.5 million (Table 7). The elimina- tion of large tankers from Pier B, the construction of the new facility at Tanio Point, and provision of a 26-inch land-line to the oîl refinery vill reduce ship turnaround time. It now takes 67 hours to handle a 20,000 ton crude oil tanker, the largest ship which can presently be handled, and thisvwill be reduced to 30 hours. The new facilities will be able to handle tankers of up to 65,000 dwt; however, with the present volume of petroleum traffic it i8 not expected that these will exceed 40,000 dwt immediately. The saving in turnaround time, plus the greater operating efficiency of 40,000 dwt tankers, will produce savings of US$0.45 per ton of petroleum products, resulting in a first year economic return of 16% in 1974. This does not include unquantifiable benefits related to the removal of large oil tankers from their present location off Pier B, which will significantly reduce operational hazards. May 25, 1970 TABLE 1 MALAGASY REPBULIC APPRAISAL OF TUE PORT OF TAMATAVE PROJECT DISTRIBUTION OF CARGO TRAFFIC BY MAIN ORIGIN AND DESTINATION IN 1967 (In '000 Tons) A. DRY CARGO 1. Foreign Trade Exports fron Tamatave Hinterland 1o5 Exports originating in Secondary Ports 14 119 Imports for Tamatave Hinterland 187 Imports destined for Secondary Ports 17 204 TOTAL Exports and Imports 323 2. Domestic Trade From Secondary Ports to Tamatave 13 From Tamatave to Secondary Ports 22 35 3. Transshipment Exports arriving at Tamatave from Secondary Ports 13 Imports going out of Tamatave to Secondary Ports 20 TOTAL Dry Cargo 391 B. PETROLEUM PRODUCTS 617 Source: BCEOM Port of Tamatave Development Plan, November, 1969 March 20, 1970 TABLE 2 MAIAGASY REPBULIC APPRAISAL OF THE PORT OF TAMATAVE PROJECT DRY CARGO TRAFFIC (196l2 BY MAIN TYPES (In 1000 Tons) A. Exports Bananas 21 Coffee 1h Rice 26 Cloves 6 Graphite 18 Others 34 SUBTOTAL 119 B. Imports Cement and Lime 38 Iron and Steel Products 13 Rice 14 Flour 22 Coffee, Cloves, Vanilla 10 Petroleum Products in Barrels 12 Paper 5 Wine 5 Fertilizer il Salt 5 Others 69 SUBTOTAL 20h GRAND TOTAL 323 Coastal Traffic 35 Transshipment 33 TOTAL TRhAFFIC 391 Source: BCEOM Port of T>matave Development Plan, November 1969. March 20, 1970 TABLE 3 MAIAGASY REPBULIC APPRAISAL OF THE PORT OF TAMATAVE PROJECT CARGO MOVEMENT IN AND OUT OF TAMATAVE IN '000 TONS DRY CARGO PETROLEUM PRODUCTS GRAND YEAR IN OUT TOTAL IN & OUT TOTAL 1952 255 111 366 - 366 1953 216 110 326 38 364 1954 248 106 354 102 456 1955 264 141 405 76 481 1956 238 144 382 83 465 1957 268 136 404 74 478 1958 202 161 363 97 460 1959 202 112 314 91 405 1960 203 98 301 98 399 19611/ 188 118 306 118 42h 1962 212 155 367 115 482 1963 219 119 338 114 452 1964 217 127 344 139 483 1965 228 156 384 131 515 1966 229 134 363 239 602 1967 230 161 391 617 1,008 1968 278 185 463 674 1,137 1/ First year of independence. Source: BCEOM Port of Tamatave, Development Plan, November 1969 March 20, 1970 MALAGASY REPUBLIC APPRAISAL OF THE PORT OE. TAMATAVE PROJECT TRAFFIC FCRECAST (DRY CARGO) (In 000 Tons) Average 1969 1965/67 1967 1968 Estimnated 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 A. Direct __rts Coffee 13 9 17 20 23 24 25 27 29 31 33 35 Cloves 5 6 5 5 5 5 6 6 6 6 6 7 Graphite 17 18 17 17 17 17 18 18 18 19 20 20 Rice 20 20 35 50 60 70 80 85 90 95 100 105 Bananas 20 21 20 20 25 30 40 40 40 4o 45 45 Other Exports 27 31 35 37 39 41 43 45 47 50 53 56 Chromites - 100 120 160 160 160 160 160 160 160 160 Cocoa 5 10 10 B. Indirect Exports Coffeée 6 5 8 8 9 10 il il 12 12 13 13 Rice 6 6 8 9 9 10 10 il il 12 12 Probable Fertilizer Exports - - - - - - - - 4o 45 50 55 Probable Ammonia Exports - - - - - - - - 10 15 20 25 Other Exports 6 3 9 9 10 10 il il 12 12 13 1 TOTAL EXPCRTS 11h 119 158 171 2=2 29 7 *T 5 135 7 Q0 _3 5 C. Direct Imparts Ceænt 32 33 35 38 40 42 44 - - - - Other Inports 148 143 165 171 177 185 192 200 208 216 225 234 D. Indirect Impcr ts ~CemîÎt h 5 5 5 6 6 7 - - - - - Other il 12 12 13 13 14 14 15 16 17 18 19 Fertilizers (Direct and Indirect GH) 10 il 25 30 35 45 55 65 75 90 100 110 TOTAL IMPORTS 2_05 204 2 0 26 2 242 7 27 292 3 28n 299 323 -343 Coastal Traffic 35 35 339 39 4 0 41 7 43 4 4 5 46 47 Unloadirg of Indirect Exports 17 13 19 23 23 25 28 29 32 32 35 35 38 38 Loadirg of Indirect Imparts 16 20 20 25 20 22 24 26 28 23 25 27 29 31 GRAND M AL --__ __ __~ ~T 76 _1 __-9 879 9 ___92 -03 GRAND TOTAL 3 391 463 530 7 7- 2 1 792 9 992 7 Petroleum and Petroleum Products 329 617 674 642 840 830 819 810 800 840 882 926 972 1021 March 20, 1970 TABLE5 MALAGASY REPUBLIC APPRAISAL OF THE PORT OF TAMATAVE PROJECT SHIP WAITING TINE AS A FUNCTION OF CAPACITY UTILIZATION AND NUMBER OF BERTHS 1 10 100 2 3 4 5 6 1 20 30 40 1 30r -- X -r -t 30 20 - -~ ~~ 20 10_t= .±.@ t: `, I I tbj,' 10 6 -~ -4 L =-= - 6 5 - _ 4 4t 3 --i -î- --t- 3 a' 2 2 :1. îo 0 _ 1.0 52~ ~ ~ ~~~~~~~~~~0 4-4 o~~~~~~~~~~~~~~~~ ;01 0 01 E-'~ ~~~~7 000l; o,o506 m. W -- X-\-7f- - 400605 cz 004 - - 004 OD 03 t2 -\ '-\ - \- - 03 ooi °°;-;\\ 01 Co 004 o - me _. t t les 00e 0001 . . , oooi 1 2 3 14 5 6 1 20 30 40 1 I A ~~~10 100 Number of ber ths Average delcays on call arrivais in a waiting line system with these Dropertmes: ci) poisson (unlimited)carrivals b) constant service tîme c) service in arrival order SOURCE: "Solutions, Methods For Waiting Line Problems" - The Port of New York Authority, 1958 Miarch 20, 1970 TABLE 6 MALAGASY REPUJBLIC APFRAISAL OF THE PORT OF TAMATAVE FROJECT EXPECTED DEVELOPMENT OF PRODUCTIVITY (tons per ship--day) Coasters Exports Imports A. General Cargo 1. Productivity in 1968 245 348 472 2. Productivity Increases due to a) Increase in number of gangs on second shift 10% 15% 15% b) Improved Organization and management 4% 10% 7% c) Increase in size of cargo 5% 10% 3. Productivity in 1974 prior to TImplementation of Project 285 487 580 4. Productivity Increaæadue to Component I of Project 1/ _4% 5% 3% 5. Productivity in 197>4 with Implementation of Component I of Project 296 506 598 B. Special Cargo 6. Productivity in 1974 a) Chromites - 5,000 b) Benanas - 350 c) Wheat _ - 1,450 1/ See Table 7 March 20, 1970 TABLE 7 MALAGASY REPUBLIC APPRAISAL OF THE PORT 0F TAMATAVE FROJECT Economic Costs of Project Components (US$ '000) Item I Il III IV Total Breakwater - 3,900 1,520 - 5,1420 Improvement of Pier B 600 - - - 600 Ektension of Pier C Berth C1 - 600 600 Berth C2 - - 1,1470 - 1,470 Transit Sheds and Warehouses 690 250 250 - 1,190 Tanker Mooring 1/ - - - 1,980 1,980 Surface Stacking Areas 470 - - - 470 Cargo Handling Equipment 312 399 229 - 940 Sub Totals 2,072 5,149 3,1469 1,980 12,670 Consulting Services 803 380 257 80 1,520 Quantity Contingencies 305 756 510 159 1,730 Interest During Construction 2/ 253 1,259 338 267 2,117 Total Economie Cost 3à 7,5à àL574 2.t486 18.037 1/ Including investment by oil company. 2/ 10% opportunity cost of capitaI4 compounded to June 30, 1974 March 20, 1970 TEABLE 8 MALAGAS! REPUBLIC APPRAISAL OF THE PORT OF TAMATAVE PROJECT COST BENEFIf CÂLCULATIONS (1974) No Invest With Investmente 6/ Ship Day Requirementa ment8 Jil (i)+(ii) (i)+(ii)+(iii) General Cargo Importa (1) 477 463 463 463 General Cargo Exporte 423 403 403 403 Wheat 24 24 24 24 Chromites 32 32 32 32 Bananas 112 112 112 112 Total 1,068 1,034 1,034 1,034 Unproductive Time Including Sundays (12%) 128 124 124 124 Total Ship Days Required 1,196 1,158 1,158 1,158 Available Capacity in 22 Ship Days 1,2771/ 1i277 i, 602/ 1,82'53 Total Ship Days required to capacity ratio (in percent) 94 91 79 63 Waiting ' to service ratios _4 2.00 1.20 0.35 0.07 Ship Waiting Tine (days) 2,392 1,389 405 81 Ship Time Saved (days) 1,003 984 324 Value of Ship Time Saved (in US$ 100)W/ 1,4o4 1,378 454 Marginal Inmvestr,n1t (in US$ '0OO)00 3,433 7,544 4,574 1974 Benefit to Investment ratios (in percent) 41 18 10 1/ 3Yu Berths x 365 2/ 4 Berths x 365 3/ 5 Berths x 365 4/ From Table 5 5/ At US$1,400 per ship day 6/ From Table 7 Yarch 20, 1970 MALAGASY REPUBLIC APPRAISAL OF THE PORT OF TAMATAVE PROJECT Reseau National Des Chemins de Fer Malagdasy- Port Operating Section Port OperatirfRevenoes and Expenditures Actual for the Years 1964-1968 and First Six Months 1969 and Budget Estimates for the Years 1969 and 1970 (Figures in Thousands of Malagasy Francs) Actual Budget First Six Months 1965 1966 1967 1968 1969 1969 1970 REVENUES Cargo Handling and Warehousing h70,716.9 45/,h44.3 hQ7,984.0 550,859.5 327,038.9 657,728.0 650,000.0 EXPENDITITRES Personnel Costs 258,124.1 282,825.6 330,937.7 380,041.0 201,235.1 408,225.0 400,000.0 Maintenance, Materials and Supplies 36,459.5 52,340.3 61,833.2 56,941.0 28,319.6 50,450.o 52,000.0 Water, Power and Utilities 16,940.2 20,298.6 35,289.5 28,734.0 13,225.3 28,050.0 29,000.0 Contribution to Port Directoers Budget 18,000.0 18,954.9 21,002.5 20,000.0 10,000.0 20,000.0 20,000.0 Other Expenses 6,437.3 10,073.0 24,599.7 17,126.9 21,967.6 41,700.0 4o,000.0 Depreciation - -22,962.6 11,500.0 23.000.0 24h000.0 335,961.1 384,492.4 473,662.6 525,805.5 286,247.6 571,425.0 565,000.0 Net Operating Revenoes 134,755.8 65,551.9 24,321.4 25,054.0 40,791.3 86,303.0 85,000.0 Interest Expense 985.8 960.9 935.4 909.4 441.5 900.0 3,500.0 Net Income 133,770.0 6h,591.0 23,386.0 24,14h.6 4o,349.8 85,403.0 81,500.0 Operating Ratio (Excluiling Depreciation) 71.4% 85.4% 95.1% 91.3% 84.o% 83.4% 83.2% Source: Reseau National des Chemins de Fer March 20, 1970 MALAGASY HEPUBLIC APPRAISAL OF THE PORT 0F TAMATAVE PHOJECT Port Operating Revenues and Expenditures Actual for the Years 1967 and 1968 and the First Six Months of 1969 and Budget Estimates for the Years 1969 and 1970 (Figures in Thousands of Malagasy Francs) Actual Budget First six mionths 1967 1968 1969 1969 1970 REVENUES Charges on Ships - 30,405.7 21,780.5 49,092.2 51,000.0 Charges on Merchandise - 91,696.9 51,717.6 98,600.0 98,600.0 Charges on Passengers - 1,265.9 583.0 1,200.0 1,000.0 Contribution of Railway - to Port's Budget 21,002.5 20,000.0 10,000.0 20,000.0 20,000.0 Other 6,385.0 7,127.0 2,389.0 4,778.0 4,778.o 27,387.5 150,495.5 86,1470.1 173,670.2 175,378.0 EXPENDITURES Personnel Costs 30,385.1 52,059.9 30,383.3 64,201.8 70,430.0 Maintenance, Materials and Supplies 16,105.1 31,153.4 15,454.9 33,300.0 35,991.0 Water, Power andUtilities 4,426.9 8,420.4 5,061.5 9,800.0 13,000.0 Other Expenses 6,821.0 7,928.0 5.460.o 11,550.0 12,390.0 57,738.1 5>9,561.7 56,359.7 118,851.8 131,811.0 Net Operating Revenue (30,350.6) 50,933.8 30,110.h 54,818.4 43,567.0 Source: Port Directorate March 20, 1970 iALAGASY R2PUB3IC APPRAISAL 0F` rHE PO.RT 0F TÀAhAV#; POJECT Forecast of Port OperatinE Revenues and Excenditures 1971-9l70 (Figures in Millions of Malagasy Francs) 1971 1972 1973 1974 1 1976 1977 197 (nine months) Revenues Pilotage, dockage and other charges on ships 53.5 76.8 79.8 83.6 82.8 88.5 91.9 95.9 Cargo handling charges 462.9 670.4 718.2 779.3 742.0 832.4 887.1 956.7 Warehousing 36.1 52.2 56.1 61.3 58.8 66.9 71.3 77.4 Revenue from piping petroleum 11.5 17.1 17.1 36.1 36.1 36.1 36.1 36.1 Equipnunt sentals, sales of supplies and otner income 63.0 90.1 96.2 103.8 101.7 113.0 119.8 128.8 627.0 906.6 967.4 1,064.1 1,021.4 1,136.9 1,206.2 1,294.9 Additional revenues from postulated tariff increasea9 8.h 113.3 120.9 28 2.7 271.3 302.0 3~20.4 344.0 705.4 1,019.9 1,m088.3 1,346.8 1,292.7 1,4387 1,526 6 1,638.9 Extenses Salaries, wages and staff benelits 349.8 491.7 511.1 523.7 499.2 534.7 555.9 583.2 lMaCerials, maintenance snd repairs 63.o 95.0 97.3 143.9 143.0 154.4 150.9 163.5 Electricity and water 31.4 L4.8 46.4 48.4 47.4 50.5 52.2 54.1 Adeunistrative andother expoeses 37.4 50.5 51.6 53.0 52.3 54.2 55.7 57.1 Municipal and local taxes 30.0 29.0 29.0 70.0 69.0 67.5 66.0 64.5 Depreciation 102.4 133.3 132.7 238.8 243.7 241.0 243.8 243.0 619.8 °44 3 868.1 1,077.8 1,054.6 1,102.3 1,132.5 1,165.4 Net Operating Revenue 85.6 175.6 220.2 269.0 238.1 336.6 394.1 473.5 Interest Expense 5.4 10.9 18.7 22.4 105.0 184.0 17S.1 173.9 Net Revenue Surplus d0.2 164.7 201.5 246.6 133.1 152.6 215.0 299.6 Income and Transactions Taxes 42.3 61.2 65.3 80.8 77.6 86.3 91.6 145.7 Net Income 37.9 103.5 136.2 165.8 55.5 66.3 - 123.4 1t3.9 Times Interest Covered 15.9x 16.lx 11.8x 12.Ox 2.3x 1.8% 2.2x 2.7x Cash Generated, Net Operatirg Revenue plus Depreciation 188.0 308.9 352.9 507.8 481.8 577.6 637.9 716.5 Total Debt Service 13.1 18.7 26.5 30.2 144.2 258.0 257.8 257.6 Times Debt Service Covered (Before Taxes) 14.4x 16.5x 13.3x 16.8x 3.3x 2.2x 2.5t 2.8x Return on Average Net Fixed Assets (Before Taxes) 4.4% 7.0% 9.1% 4.0% 3.6% 5.3% 6.3% 7.8% Operating Ratio 86.4% 82.8% 79.8% 80.0% 81.6% 76.6% 74.2% 71.1% See appended notes fcr assumptions on e.ich projections are based Source: Association Staff May 21, 1970 Notes on TABLE 11 Page 1 REPUBLIC OF MALAGASY APPRAISAL OF TAMATAVE PORT PROJECT Forecast Income Account 1971-1978 Operating Revenue 1. Traffic Growth Revenue from wharfage, cargo-handling and equipment rentals is estimated to increase proportionately to traffic growth, as projected in this report, Table 4. The present charges of the Port Directorate and Operations Section were applied except for oil-handling for which a new, cost-based tariff was estimated. Revenues from other sources are expected to increase more slowly, in consonance with past experience. 2. Increases in Tariff Charges Increases are assumed to take place as follows: (a) 12-1/2% at the beginning of 1971 to produce a reasonable rate of return on average net fïxed assets and to generate cash resources to enable the port to make a reasonable contri- bution to the coBt of the project; (b) A further 12-1/2% increase to take place when the project facilities come into use at the beginning of 1974 to offset the additional coste of depreciation and mainte- nance and enable the port to earn a satisfactory rate of return (7%) in the fifth year of operation of the new facility in 1978; Operating Expenditure 1. Staff Costs Analysis of staff costs of the Port Directorate and Operations Section indicates they are 52% variable with traffic volume 4.1 473.5 4801.4 1,711.3 Depreciation 102.4 133.3 132.7 238.8 243.7 241.0 243.8 243.0 368.4 1,210.3 Proceeds f!mom IDA Credit 392.0 1,138.0 1,010.0 2,540.0 Government Contributions for Project 220.0 700.0 575.0 1,495.0 Total Funds Available 800.0 2,146.9 1,937.9 507.8 481.8 577.6 637.9 716.5 4,884.8 2,921.6 Annual Cash Surplus (Deficit) ( 4.6 ) 6.1 ( 1.0 ) 188.5 190.0 138.1 173.7 189.0 0.5 879.3 Cash on Hand - Beginning of tle Year 60.0 55.4 61.5 60.5 249.0 439.0 577.1 750.8 60.0 60.5 Cash on Hand - End of the Year 55.4 61.5 60.5 249.0 439.0 577.1 750.8 939.8 60.5 939.8 Source: Association Staff 4ay 21, 1970 MALAGASY REPUBLIC APPRAISAL CF THE PORT OF TAMATAVE PROJECT Pro Forna Balance Sheets As at April 1, 1970 and December 31, 1971 through 1978 (Figures in Millions of Maîagssy Francsh As at April 1, As at December 31 ASSETS 1971 1971 1972 1973 1974 1975 1976 1977 1978 FIXED ASSETS (Note 1) Land, Roads a.d Stacking Areas 606., 606.4 606.4 606.4 784.1 784.1 784.1 784.1 784.1 Breakwater 1,615.5 1,615.5 1,615.5 1,615.5 3,666.0 3,666.0 3,666.o 3,666.o 3,666.0 Wharves 1,465.0 1,465.0 1,465.0 1,465.0 2,476.3 2,476.3 2,476.3 2,476.3 2,476.3 Buildings 442.0 442.0 442.0 442.0 892.7 892.7 892.7 892.7 892.7 Equipment and Floating Craft 1,404.5 1,434.5 1,464.5 1,494.5 1,948.0 2,023.0 2,098.0 2,173.0 2,248.0 Tanker Moorings - - - 382.7 382.7 382.7 382.7 382.7 5,533.4 5,563.4 5,593.4 5,623.4 10,149.8 10,224.8 10,299.8 10,374.8 10,449.8 Less: Accumulated Depreciation (Note 2) 2,882.8 2,985.2 3,118.5 3,251.2 3,490.0 3,733.7 3,974.7 4,218.5 4,461.5 Net Fixed Assets in Service 2,650.6 2,578.2 2,474.9 2,372.2 6,659.B 6,491.l 6,325.1 6,156.3 5,90°-3 Works in Progress 126.3 756.5 2,709.8 4,451.4 - - - - 2,776.9 3,334.7 5,184.7 6,823.6 6,659.8 6,491.1 6,325.1 6,156.3 5,988.3 CURRENT ASSETS (Note 3) Cash 60.0 55.4 61.5 60.5 249.0 439.0 577.1 750.8 939.8 Debtors 130.0 150.0 163.0 173.0 214.0 206.0 228.0 242.0 260.0 Materials and Supplies 50.0 46.4 48.8 50.4 52.8 54.4 56.2 58.9 61.5 240.0 251.8 273.3 283.9 515.8 699.4 861.3 1,051.7 1,261.3 Less: Creditors and Accrued Charges 30.0 38.0 41.3 42.9 51.6 50.2 53.8 55.6 62.5 210.0 213.8 232.0 241.0 464.2 649.2 807.5 996.1 1,198.8 DEFERRED EXPENSES Unamortized Technical Assistance Costs (Note 4) 5.0 85.5 151.0 216.5 173.2 129.9 86.6 43.3 - Total Assets 2,991.9 3,634.0 5,567.7 7,281.1 7,297.2 7,270.2 7,219.2 7,195.7 7,187.1 LIABILITIES AND CAPrTAL ILNC-TERM DEBT (Note 5) Caisse Centrale de Cooperation Econondque 132.9 125.1 117.3 109.5 101.7 93.8 85.9 78.0 70.0 Due to Government (IDA Credit) 110.0 502.0 1,640.0 2,650.0 2,650.0 2,618.7 2,552.6 2,481.8 2,406.1 242.9 627.1 1,757.3 2,759.5 2,751.7 2,712.5 2,638.5 2,559.8 2,476.1 GOVE8NMNT EQUrI' Port Development Reserve (Note 7) - - - - 67.2 126.7 10. 8 309.3 427.7 Capital Acoeunt 2,749.0 2,969.0 3,669.o 4,244.0 4,2h4.O 4,244.0 14,24. 0 4,244.0 4,244.0 Retained Surplus (See Table 14) - 37.9 141.4 277.6 234.3 187.0 125.9 82.6 39.3 2,749.0 3,006.9 3,810.4 4,521.6 4,545.5 4,557.7 4,580.7 4,635.9 4,71l.0 Total Liabilities and Equity 2,991.9 3,634.o 5,567.7 7,281.1 7,297.2 7,270.2 7,219.2 7,195.7 7,187.1 Lebt/Equity Ratio 8:92 17:83 32:68 38:62 38:62 37:63 37:63 36:64 34:66 See appended notes for assumptions on which projections are based Source: Association Staff May 21, 1970 Notes on TABLE 13 Page 1 REPUBLIC OF MALAGASY APPRAISAL OF TAMATAVE PORT PROJECT Notes on Balance Sheet Note 1. Fixed Assets. Only the fixed assets within the revised port limite referred to in 4.05 of this report are included. The bases of valuation are: (a) Land. The cost of fill which builda up the reef on which the port is built, as estimated by the appraisal mission. This exceeds the market value of property in the port area. (b) Roads and Stacking Areas at replacement cost as estimated by the appraisal mission, plus additions at estimated cost. Midongy-d. Su,ogîdon ESNLIOSUE NUE. COSN ROUES YOT APHI NROE K OMETERS LJANUARY 1970R 2753B MAP 2 - . 42 r~~~~~~~ 4 ~PRPCPDErE) PETR3LEU)MsB 'à ~~~~~~~~~~PRCDUC33 MOCRI NO, lÏ~~~~~~~~~~~~~~~~~~'''' r, -p' 21 45 25 "'7~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~C ~o 0 5 0 0 10 0 0 2 0 0 0 3000 FT~~~~~~~~~ 2 $ B j e d I ro n de '; ç,0b M A L A G A S Y ' B E$2U 3L$, SOUNDINGS IN MET2RS 'ANUARY 1970 IBRD 1933R2~~~~~~~~~~~~~~~ 2'3 7 = = - = D f: f S 'E O i i r i : E . E ; L ; S>S^e E § : z D: =;: 0 : = b 0 :: a 0 . uS CV X f V :t V ;,\ 5000 10 X 0 t X Sa W a * a ViT D j1 SA < : ;; ; ;t ;;: t 37, ,Dxhf S 0 `B;00 \ i: ; ;; 0 :0;i 0; :0:f- ;:;:-000/// / D;: L t ; d J i j;; k :1 ' i _ ES a i ; i : : :; ;i i E : ; SE U 0U; f S b g ' S ,: f . f X 2 L X U