Documnmt of The World Bank FOR OFFICIAL USE ONLY Report No. 5756 PROJECT PERFORMANCE AUDIT REPORT KOREA FIRST AND SECOND PORT PROJECTS (LDANS 917-KO/1401-KO) June 28, 1985 Operations Evaluation Department T document b a tesfricd ditblWle mad ay be med by redpieMts emly In the perfrmace of er ea dufies. Its coemlb asy met sabewie be disclod widd WWd B3ank ulhatle. FOR OFFICIAL USE ONLY PROJECT PERFORMANCE AUDIT REPORT KOREA FIRST AND SECOND PORT PROJECTS (LOANS 917-KO/1401-KO) TABLE OF CONTENTS Page No. Preface................................... ............. ................ i Basic Data Sheet ................................ .0........ ..... ii Highlights................................................. o......... iv PROJECT PERFORMANCE AUDIT MEMORANDUM I. BACKGROUND. .................... o.. ............. oe .... 1 II. PROJECT IMPLEMENTATIONo............................. ... 3 III. PROJECT RESULTS..................................... .. ...... 6 A. Economic Impact of the Project... ...............o. 6 B. Financial Impact of the Project.................6 .... 14 C. Institutional Impact of the Project................... 14 Tables: 1. Appraisal Cost Estimate vs. Actual Expenditures........ 16 2. Pusan Port - Forecast vs. Actual Dry Cargo Throughput... 17 3. Pusan Port - Forecast vs. Actual Throughput of Break Bulk and Containerized General Cargo........... 18 4. Pusan Port - Forecast vs. Actual Throughput of Container Traffic (Thousands of Containers)... 19 5. Pusan Port - Forecast vs. Actual Throughput of Container Traffic (Thousands of Tons).......... 20 6. Pusan Port - Forecast vs. Actual Grain Traffic............ 21 7. Pusan Port - Forecast vs. Actual Coal, Ore & Minerals, Scrap & Steel Traffic.... 22 8. Pusan Port - Forecast vs. Actual Passenger Traffic........ 23 9. Mukho Port - Forecast vs. Actual Coal, Cement and Limestone Traffic... .........o .. ...*........ *...... . 24 PROJECT COMPLETION REPORT FIRST PORT PROJECT (LOAN 917-KO) 1. Introduction ............................ .... .. ..0-0. 25 2. Project Preparation and Appraisal....r.i...... 25 3. Project Implementation and Cost 28 4. Traffic.. .... ....... .. ........ . ..... ... .... .. 29 5. Financial Performance of the Borrower.................... 31 6. Institutional Performance and Development.............. 36 7. Economic Reevaluation ................... ................ 38 8. The Role of the IBRD..................................... 39 This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. Table of Contents (Cont'd.) Page No. Annex Degree of Compliance with Covenants in the Loan Agreement per Loan 917-KO............... ............... 42 Tables 1. Actual and Appraisal Estimates of Project Costs.o......... 46 2. Procurement Schedule for Bank's Financed Items........... 47 3. Freight Traffic Forecast and Actual by Type of Cargo (Busan Port) .......................................... 48 4. Freight Traffic Forecast and Actual by Type of Cargo (Mukho Port)................. .......................... 51 5. Income Account (Busan Port)... ................oo.s.... 52 6. Table of Source and Application of Funds (Busan Port).... 53 7. Balance Sheet (Busan Port)............................... 54 8. Selected Financial Ratios (Busan Port)...............o.. 55 9. Income Account (Mukho Port) .............0........000000 56 10. Table of Source and Application of Funds (Mukho Port).... 57 11. Balance Sheet (Mukho Port) .......................0.0 58 12. Selected Financial Ratios (Mukho Port)................... 59 PgOJECT COMPLETION REPORT SECOND PORT PROJECT (LOAN 1401-KO) I. Project Background and Sectoral Setting.................. 61 II. Project Formulation............. .................... 64 III. Project Description, Implementation and Cost............. 64 IV. Traffic and Port Operations.................0 .......... 75 V. Financial Performance of BDMPA and KMPA.................. 78 VI. Institutional Development .................. --o 83 VII. Economic Re-evaluation ............... o 84 VIII. The Role of The Bank.................................... 85 IX. Conclusions............... .......... 0 ............ ..... 86 Tables 1. Estimated and Actual Project Costs....................... 87 2. Schedule of Disbursements.................s.............. 88 3.1 Busan Port Traffic - Dry Bulk Cargo...................... 89 3.2 Busan Port Traffic - Liquid Bulk and General Cargo....... 90 3.3 Busan Port Traffic - Container Cargo.......So........... 91 3.4 Busan Port Traffic Summary................ .............. 92 4.1 Busan-District Maritime and Ports Authority - Income Account (1973-83) ......... o.rts ................... 93 4.2 Busan-District Maritime and Ports Authority - Balance Sheet (1974-83)... o ................................... 94 4.3 Busan-District Maritime and Ports Authority - Sources and Applications of Funds (1973-83)............... ..... 95 4.4 Busan-District Maritime and Ports Anthority - Selected Financial Ratios, 1976-83...................... 96 Table of Contents (cont'd.) Page No. 5.1 Korea Maritime and Port Administration - Income Statement (1979-83).................................... 97 5.2 Korea Maritime and Port Administration - Balance Sheet (1979-83)......................... 98 5.3 Korea Maritime and Port Administration - Sources and Applications of Funds (1979-83)........................ 99 5.4 Notes to Financial Statements............................ 101 6.1 BDMPA Revenue Center Cost Report......................... 106 6.2 TMPA Revenue Center Cost Report.......................... 107 7.1 Economic Costs and Benefits.............................. 108 7.2 Operational Parameters Assumed for Economic Evaluation... 109 7.3 Container Handling Without and With Proposed Container Berths....................................... 110 8. Compliance with Loan Conditions.......................... 111 Appendix Borrower Comments.o ..... ........................ 120 Maps IBRD 10383R IBRD 11700R IBRD 10382R3 IBRD 12506R (PCR) PROJECT PERFORMANCE AUDIT REPORT KOREA FIRST AND SECOND PORT PROJECTS (LOANS 917-RO/1401-KO) PREFACE The following report is a performance audit on the First and Second Port Projects in Korea for which two loans were made one in June 1973 (Loan 917-KO, US$80.0 million) and the other in April 1977 (Loan 1401-KO, US$67.0 million). Both projects were delayed by about one year and the final dis- bursements were made in June 1980 and June 1984 respectively. This report consists of a Project Performance Audit Memorandum (PPAM) prepared by the Operations Evaluation Department (OED) which covers both projects, and two Project Completion Reports (PCRs), one for each proj- ect, prepared by the East Asia and Pacific Regional Office. The PPAM is based on a review of the Minutes of the Executive Directors' Meeting at which the projects were approved, the President's and Staff Appraisal Reports, Bank files and documents including Supervision Reports and the PCRs. OED also interviewed Bank and Borrower staff familiar with the project. An OED mission visited Korea in October 1983 for the purpose of reviewing the proj- ects; the assistance of the Government and of the Korean Maritime and Port Authority (KMPA) are gratefully acknowledged. Based on the above, the audit concludes that the projects met part of their declared objectives, and that some components failed to have their expected impact. OED's views on the projects are summarized and contrasted with the PCR's in the Highlights, and developed in the PPAM. The draft audit report was sent to the Borrower for comments; the comments are attached as an appendix. - ii - PROJECT PERPORMANCE AUDIT REPORT KOREA FIRST AND SECOND PORT PROJECTS (LOANS 917-KO/1401-KO) KEY PROJECT DATA Appraisal Actual or Estimates Reestimate First Second First Second Item Project Project Project Project Total Project Cost (US$million)/a 118.6 98.5 142.6 111.3 Overrun (%) - - 20 20 Loan Amount (US$million) 80.0 67.0 80.0 67.0 Disbursed 80.0 67.0 80.0 66.2 Principal Repaid to 11/30/84 - - 14.9 17.36 Outstanding to 11/30/84/b - - 55.3 39.2 Project Completion Date 06/78 12/81 08/79 03/83 Proportion of Time Overrun (%) 0 0 23 27 Proportion of Main Project Elements Finished by Expected Date (%) 100 100 70 75 Economic Rate of Return (%)/c 32.5 17.0 52.5 /c 40.0 /c CUMULATIVE ESTIMATED AND ACTUAL DISBURSEMENTS (US$million) FY74 FY75 FY76 FY77 FY78 FY79 FY80 FY81 FY82 FY83 FY84 Estimated 1.5 17.1 37.9 58.2 79.8 98.8 116.1 141.8 147.0 - - Actual - - 6.6 22.9 42.8 70.3 86.5 111.1 127.2 137.8 146.2 Actual/Estimated 0 0 17 39 54 71 75 78 87 94 99 OTHER PROJECT DATA Original Plan Actual First Second First Second Item Project Project Project Project First Mention in File - - 03/72 02/76 Government's Application - - 06/72 02/76 Appraisal 09/72 05/76 11/72 05/76 Negotiations 04/73 02/77 05/73 02/77 Board Approval 06/73 04/77 06/73 04/77 Loan Agreement Date 06/73 04/77 06/73 04/77 Date of Effectiveness 09/73 07/77 09/73 07/77 Closing Date 06/79 12/82 06/80 12/83 Borrower Republic of Korea Executing Agency Ministry of Transport (KKPA) Fiscal Year of Borrower January 1-December 31 - iii - MISSION DATA Month/ No. of Staff- Date of Year Staff weeks /d Report First Second First Second First Second First Second Proj. Proj. Proj. Proj. Proj. Proj. Proj. Proj. Preappraisal 10/72 08/75 4 2 4 3 10/72 09/75 Appraisal 11/72 05/76 3 4 6 10 05/73 03/77 Supervision I 02/73 03/78 3 1 3 1 04/74 06/78 Supervision II 10/74 11/78 1 1 1 1 12/74 01/79 Supervision III 04/75 07/79 3 2 6 2 05/75 09/79 Supervision IV 09/75 02/80 2 3 4 4 10/75 05/80 Supervision V 05/76 03/81 3 3 9 5 07/76 06/81 Supervision VI 11/76 11/81 1 1 1 1 01/77 12/81 Supervision VII 07/77 02/82 2 1 4 2 08/77 03/82 Supervision VIII 03/78 09/82 1 2 2 2 07/78 12/82 Supervision IX 11/78 10/83 1 2 1 2 01/79 12/83 Supervision X 07/79 - 2 - 2 - 09/79 - Supervision XI 02/80 - 3 - 3 - 05/80 - Completion 06/81 08/84 2 2 2 4 12/81 09/84 COUNTRY EXCHANGE RATES (Wor Per US$) Name of Currency (Abbreviation) Korean Won (W) First Second Project Project Appraisal year average (1973) (1976) 400 484 Intervening years average (1973-79) (1976-82) 478 607 Completion year average (1980) (1983) 681 802 /a Appraisal estimates are adjusted to reflect comparable items as executed. 'b Includes exchange adjustments of negative US$9.7 million for First Project and negative US$9.7 million for Second Project. /c These are the PCR estimates; the audit is unable to substantiate several elements in the PCR calculation and under appropriate adjustments believes the ERR would be lower; however, the audit lacks the data and resources to calculate an alternative ERR. /d Adjusted to reflect time spent on specific project only; most missions involved work on other projects. - iv - PROJECT PERFORMANCE AUDIT REPORT KOREA FIRST AND SECOND PORT PROJECTS (LOANS 917 AND 1401-KO) HIGHLIGHTS The projects included civil works at two ports: Pusan, the main port of Korea; and Mukho, a small coal and cement port on the northeast coast. The purpose of the works was to increase the capacity and improve the efficiency at the two ports to meet expected traffic developments to about 1986. At Pusan the projects included (i) rehabilitation of four piers (Piers 1, 2, 3 and 4), (ii) rehabilitation of the Central and the Lighterage wharves, and (iii) construction of new facilities to handle: domestic and international passengers (the Pubkin Pier and Pier 1, respectively), con- tainers and grain (Composite Pier), and coal, ore, minerals, scrap iron and steel (Pier 7). Also included in Pusan were the dredging of the entrance and access channels, and alongside the old and new piers (12.5 million cubic meters). At Mukho the project included the construction of two new coal loading piers, one on each side of the old pier which was rehabilitated, the installation of new coal loading equipment; rehabilitation of the central wharf; improvement of the breakwater; and dredging alongside the piers and wharf (PPAM, paras. 5 and 6). Civil works in both projects were substantially completed, although some cutbacks were made and some delays occurred. Overall cost overruns were about 20% in US dollars, 45% in Won in the First Project, and 13% in US dollars, 60% in Won in the Second Project. However, some individual items had important cost overruns: the rehabilitation of Piers 1, 2, 3 and 4 in Pusan cost 90% more than expected and the domestic ferry terminal (Pubkin wharf) cost almost twice the estimate, all in real monetary terms (PPAM, paras. 10, 11 and 13). Similarly, equipment purchased in the First Project turned out to be much costlier than estimated; in contrast, however, equip- ment purchased under the Second Project cost less than expected, an event for which the audit has no explanation (PPAM, para. 13). Overall, traffic exceeded appraisal forecasts; however, as opposed to the forecasts which predicted larger increases in bulk and break bulk traffic than in containerized general cargo, the largest increase was in con- tainer traffic (PPAM, Tables 2 and 3). The growth in container traffic created a demand which could have been accommodated in the container facility; however, a large number of containers has continued to arrive in non-cellular container ships and has been moved through the conventional general cargo berths (PPAM, paras. 16 and 17). The fact that nearly half of the containers still use the general cargo berths has also to do with the peculiar arrangements of the port with the stevedoring companies, a factor that was not taken into account when the size of the terminal was determined (PPAM, para. 17). The stevedoring companies own about 30 container yards at - v - various locations in and near Pusan and receive and make delivery of their containers alongside the ship on the conventional berths rather than use the port's container terminal (PPAM, para. 22). The audit has been unable to make projections of the likely future volume and pattern of container traffic through Pusan and of the likely throughput that could be accommodated with the existing port facilities. Moreover, the audit is unable, without detailed operational studies, to determine what levels and types of traffic could be accommodated at the port; nor is the audit able without such studies to specify the operational changes and marginal investments which might increase the container throughput at the port (PPAM, para. 24). The audit has discussed the question of possible throughput at the terminal because it affects the calculation of the ERR in a major way. In both projects the PCR calculated an ERR much higher than at appraisal. The audit has examined these calculations and is unable to substantiate several elements including the investment costs which are shown to be much lower than at appraisal. Appropriate adjustments would in the view of the audit tend to lower the ERR below the levels indicated in the PCRs. However, the audit lacks the data and resources to calculate an alternative ERR. In particular, it is unable at present, to specify alternative throughput projections for the terminal. This leaves for determination at another occasion the question as to how much traffic can be handled at the existing facilities in Pusan and under what cost and efficiency criteria. In turn this would affect how many benefits the two projects would generate in the future. While the audit is unable to specify levels of throughput for the facility, it does observe that use of the two berths built under the second project is below projections at appraisal. This is not due to inefficiency in operations but due to the nature of demand (many more shipments in smaller batches on smaller vessels) and due to the continued preference for direct delivery. Both factors tend to divert traffic from the container terminal to the break bulk general cargo berths (PPAM, paras. 24 and 25). Aside from the container terminal, some of the other project- assisted investments in Pusan have not achieved their intended use: coal throughput at Pier 7 is somewhat lower than forecasted because the antici- pated growth in cabotage traffic did not occur as domestic production has been generally lower and more coal is being moved by rail; less ore and minerals are being handled at Pier 7 because contamination by coal dust has discouraged use of the pier for those commodities; the forecast volume of scrap metal has not happened because a new ship-wrecking plant is now operating in the area, and because the poor output of the magnetic scrap crane at Pier 7 has limited the amount that can be handled; and grain throughput was initially lower because a shortage of inland storage delayed evacuation of transit grain from the silos and restricted volumes handled at the new facility. In contrast, the general cargo piers rehabilitated under both projects are well utilized principally on account of the continued arrival of containers in smaller ships which are more efficiently handled at - vi - general cargo berths than at the container terminal, but also on account of the increased general cargo traffic and the shortcomings of Pier 7 and the grain handling facility. Finally, the expected increase in international passengers to and from Japan has not materialized which, together with a con- siderable drop in the cargo moved by the ferries, has left the new interna- tional ferry terminal underused. In contrast, the domestic passenger ter- minal which was improved much more modestly than the international terminal, is now crowded (PPAM, paras. 27 to 32). Facilities at Mukho are underused as well because coal production in the area has not grown. Notwithstanding the lower volumes, it has been impossible to reach the design capacity of the coal loading equipment because of design shortcomings. In addition, the expected increase in cement traffic at Mukho has not materialized because the Ministry of Construction, with the help of the Japanese Government, built, some 10 km south of Mukho, a new cement port at Pugpyong which, due to its better location and newer facili- ties, has captured a large proportion of the traffic. The result was a 4.4 million ton short-fall over expected traffic volumes in 1981 (PPAM, para. 33). As indicated, the audit is unable to substantiate several elements in the PCRs' ERR calculation for the container terminal which accounts for 60% of the expenditures under the two projects. Under appropriate adjust- ments to these calculations, the audit believes the ERRs would be lower. The rest of the investments, which account for 40% of expenditures, would have had lower rates of return than expected except for the improvements and addi- tions in general cargo berths which are well used. The overall financial results of the two projects were better than expected mainly because container traffic has been so much higher. In con- trast, the financial results for everything else are much worse. However, revenues generated by the container traffic have assured the financial stability of the port of Pusan and KMPA as a whole, including the other ports it operates. Among them, Mukho is not meeting its expected financial goal and can only become self-sufficient with its existing traffic at much higher tariffs than presently charged (PPAM, paras. 34 to 36). The First Project was meant to help establish an independent and autonomous Korean Ports Authority (KPA) (PPAM, para. 2). Planning, coordi- nating, controlling and regulating port activities in the country had been scattered between a number of agencies over different Ministries and the project was to bring those together under one head (to avoid, for example, the Mukho-Pukpyong duplications). The institutional form of this authority was specified in the Loan Agreement to be that of a "chong", a statutory body under Korean law which the Bank believed (inaccurately as it turned out) had the requisite autonomy. The Government established the ports authority as a chong", but the Bank soon discovered that a "chong" was not the sort of organization it had in mind as it did not have the legal autonomy the Bank felt was necessary for KMPA to operate efficiently. Since 1973, the Bank has been seeking to have the Government change its view on the status of the - vii - authority and have it operate as a commercial entity with organizational, managerial and financial autonomy. The continuation of this dialogue for more than a decade, so far with only limited results, raises the question of whether the Bank has been trying to have the Government accept a type of organization with which it is not comfortable. A settlement of the issue has been proposed by the Government which, while leaving KMPA with its present administrative status, would make it mandatory for it to keep parallel com- mercial accounting books (PPAM, paras. 37 to 39). Experience under this project supports again the proposition that it was not good administrative practice to appraise projects without the final engineering at hand. At the time the Second Project was approved this practice was already discouraged by the Bank; yet, despite that the project was appraised. As a result of the lack of final engineering delays occurred and changes in project content had to be made. Lessons learned from this project include the need for better traf- ftc projections; the need for detailed operating plans for facilities created under a project; the need for better performance specification and control of Installation of equipment; and the obvious need to have a clear understanding of Government wishes before institutional changes are attempted. PROJECT PERFORMANCE AUDIT MEMORANDUM KOREA FIRST AND SECOND PORT PROJECTS (LOANS 917 AND 1401-KO) I. BACKGROUND 1. As Korea began to rebuild after the war in the 1950s transportation was almost at a standstill; rail services were slow, antiquated and unreli- able; there were no paved roads outside urban areas and no public bus lines; coastal shipping was the only means of moving around coastal areas, and for the most part people either walked or did not travel at all. By the early 1960s significant improvements had been made. In 1965-66 a UNDP financed, Bank executed study found many bottlenecks in all modes of transport and as a sequel to that study the Bank (including the International Development Association, IDA) engaged in a program to assist the Government in financiag various projects in railways and highways. In the late 1960s another UNDP-Bank study reviewed the country's first class commercial ports. That study concluded that except for a few, most Korean ports had ample capacity to handle future traffic flows: ports were, in fact, underutilized, operations were inefficient, the use of equipment was limited, most work was done manually, lighterage was used more than necessary, documentation was excessive and cumbersome, and, port services such as stevedoring and mainte- nance were found to be disorganized and inefficient. In the consultant's opinion only Pusan, Mukho and Masar. needed to resort to physical developments to handle the expected traffic to about 1986. The Government and the Bank then agreed to concentrate on improving the physical facilities and opera- tions at the ports of Pusan and Mukho, while at the same time improving over- all port coordination and administration, management and planning, and streamlining financial arrangements by creating a unified ports administra- tion. 2. The First Port Project was centered around increasing the physical capacity of the ports of Pusan and Mukho and improving their operational pro- cedures. It was also to be instrumental in the establishment of the Korean Ports Authority (KPA) initially with jurisdiction over just Pusan and Mukho but later to be extended to include all first class commercial ports. KPA was to be autonomous, with full independence to decide on its finances and budget, as well as on day-to-day operations at the ports under its jurisdic- tion. After the creation of KPA, first class ports in the country were to be operated on a commercial basis rather than as Government agencies. Although KPA's General Manager would have the rank of a Vice-Minister reporting to the Minister of Transport, he was expected to be fully independent to fix rates and charges for the use of ports, budget their expenditures, plar. their development, and ensure the financial self-sufficiency of the organization. - 2 - 3. At the time the First Project was prepared the port of Pusan had four piers and a long central wharf separating Piers 1 and 2 from Piers 3 and 4, a total of 3,845 m of berthing length (about 32 berths) of which only 2,445 m (about 20 berths) were used for commercial purposes; the rest was used by the military and the local fishing industry. The dry cargo handling capacity of the commercial berthing space was estimated to be about 1.4 million tons per year, an average of about 350 tons per linear meter of berth per year (close to 45,000 tons per berth/year) a relatively low figure by international standards. Yet, at the time, the port was moving a total of about 7.2 million tons of dry cargo (about 6.0 million excluding timber usually unloaded into a floating area), reflecting an intensive use of lighterage. There were 5,250 meters of lighter berths at the port, including 1,500 m operated by private companies. These wharves handled roughly 4.5 million tons of cargo a year, three times as much as the regular port berths. Part of the reason for the intensive use of lighterage appears to have been the comparatively shallow depth at the piers and wharves. In addition, the port had 25 anchorages, some with about 10 meters of water but the majority with no more than seven meters; thus, the average size of vessel that called at the port was no more than 15,000 to 20,000 DWT. 4. The First Project was expected to help rectify some of these deficiencies, an extensive dredging program would allow larger vessels to access the berths and piers, additional commercial berthing space would be made available for break bulk cargo by removing bulk commodities (grain, coal, ores, cement and scrap metal) to a special pier, fishing activities and the military would be moved to new areas thus liberating Piers I and 3 and a specialized container pier was to be constructed. At the same time, improvements in operations were to be obtained from a more intensive use of mechanization and from the use of specialized equipment to handle containers on the general cargo berths. As a result of all these measures the port would end up with some spare capacity for handling break bulk freight. 5. The First Project included: (i) the construction of a Composite Pier for handling containers (2 berths) and grain (1 berth), this included construction of the piers, a container stacking area, all necessary equipment for handling containers (4 gantry cranes, transtainers, and other ancillary equipment), three grain silos and equipment for mechanically unloading the grain; (ii) the construction of Pier 7 for handling bulk commodities, in particular, coal (1 berth), ores and minerals (2 berths), and scrap iron and steel (1 berth), and included the procurement of equipment and bulk handling systems; (iii) the rehabilitation and improvement of Piers 1 North and 2 for general cargo; and (iv) the provision of modern and improved facilities for the handling of passengers on Pier 1 South for international passengers (especially Japan traffic) and the Pubkin wharf for domestic passengers. 6. At the time of the First Project Mukho was a comparatively small, artificial port enclosed by two breakwaters, which handled mostly coal and cement. However, the crest elevation of the breakwater was so low that overtopping by the waves was a common event and the port was unsafe and unusable about 15 to 25 days a year. The berthing facilities at the port consisted of two piers adjacent to one another for loading coal by conveyor - 3 - (two berths), south of the coal facility a 330 meter wharf and a 130 meter pier for loading cement and clinker, and north of the coal facility about 750 meters of wharves and piers of general use including fishing. The wharf backup areas at the cement terminal were all paved and in good condition; however, all coal loading facilities including the piers, conveyors, conveyor supports, loaders, reclaimers, etc., were in poor condition, some beyond repair. Since the 2.8 million tons of freight handled through Mukho in 1970 were expected to increase to about 8.5 million tons by 1986 (6.0 million tons of cement and 2.5 million coal), improving the port was considered a high priority. Therefore, the project included (i) reinforcing and raising the breakwater; (ii) constructing, abutting to the existing two coal piers two new coal piers fitted with three 300 ton per hour loaders with telescopic arms which would be fed by the existing but rehabilitated conveyors; (iii) two new coal reclaimers; (iv) rehabilitation of the cement berths, and (v) dredging at the new coal piers to allow larger vessels to come alongside and be used in what was essentially cabotage transport to Pusan. These civil works, along with a reorganization of the operating procedures at the coal yard and better scheduling of the sailings, mostly to Pusan (for the coal) and Pohang kfor the limestone), were expected to produce a high utilization of the port and a high return on the investment. Rehabilitation of the cement berths were comparatively minor works to improve the handling of cement and clinker also moved mostly to domestic ports. 7. The increased traffic and the improved facilities and operating procedures, together with the introduction of cost related tariffs, were expected to make the two ports self-sufficient and independent of Government subsidies. To achieve this self-sufficiency tariffs were to be increased in two stages: a rate adjustment by the beginning of 1974, and the enactment of fully cost related tariffs by early 1976. Consultants were to assist in improving cost accounting and in implementing a commercial type accounting system for the new KPA so that a uniform cost-based tariff could be charged at all ports. 8. Implementation of the First Project began in late 1973 and civil works were started a year later in 1974. By late 1975 it was already evident that container traffic at Pusan was growing much faster than had been forecast when the project was designed. Consultants determined that there was a need for additional container berths and a follow on project was appraised in May 1976. This Second Port Project (Loan 1401, US$67.0 million) essentially aimed at expanding the container terminal then under construc- tion, but it also included extensive rehabilitation and rebuilding of other facilities (Piers 3 and 4, the Central Wharf and the Lighterage Wharf), which further added to the port's capacity to handle break bulk general cargo. The Second Project was approved by the Bank in April 1977. II. PROJECT IMPLEMENTATION 9. Except for some bureaucratic delays in contracting the civil works implementation of the First Project proceeded smoothly (PCR, para. 3.05); however, implementation of the Second Project was delayed by the hiring of consultants to prepare the detailed engineering for the project (PCR, para. 3.02). The project had been, in fact, approved without final engineering designs on hand, a risky practice that was already being discouraged by the Bank at the time. 10. Bids for the execution of the works in the First Project were received in late 1974 and soon it was realized that the appraisal cost estimate, which was done before the oil price crisis, would be significantly overrun. While at appraisal the project was estimated to cost US$118.6 million, by the end of 1974 the estimate had risen to US$168.0 million. As the Bank would not increase its participation in the project, the Government resorted to the Saudi Development Fund for assistance in financing US$35.0 million of the estimated cost overrun. However, in the end, the project cost only US$142.6 million to complete, mostly because of a sharp devaluation of the Won in late 1974 and thus, fewer of the Saudi funds were used. While the project was originally to be financed 68% by the Bank (US$80.0 million) and 32% by the Government (US$38.6 million), the final sharing of costs was 55% by the Bank (US$80.0 million), 14% by the Saudi Fund (US$21.2 million) and 31% by the Government (US$45.4 million). Still, the project had a consider- able cost overrun of 20% in US dollars or 45% in Won. 11. In the First Project the cost overrun on civil works was consider- ably less than the overrun for equipment reflecting the closer control that the Government could exercise over the domestic portion of the project than over the internationally procured elements. Nonetheless some civil works, particularly at Pusan, turned out to be considerably more expensive than expected at appraisal: rehabilitation of Pier 2 and the Domestic Ferry Terminal exceeded the appraisal estimate by 150% and 80% respectively. In contrast, the grain handling equipment and the scrap iron cranes cost four and three times more than the estimate, respectively, and the container handling equipment cost about 50% more than forecast (see PPAM, Table 1). 12. The design of the container terminal incorporated a particularly useful feature in that it allowed the pier to be enlarged in stages as need arose. In the event, the need was perceived even before the First Project was completed and the expansion was financed under the Second Project (Loan 1401-KO, 1977, US$67.0 million). However, works under the Second Project could not commence for a year after approval of the loan because of the time it took to hire consultants to complete the engineering designs and also on account of budgetary constraints of the Government. The works were a simple extension of what was already being done under the First Project and, as expected at appraisal (PCR, para. 3.05), it should have been cc-uparatively simple to get on with the task. However, although the processing of the project may have been too early, the Bank seized the opportunity to quickly proceed with the project before the preparatory work was done, this contri- buted to later delays. Once underway project execution was efficient. The Region believes that delays were mostly due to lack of Government funds. 13. Instead of the three lots of construction contracts foreseen at appraisal, works under the Second Project were broken down into four lots and the two lots for the container terminal extension were awarded to the same - 5 - contractor. All works were completed by mid 1983 about one year behind schedule. Cuts and additions were introduced to the project as it pro-- gressed. For instance, whereas a 700 meter extension to the container pier was planned, only 600 meters were built; however, two sheds for stuffing and unstuffing containers were built (20,500 sq. meters) as opposed to only one proposed (8,000 sq. meters), eight new sheds were built on Piers 3 and 4 (four each) when none were provided for at appraisal, and seven other build- ings were erected elsewhere in the port when none were planned. Of the ten transtainers, nine were bought; of 24 yard tractors, 18 were received; and of 72 chassis for moving containers, 70 were purchased; also, only one tugboat was procured when two were planned; however, four forklifts that had not been planned were procured. Also feasibility studies and detailed engineering for a proposed Third Port Project which were not planned were done under the project. On the basis of items that can be compared, the Second Project was almost 60% more expensive in Won, 13% more expensive in US dollars (PPAM, Table 1). However, in contrast with the First Project, cost overruns in the Second Project were larger for the civil works than for the equipment. In fact, equipment purchases turned out to cost much less than forecast, an event for which the audit found no explanation. The Region thinks that the statements in this paragraph relating to the length of pier extension, to the construction of new sheds and to the rise in costs are inconsequential. For example, according to the Region, eight sheds were done as part of the rehabilitation of Piers 3 and 4 called for in the appraisal report, although no specific mention was made of them; the 700 m figure for the container terminal expansion mentioned at appraisal was only indicative as the detailed engineering produced the length of 600 m; and that the cost overruns can not be supported. 14. While all civil works are providing satisfactory service, not all mechanical equipment procured under the two projects is performing as well as expected. In particular the scrap cranes have not been able to generate their expected output apparently because their magnets are too weak, their down time is too high, their span is too wide to work two hatches at the same time, and they have been placed so that visibility is poor and their opera- tion complicated. The problem can be traced partly to poor specifications and partly to poor supervision of their installation. The consequence is that scrap ships wait five times longer for a berth and take three to four times as long to unload as the average wait'ng and operating times at the port. The coal loading equipment at Mukho also has not been able to reach its design capacity due apparently to the purchase of poorly specified equip- ment. At Mukho, however, the significantly lower traffic has made the consequences of the equipment's poor performance less noticeable. The Region strongly objects to the statements in this paragraph regarding poor supervision and poorly specified equipment because it believes that there is little or no evidence to support them. 15. All other equipment seems to be working as planned and productivity at the port has improved considerably since the introduction of the mechani- zation that the project made possible. Ill. PROJECT RESULTS A. Economic Impact of the Project 16. It is unfortunate that otherwise well executed projects should have been planned and designed on the basis of traffic forecasts that turned out to be quite inaccurate. The traffic projections indicated the need to build additional facilities when adapting existing berths aad piers to alternative uses would, in hindsight, have sufficed. Had the traffic forecast been more accurate in predicting the growth in container flows, for example, provision could have been made at the time to adapt the existing piers for intensive container operation instead of rehabilitating them for break bulk use. Although not an imminent need, if container traffic continues to grow at high rates it may become necessary to take such an action and recondition again piers that were just rehabilitated under the two projects. This is because in the absence of throughputs of several hundreds of thousands of TEUs it is more economical to convert a conventional pier to container use than to build a new container terminal. Similarly, given what is now known about developments at Mukho, facilities there could have been made considerably smaller. 17. Traffic forecasts for Pusan (PPAM, Table 2) were already off by 20% when the First Project was approved in 1973. Although traffic estimates were updated for the Second Project, when it was approved in 1977 traffic was already 35% higher than the revised estimate (which was, in turn, 100% higher than had been estimated four years earlier at the time of the First Project). When the First Project was completed in 1978, traffic exceeded forecasts by a factor of two and when the Second Project was completed in 1983, it was 1.5 times higher than forecast. This increase in traffic should have been foreseen at the time the First Project was appraised as indicators were clearly showing Korea's export drive and rapid industrialization; however, according to the Region, the high ex-post growth rates could not have been foreseen. Similarily, the growth in foreign trade should have been a major element in forecasting traffic four years later when the Second Project was appraised; yet, the SAR (Annex 7, para. 1) admitted that ...available statistics of cargo movement through Pusan provide an unsatisfactory basis for projections..." and that -this was particularly true for movements of general cargo, the key commodity from the point of view of the project.- Since the expansion of Korea's trade was concentrated on consumer products, much of the increase was likely to be in general cargo which could have been predicted to eventually move in containers; this trend was missed in the forecasts prepared for both projects (PPAM, Table 3).1/ Instead, the appraisal for the First Project forecast a significantly larger growth in bulk and break bulk commodities and for this reason the project was 1/ Failure to predict the rate of containerization has created difficulties with other Bank projects such as the First and Second Port Projects in Papua New Guinea, the Yemen Arab Republic Port Project and the Mauritius Port Project, among others. - 7 - designed to make available space for handling those cargoes (Piers 1, 2 and 7). Similarly, in the Second Project a considerable proportion of investments was dedicated to improving general cargo facilities (Piers 3 and 4, the Central Wharf and the 1,ghter Wharf) when the traffic that was increasing most rapidly was containers. While bulk traffic increased moderately in the decade since the First Project, break bulk general cargo increased until 1978 and has decr'eased significantly sincethen as containers have been used more and more (PPAM, Tables 2 and 3). Thus, the need for space to handle bulk and break bulk general cargo (more recently) has been below forecasts with the result that some project financed facilities are now less used. Failure to predict the rapid increase in container traffic and to identify how the containers would flow through the port also seems to have affected the judgment on the appropriate capacity that was necessary at the container terminal. When traffic grew faster than the forecast the decision was made to double the size of the terminal (Second Project); however, this has proven to be excessive because a large number of containers still arrive in non-container ships that can he handled as expeditiously, cheaply and safely at the conventional piers (PCR for Second Project, para. 4.07). The Region feels this statement is unwarranted and premature. The terminal, according to the Region, was built to handle container traffic growth to 1990 and hence it is anything but excessive because capacity will most likely be reached long before that date. 18. A similar miscalculation occurred at Mukho where future coal and cement production trends as well as traffic patterns were missed in the forecast. Coal shipments instead of growing at 4% per year, have been moving erratically but roughly hovering at around 65% of the volume forecast. The main reason has been a drop in coal production in the port's hinterland and a switch from cabotage to a more intensive use of rail transport. Cement shipments through Mukho after increasing at about the rate forecast, fell significantly when the new specialized port of Pukpyong was opened just 10 km south of Mukho. The net result of these changed traffic flows and patterns was a shortfall of about 4.4 million tons vis-a-vis the forecast for 1981 (PPAM, Table 9). 19. The audit's review of the economic performance of the projects tends to confirm the PCRs' conclusion that the benefits obtained from container traffic compensate for the rather marginal benefits generated by all other investments in the projects. However, the audit does not agree that the economic rate of return of the First Project is 60% higher than estimated at appraisal and that that of the Second is almost 2.5 times higher. Instead, for reasons developed in the following paragraphs, the audit estimates that the completion rates of return were no more than the rates estimated at appraisal. (i) The Container Terminal at Pusan 20. According to the PCR the construction (under the First Project) and expansion (under the Second Project) of the container terminal resulted in high economic returns. The audit concurs that in view of the rapid build up of container traffic in the 1970s, proper container handling facilities were - 8 - required at Pusan. At the time of the First Project there were no specialized facilities at the port and it would have been impossible to handle economically the traffic that came to Pusan in the succeeding several years without a proper terminal. By constructing the first two berths of the container terminal (under the First Project) and by improving the capability of the general cargo berths to handle containers the Korean authorities prevented a serious breakdown of the country's foreign trade. The doubling of the container terminal to four berths under the Second Project provided an increased container handling capacity. However, the audit is not clear whether this additional capacity was necessary or economically justified, or whether it represented the least cost solution for handling the container traffic that was forecast at appraisal, the traffic which is now passing through Pusan or the traffic likely to come in the near future. 21. The SAR for the First Project estimated an ERR of 37% for the first two berths of the terminal based on a throughput of 1.8 m tons (equivalent to about 200,000 containers) in the early 1980s and a throughput of roughly twice that in 1986. The SAR for the Second Project estimated an ERR of 17% for the two additional berths and, though it is unclear what throughput was projected at the time, no more than 170,000 containers were expected to use the facility by 1986 (SAR, Table 6). While total containers passing through Pusan in the early 1980's exceeded the projections of both appraisals, the completed container terminal (all four berths) handled less than 400,000 containers in 1983 mainly because of the continued high use of other port facilities to move them. If one were to arbitrarily assign current traffic unevenly, say 250,000 containers to Pier 5 and 100,000 to Pier 6, one would conclude that use of the piers was in accordance with the respective SAR projections. However, if one were to make the more reasonable assumption that the terminal's throughput is distributed evenly over the four berths, the use of Pier 5 would have been slightly above projections in the first few years after it came into service and slightly below after the expansion came on line and Pier 6 would be significantly underutilized. 22. The audit notes that the design of a container handling facility in a port is considerably influenced by the characteristics of the distribution chain of the containers both on the seaward and landward sides of the port. If containers arrive in large batches on large ships, an automated, dedicated terminal would provide the lowest total (main haul) costs; however, if, as in Pusan, containers arrive in smaller batches in smaller vessels, adaptation of existing berths may be the least cost alternative for handling them, especially if this solution is tied to a system of direct delivery of containers to and from inland locations. Thus, the suitability of container handling facilities at Pusan is determined to a considerable extent by the way in which container traffic was forecast to develop. However, as indicated, the forecasts in the two projects failed to predict accurately the development of container traffic. In hindsight, the following facts about actual traffic development are relevant: - 9 - (a) in the year 1981 (the third full year of operation of Pier 5) the average batch was 318 containers and the average container ship calling at Pusan was a 700 TEU vessel2/ (indications are that the type of vessel size has not changed greatly since 1981); (b) in the most recent year for which data are available (1983) roughly 55% of all Pusan containers were handled at the terminal and 45% at other berths in the port, and the majority of the latter were marshalled at privately owned container yards on the periphery of Pusan City and picked up and delivered directly by truck at shipside. Thus, the typical container ship currently calling at Pusan is at the smaller end of the scale by container ship size standards and while there is no full explanation for this phenomenon, the geographic position of Pusan in relation to world shipping lanes may have some bearing on this fact, and so may the attractiveness (based on cost, tariff or other considerations) of the system of direct delivery used by forwarders in Pusan. In turn, this may be influenced by the fact that over 80% of all containers moved through Pusan do not have their origin or destination in Pusan. 23. The audit concludes that the objective of using the terminal mainly for mainline (larger) container vessels (SAR for the Second Project, para. 5.13) has not yet been met and that in consequence "a smaller project at a lower cost would have sufficed," as the appraisal for the Second Project indicated would be the case if not enough mainline container ships called at the port (para. 5.13).3/ Similarly, the projected future use of the terminal also has an important effect on the ERR. If a greater proportion of containers comes in larger batches on larger vessels the container terminal would be the most appropriate place to handle them. If unacceptable delays and costs should occur as such traffic increases, the expansion of the terminal might be the most economical course of action. However, if the present pattern of batch and ship size continues into the future, several strategies would be available to optimize the use of the available facilities in Pusan, including concentration of larger vessels at the terminal while at the same time making greater use of the rest of the port for containers. 24. The audit observes that the number of containers that can be handled at the terminal within acceptable delay and cost parameters vis-a-vis 2/ See detailed engineering for 3rd Phase Pusan Port Development, Lyon Associates Inc., Consulting Engineers; Tables 11-12. 3/ The Region would like to reiterate that the terminal throughput should not be an issue. According to the Region, all of the "complex operational analyses" have been done and the maximum throughput was established as outlined in the PCR. - 10 - the demands of the trade is not a unique number but a range.4/ The range can only be determined by means of complex operational analyses5/ which take into account the unique characteristics of the particular trade and facility, and establish the total distribution costs from origin to destination. So far as the audit can determine, such analyses have not been made.6/ Yet, under reasonable cost and delay standards, and assuming that the proportion of larger vessels (2,000 TEU ships) using the port were to increase significantly, the audit estimates that the container terminal could handle at least 50% more than the 340,000 containers which used the facility in 1983 if use of berth length, crane number and productivity, and ground equipment efficiency are optimized. If, on the other hand, the terminal is used for smaller batches and vessels, as at present, the number of boxes that could be handled would be less, though still in excess of the 1983 levels. Furthermore, depending on the distribution of batches and ship sizes the number of containers that could be handled at the port could be varied significantly by varying the number of cranes and by making other adjustments to the operation of the port as a whole. 25. The audit has discussed the question of possible throughput at the terminal because it affects the calculation of the ERR in a major way. In both projects the PCR calculated an ERR much higher than at appraisal. The audit has examined these calculations and Is unable to substantiate several elements including the investment costs whith are shown to be much lower than at appraisal. Appropriate adjustments would in the view of the audit tend to lower the ERR below the levels indicated in the PCRs. However, the audit lacks the data and resources to calculate an alternative ERR. In particular, it is unable at present, to specify alternative throughput projections for the terminal. This leaves for determination at another occasion the question as to how much traffic can be handled at the existing facilities in Pusan and under what cost and efficiency criteria. In turn this would affect how many 4/ An indication of the wide variations in capacity estimates is provided by reference to Table 22 in the SAR of the First Project where the first two berths alone were shown to be able to handle the equivalent of 400,000 containers for many years into the future, presumably at acceptable economic costs. On the other hand, the SAR for the Second Project shows that Pier 6 came into use on an economic basis after the first two berths had reached an annual throughput of only 200,000 containers. 5/ See footnote 3 above. 6/ Studies made in connection with the feasibility of the third phase development at Pusan such as Final Report Korea Port Phase Three Development Study by a group of consultants February 1981 and related studies do not make total distribution cost analyses for various alternative uses of existing and proposed systems to determine total cost to tho economy and they cost out private sector alternatives including the cost of land without corresponding opportunity cost solutions for publicly owned land. - ii - benefits the two projects would generate in the future. While the audit is unable to specify levels of throughput for the facility, it does observe that use of the two berths built under the second project is below projections at appraisal. This is not due to inefficiency in operations but due to the nature of demand (many more shipments in smaller batches on smaller vessels) and due to the continued preference for direct delivery. Both factors tend to divert traffic from the container terminal to the break bulk general cargo berths. 26. In both the First and Second Projects adverse consequences have resulted from building up facilities which did not fit well with the containerized and non-containerized distribution of general cargo traffic. The lesson which emerges is that the Korean authorities would be well advised to make careful and comprehensive analyses in order to decide on the need for further expanding the container terminal, and on the design of such an expansion if it is needed. In that connection, the authorities may also wish to consider the appropriateness or otherwise of discontinuing the direct delivery of containers and of closing down the private satellite container terminals. As long as container marshalling services are being provided by the private sector and cost and service characteristics are acceptable to users, the authorities may wish to be cautious in developing a wholly publicly owned alternative scheme. Possible externalities in the form of congestion and pollution costs for the city, and inappropriate land use patterns would, of course, need to be taken into consideration in such analyses. (ii) Other Investments at Pusan 27. Other investments in Pusan, which represented about 40% of total expenditures, have produced marginal retur s, a fact that is concealed by the joint analysis of all investments (including the container berths) in the PCR for the First Project, and their exclusion in the ERR calculations of the Second Project. (a) Grain Handling Facility 28. Within acceptable cost and delay limits for the average size grain vessels that call at Pusan (20,000 DWT), the grain handling facility located at one of the ends of the Composite Pier can handle between 3.0 and 4.0 million tons per year. The Region commented that the appraisal estimated 2 million tons per year; the audit believes that the limiting conditions which determine an economical capacity of 2 million tons/year have not occurred. However, traffic through it was about 1.6 million tons in 1983 and over 100,000 tons have had to be moved over the less efficient general cargo berths. This suggests that the grain facility is not being adequately used (PPAM, Table 6). The explanation provided in the PCR is that the silos are used for storage rather than just as a transit facility. This raises questions about the reasonableness of the PCR's use in the ex-post evaluation of the same benefits as were forecast at appraisal. Quite likely the benefits have been somewhat lower because less grain than expected has moved through the terminal, and the costlier handling at general cargo berths has - 12 - made savings correspondingly smaller. In addition, traffic has been added to berths that should be used otherwise. Some of the loss is compensated, however, by the benefit arising from the dead storage of grain in the silos; yet, this use of the existing assets is not likely to be one that maximizes benefits to the economy. Also, the silos, and particularly the equipment, turned out to be much more expensive than expected: the silos were 30% more expensive and the equipment was four times dearer than forecast. The audit agrees with the marginality of the rate of return estimated in the PCR. (b) Bulk Commodities Pier (Pier 7) 29. An important objective of the project was to remove the handling of bulk commodities from the general cargo berths to a specialized pier so that more capacity would be available to cope with the expected increase in break bulk shipments. Thus, Pier 7 was built to handle coal, ores, minerals, scrap metal and steel. The size and design of Pier 7 was matched to the traffic forecasts but in contrast to grain, for which traffic just about matched the forecast, traffic intended for Pier 7 fell greatly short of appraisal projections (PPAM, Table 7). One reason for the shortfall in traffic is that the pier was designed to handle coal side by side with ores and minerals both of which are easily contaminated by coal dust. The contamination has discouraged the use of the pier for the ores and minerals and thus, while they were to be over 55% of Pier 7's traffic they are now less than 35% of what moves over it. Another reason for thp low volumes is that a ship wrecking company started operating close to the port with the consequent decrease in imports of scrap and steel. Finally, the decreased domestic production of coal and a shift in coal shipping from cabotage to rail transport have also contributed to reduce the use of Pier 7. Given the muth lower traffic volumes and the 60% higher than forecast cost of building and equipping Pier 7, the audit estimates the facility to have had a very low, if not negative, rate of return. (c) Piers 1 North, 2, 3 and 4, Central Wharf and Lighter Wharf 30. Break bulk general cargo traffic grew faster than forecast until 1978 and the rehabilitation of Piers 1 and 2 was a welcome relief; however, it has fallen back considerably since then, mostly because of the rapid pace of containerization (PPAM, Table 3). The significantly improved and enlarged number of gene-al cargo berths of the port are now used somewhat below their capacity, although more intensely than projected in part because of their use for containers but also because of the shortcomings of the grain terminal and Pier 7. The Region notes the throughput in Pusan is higher than in most ports and that it is high in consideration of these berths being used for container traffic. However, their rehabilitation was, overall, 88Z more expensive than expected (measured in US dollars Pier I was 22% more, Pier 2 was 100% dearer and Piers 3 and 4 and the Central and Lighter Wharves were 200% more expensive than forecast) and thus the audit conjectures that the rate of return on investments would be no more than estimated at appraisal. The Region indicates that in its view the statement regarding 88% and 200% overruns cannot be supported. - 13 - (d) Passenger Facilities (Pier 1 South and the Pubkin Wharf) 31. At appraisal a significant increase was anticipated in the flow of passengers both on the international ferry to and from Japan and on domestic routes. The former was also expected to move a certain number of roll-on/ roll-off container trailers. Thus, the First Project included the improve- ment of Pier I South for international passengers and ro-ro traffic, and improvement of the Pubkin Wharf for domestic use. However, as can be seen from PPAM, Tables 4 and 8, both the international ro-ro, and passenger traffic have been less than one-third of the expected volume and the domestic flow, though closer to expectations, has also been less than anticipated. The net result is that the international facility is considerably oversized and underutilized even in peak travel periods, while the domestic terminal, which was improved much more modestly than the international, is at times congested and crowded. 32. Also, due to the existence of a large rock formation at the end of the pier the full length of it cannot be used to dock either other ferries or tourist liners which are now calling quite often at Pusan. The lack of enough soundings prevented the detection of that formation which is only at 4 meters depth and would now be very expensive to remove. Therefore, it is unlikely that the utilization of the international terminal can be significantly increased. (iii) Port of Mukho 33. The PCR for the First Project estimated the rate of return on investments at Mukho to be slightly less than 5%. The audit agrees that this probably reflects well the poor investment that the improvement of Mukho has turned out to be. Construction and equipment costs averaged well over 50% more than expected and traffic is but a fraction of what was expected (PPAM, Table 9). Although the port is well operated and maintained, it is considerably larger than necessary for its present and likely future traffic. The lack of port investment coordination manifest itself vividly in the construction of a new port at Pukpyong just a few kilometers south of Mukho. The new port competes directly with Mukho and has attracted a considerable proportion of what was expected to be Mukho's traffic. Another reason for the considerable shortfall at Mukho was the switch in the transport of domestic coal from cabotage to rail. A careful study of the alternatives for the transport of coal and also cement would have been needed prior to engaging in investing at Mukho; this was not done and the investment in Mukho has become largely redundant. In as much as the switch of mode of transport by the coal was the result of regulatory actions decreed by the Government, it could have been avoided if a proper coordinating authority had existed. The Region feels that the foregoing is not correct because rail and cabotage complement each other rather than compete for coal traffic at Mukho and also that a careful analysis was done but that obviously plans for a similar development at Pukpyong were not known to the appraisal team. The audit notes that the coal shipped zrom Mukho originated at mines which had direct access to Korea's rail system. - 14 - H. Financial Impact of the Project 34. At the time the Bank became involved with Korean ports financial control was unsatisfactory and record keeping was tailored for Government budgetary requirements rather than to assist management. In fact, there was no single and complete set of accounts, and although revenues were recorded in detail, expenses were only indicative of the true costs of operations. Remedial measures were to be implemented under the projects: consultants would help introduce a full commercial type accounting system where costs would be recorded by cost centers and intensive training in the bookkeeping aspects of the new system would be carried out. The new accounting system was to be a principal aid to the new ports authority in determining its costs and hence its cost-based tariff. However, since the Ports Authority was never created as an independent agency, it was not until fiscal year 1983 that commercial accounts were produced in parallel with the traditional administrative accounting used in the Government. In fact, the necessary legal actions that would sanction the use of the new accounting procedures have never been taken (PCR, para. 6.02). 35. The new accounting system was expected to generate the information to determine a uniform cost-based tariff for Pusan and Mukho and later all other ports under the jurisdiction of the new ports authority. A cost-based tariff has yet to be implemented. 36. The financial objective of the projects was to have the new ports authority become self sufficient by the time the First Project was completed; in particular, it was expected that Pusan and Mukho would no longer depend on subsidies. Financial self-sufficiency has been achieved at Pusan (PCR of First Project, paras. 5.03 to 5.06 and PCR for Second Project, paras. 5.01 to 5.06), not due to the introduction of the cost based tariff, but because the rapid rise in containerization has allowed the generation of sufficient revenues to improve the port's overall financial results. Container tariffs are high and unit costs to handle them are low. In contrast, at Mukho it will take a considerable time before the port breaks even in a commercial sense (PCR for First Project, paras. 5.07-5.10), and the cost-based tariff may never be introduced there because of its competitive disadvantage vis-a-vis Pukpyong. C. Institutional Impact of the Project 37. At the time of the First Project there was little coordination of activities within or among individual ports. Too many operators were involved with the handling of cargoes within ports (which resulted in low throughputs) and there was little coordination between different ports as they were under the jurisdiction of a number of Governmental agencies spread across different ministries. The scattering of functions, plus the Economic Planning Board's control over budgets, resulted in weak, uncoordinated management, poor investment planning and disjointed financial and operational policies (SAR for First Project, paras. ii, 3.11-3.18). 38. It was proposed to deal with these problems by creating an independent and autonomous body similar to a statutory corporation. This new body would control all first class commercial ports in the country and would - 15 - be financially self-sufficient to insure that it made optimal investment decisions. The Korean Ports Authority (KPA) was expected to be free to determine its own budget, control its costs and determine port tariffs in a manner that would secure its viability by charging fully allocated costs to its users. A Plan of Action to achieve these objectives was attached as Schedule 5 to the Loan Agreement for the First Project which included, at the suggestion of the Bank, the Korean word "chong" to describe the nature of the new organization. Had the Bank known that a *chong", as was explained to the andit mission, is not an autonomous agency but a Government Department, it would most likely not have been used to describe the kind of organization that was proposed. Following the terms of the agreement the Government created the Korean Maritime and Ports Authority (KMPA) as a "chong" and also empowered it with regulatory functions such as licensing ships and crews and controlling cabotage and ocean-going shipping. Clearly, the Government was not prepared to relinquish control over port affairs and their administration and planning. However, for the past 10 years the Bank has been seeking unsuccessfully to relieve the agency of its regulatory functions and change it to an independent and autonomous port administration. 39. The dialogue that has taken place over the last decade puts in question the reasonableness of the objective still being sought by the Bank. Independent of whether the organization proposed by the Bank at the time of the project was one that satisfied both the Bank and the Government, the question now is whether the Bank should persist in institutionalizing an organizational arrangement with which the Government is evidently not comfortable. Since, according to Bank staff, due to the good Government/Bank dialogue, better coordination of investments and improved port planning for class one ports has already been largely implemented by the Government,-, the outstanding issue would be the management of KMPA's financial and economic goals. The question is then whether those goals could not also be reached under the framework currently used by the Government. The Bank has under review a proposal by the Government under which the Government would institutionalize the use of commercial accounting to help guide the achievement of those financial and economic goals while leaving KMPA's administrative structure untouched (PCR on Second Project, para. 6.02 and Attachment to Table 8). A prompt decision would be desirable to both sides. 7/ Industrial ports, however, are still under the jurisdiction of the Ministry of Construction and the coordination mechanism with class one ports is still the same as it was before. PROJECT PERFORMANCE 4UDIT MEMORANDUM KOREA FIRST AND SECOND PORT PROJECTS (LOANS 917 AND 1401-KO) Appraisal Cost Estimate vs. Actual Expenditures APPRAISAL COST ESTIMATE ADJUSTED APPRAISAL ESTIMATE La ACTUAL EXPENDITURES First Proiect Second ProJact First Project Second Project First Project Second Project TOTAL Wona US$§bWon n /c Won a Wo US Von.a Ua$;Won a S US$. on US d PUSAN Civil Works - Dredging 5,508 13.77 1,736 3.58 1,736 3.58 3,117 6.87 49,000) 70.75) 74,415 123.37 - Composite Pier 14,832 37.08 29,552 60.93 25,330 52.23 22,098 45.75 - Pier 1 4,656 11.64 - - - - 6,868 14.22 - - 6,868 14.22 - Pier 2 784 1.96 - - - - 1,979 4.10 - - 1,979 4.10 - Pier 3 & 4 - - 2,088 4.11 - - 2,088 4.31 - - - Central Whf. - - 757 1.56 - - 757 1.56 - - 14,211) 20.25) 14,211 20.23 - Lighter Whf. - - 503 1.04 - - 88 0.18 - - - Pier 7 5,420 13.55 - - - - 6,974 14.44 - - 6,974 14.44 - Grain Silos 1,896 4.74 - - - - 2,408 4.98 - - 2.408 4.98 - Domestic Pam Tranl. 788 1.91 1.429 2.96 - 1.29 2.6 3, 88 4 84-.17 3466 2T~ 29,999 61M8 #!0fi 93T2 63-,211 -1-. W 108,2 184.32 Equipment - Container Handling 2,828 7.07 11,416 23.54 11,416 23.54 3,964 8.21 8,251 11.86 12,215 20.07 - Coal and Ore Idig. 1,664 4.16 - - - - 2,921 6.05 - - 2,921 6.05 - Scrap Handling 448 1.12 - - - - 1,945 4.13 - - 1,945 4.03 - Grain Handling 772 1.93 - - - - 4,311 9.05 - - 4,371 9.05 - Ro-Ro Rasp 172 .43 - - - - - - - - - - * - Thgboats - - 3.787 7.79 - - 3 3.90 - - 91q 1.40 919 1.40 5,88 1.71 'M3 i1.333 27.V4 1320 27.33 =0 13.2 40.60 SUB-TOTAL PUSAN 39,768 99.42 49,839 102.75 43.308 89.30 58,272 120.65 72,381 104.25 130,653 224.90 KUKHO Civil Works - Dredging 32 .08 - - 829 1.72 - - 829 1 1.72 - Coal Pier 1,048 2.2 - - - - ) - - - Central Wharf 228 .57 - - - - ) 2,310 4.78 - - ) 2,310 4.78 - Breakwater 860 2.15 - - - - ) - - 2,168 5.42 - - - - ,13 6.50 3,139 6.50 E4uLpment - Coal Handling IM 3.94 - - - - 2 5.30 - - 2.561 5.30 SUB-TOTAL MUKHO 3,744 9.36 - - - - 5,700 11.80 - - 5,700 11.80 CONSULTING SERVICES 3,908 9.77 3,444 7.10 3,444 7.10 4,913 10.17 3,698 5.98 8,411 16.15 TECHNICAL ASSISTANCE - - 1,000 2.06 1,000 2.06 * - 727 1.07 727 1.07 ADDITIONS TO PROJECT 'e - 4,622 6.29 4,622 6.29 TOTAL 41,420 118.55 54,283 111.92 47,752 98.46 68,886 142.62 81,228 117.59 150,113 260.21 /a Adjusted to reflect actual execution of project items. At Won 400 per US$ c At Won 482 per US$ 77 At Average exchange rate of period when expenditures were incurred. To Includes forklift trucks and feasibility and engineering studies for possible Third Ports project. Sourne PCRA January 1985 PROJECT PERFORMANCE AUDIT MEMORANDUM KOREA FIRST AND SECOND PORT PROJECTS (LOANS 917 AND 1401-KO) Pusan Port - Forecast vs. Actual Dry Cargo Throughput (Thousands of Tons) APPRAISAL FORECAST ACTUAL FIRST PROJECT SECOND PROJECT Dry Bulk Gral. Cgo. Total Dry Bulk Gral. Cgo. Total Dry Bulk Gral. Cgo. Total 1972 5,250 3,682 8,932 - - - n.a. n.a. n.a. 1973 5,488 3,803 9,291 - - - 4,766 6,453 11,219 1974 5,803 4,001 9,804 - - - 4,443 7,650 12,093 1975 6,153 4,079 10,232 - - - 6,045 8,631 14,676 1976 6,513 4,332 10,845 8,404 8,153 16,557 7,724 11,668 19,392 1 1977 6,847 4,567 11,414 8,677 8,505 17,182 9,413 13,693 23,106 1978 7,230 4,785 12,015 8,632 8,874 17,506 7,975 16,218 24,193 1979 7,604 5,024 12,628 8,991 9,262 18,253 7,817 17,304 25,121 1980 7,998 5,249 13,247 9,379 9,667 19,046 6,394 16,327 22,721 1981 9,456 4,296 13,752 9,794 10,095 19,889 7,973 19,149 27,122 1982 - - - 10,033 10,549 20,582 9,882 16,573 26,455 1983 - - - - 10,284 11,029 21,313 10,781 18,044 28,825 1986 7,360 9,905 17,265 11,103 12,603 23,706 - - - Sourse: PCRs March 1985 PROJECT PERFORMANCE AUDIT MEMORANDUM KOREA FIRST AND SECOND PORT PROJECTS (LOANS 917 AND 1401-KO) Pusan Port - Forecast vs. Actual Throughput of Break Bulk and Containerized General Cargo (Thousands of Tons) APPRAISAL FORECAST ACTUAL FIRST PROJECT SECOND PROJECT Break Contain- Total Break Contain- Total Break Contain- Total Bulk erized Gral. Cgo. Bulk erized Gral. Cgo. Bulk erized Gral. Cgo. 1973 3,333 470 3,803 - - - 5,510 943 6,453 1974 3,331 670 4,001 - - - 6,120 1,530 7,650 1975 3,199 880 4,079 - - - 5,130 3,501 8,631 1976 3,232 1,100 4,332 4,778 3,375 8,153 6,470 5,198 11,668 1977 3,192 1,375 4,567 4,944 3,561 8,505 7,040 6,653 13,693 1978 3,145 1,640 4,785 5,090 3,784 8,874 8,325 7,893 16,218 1979 3,116 1,908 5,024 5,089 4,173 9,262 8,062 9,242 17,304 1980 3,077 2,172 5,249 5,080 4,587 9,667 5,913 10,414 16,327 1981 1,859 2,437 4,296 5,136 4,959 10,095 7,149 12,000 19,149 1982 - - - 5,150 5,399 10,549 2,044 14,529 16,573 1983 - - - 5,158 5,831 11,029 2,082 15,962 18,044 Source: PCRs March 1985 PROJECT PERFORMANCE AUDIT MEMORANDUM KOREA FIRST AND SECOND PORT PROJECTS (LOANS 917 AND 1401-KO) Pusan Port - Forecast vs. Actual Throughput of Container Traffic (Thousands of Containers) APPRAISAL FORECAST ACTUAL SECOND FIRST PROJECT PROJECT At General Interntle At General Interntl. Cargo Ferry Container Cargo Ferry Container Berth Berth Pier Total Total Berth Berth Pier TOTAL 1972 12 15 - 27 - 35 - - 35 1973 20 26 - 46 - 82 - - 82 1974 28 37 - 65 - 133 - - 133 1975 34 47 - 81 - 173 - - 173 1976 40 56 - 96 - 238 - - 238 1977 76 56 - 132 224 312 - - 312 1978 0 56 108 164 232 347 - - 347 1979 0 56 140 196 253 209 17 176 402 1980 0 56 172 228 275 223 19 195 437 1981 0 56 204 260 298 286 18 223 527 1982 - - - - 321 269 n.a. 283 552 1983 - - - - 346 286 n.a. 340 626 1986 0 56 344 400 395 - - - Source: PCRs May 1984 PROJECT PERFORMANCE AUDIT MEMORANDUM KOREA FIRST AND SECOND PORT PROJECTS (LOANS 917 AND 1401-KO) Pusan Port - Forecast vs. Actual Throughput of Container Traffic (Thousands of Tons) APPRAISAL FORECAST ACTUAL SECOND FIRST PROJECT PROJECT General Interntl. At General Interntl. Cargo Ferry Container Cargo Ferry Container Year Berth Berth Pier Total Total Berth Berth Pier TOTAL 1972 100 175 - 275 - 425 - - 425 1973 190 280 - 470 - 943 - - 943 1974 280 390 - 670 - 1,530 - - 1,530 1975 370 510 - 880 - 3,501 - - 3,501 1976 480 620 - 1,100 3,375 5,198 - - 5,198 1977 759 620 - 1,375 3,561 6,653 - - 6,653 1978 0 620 1,020 1,640 3,784 7,893 - - 7,893 1979 0 620 1,288 1,908 4,173 5,817 200 3,232 9,242 1980 0 620 1,552 2,172 4,587 6,417 213 3,784 10,414 1981 0 620 1,817 2,437 4,959 7,305 212 4,483 12,000 1982 - - - - 5,399 8,174 n.a. 6,355 14,529 1983 - - - - 5,871 8,539 n.a. 7,423 15,962 1986 0 620 3,165 3,785 6,984 - - - Source: PCRs May 1984 PROJECT PERFORMANCE AUDIT MEMORANDUM KOREA FIRST AND SECOND PORT PROJECTS (LOANS 917 AND 1401-KO) Pusan Port - Forecast vs. Actual Grain Traffic (Thousands of Tons) APPRAISAL FORECAST ACTUAL SECOND FIRST PROJECT PROJECT At General At New At General At New Cargo Grain Cargo Grain Year Berth Facility Total Total Berth Facility TOTAL 1972 1,000 - 1,000 - 917 - 917 1973 1,060 - 1,060 - 1,087 - 1,087 1974 1,120 - 1,120 - 644 - 644 1975 1,180 - 1,180 - 977 - 977 1976 1,250 - 1,250 1,002 1,099 - 1,099 1977 1$300 - 1,300 1,042 1,296 - 1,296 1978 0 1,400 1,400 1,084 1,189 - 1,189 1979 0 1,460 1,460 1,127 637 1,014 1,651 1980 0 1,530 1,530 1,172 200 1,255 1,455 1981 0 1,600 1,600 1,219 321 1,225 1,546 1982 - - - 1,286 81 1,420 1,501 1983 - - - 1,318 126 1,678 1,804 1986 0 2,000 2,000 1,483 - - - Source: PCRs May 1984 PROJECT PERFORMANCE AUDIT MEMORANDUM KOREA FIRST AND SECOND PORT PROJECTS (LOANS 917 AND 1401-KO) Pusan Port - Forecast vs. Actual Coal, Ore & Minerals, Scrap & Steel Traffic (Thousands of Tons) APPRAISAL FORECAST ACTUAL Coal Ore & Minerals Scrap & Steel Coal Ore & Minerals Scrap & Steel At Gen. at At Gen. at At Gen. at At Gen at . At Gen. at At Gen. at Cargo Pier Cargo Pier Cargo Pier Cargo Pier Cargo Pier Cargo Pier Barth 7 Berth 7 Berth 7 Berth 7 Berth 7 Berth 7 1972 1,000 - 650 - 1,070 - 383 - 277 - n.a. - 1973 1,060 - 660 - 1,095 - 446 - 384 - n.a. - 1974 1,120 - 670 - 1,195 - 725 - 368 - n.a. - 1975 1,185 - 685 - 1,170 - 950 - 359 - n.a. - 1976 1,250 - 700 - 1,320 - 806 - 522 - n.a. - 1977 0 1,310 0 715 385 950 783 - 650 - n.a. - 1978 0 1,370 0 730 350 1,000 873 - 497 - n.a. - 1979 0 1,450 0 755 315 1,065 287 790 450 16 n.a. 260 1980 0 1,525 0 770 280 1,110 219 1,012 313 69 n.a. 442 1981 0 1,600 0 800 240 1,150 351 1,039 478 85 n.a. 734 Source: PCRs May 1984 - 23 - TABLE 8 PROJECT PERFORMANCE AUDIT MEMORANDUM KOREA FIRST AND SECOND PORT PROJECTS (LOANS 917-KO AND 1401-10) Pusan Port - Forecast vs. Actual Passenger Traffic (Thousands of Passengers) INTERNATIONAL DOMESTIC TERMINAL TERMINAL Appraisal Appraisal Estimate Actual Estimate Actual 1972 48.0 2,050.0 1976 70.0 2,400.0 - 1979 - - - 1,439.0 1980 - 40.7 - 1,509.2 1981 115.0 51.2 2,900.0 1,548.3 1982 - 56.5 - 1,781.8 1986 185.0 - 3,550.0 - Source: KMPA May 1984 PROJECT PERFORMANCE AUDIT MEMORANDUM KOREA FIRST AND SECOND PORT PROJECTS (LOANS 917 AND 1401-KO) Mukho Port - Forecast vs. Actual Coal, Cement and Limestone Traffic /a (Thousands of Tons) APPRAISAL FORECAST ACTUAL Coal Cement Limestone TOTAL Coal Cement Limestone TOTAL 1972 1,800 2,150 60 4,010 1,043 1,461 22 2,526 1973 1,900 2,350 66 4,316 1,054 1,797 17 2,868 1974 1,967 2,600 265 4,832 1,454 2,263 12 3,729 1975 2,033 2,850 265 5,148 1,670 2,895 12 4,577 1976 2,100 3,100 265 5,465 1,421 3,043 8 4,472 1977 2,180 3,350 325 5,855 1,593 3,240 8 4,841 1978 2,260 3,600 385 6,245 1,506 2,794 6 4,306 1979 2,340 3,850 445 6,635 1,572 2,245 6 3,823 1980 2,420 4,100 505 7,025 1,619 1,793 6 3,418 1981 2,500 4,400 565 7,645 1,397 1,875 6 3,278 /a 99% of total traffic at port. Source: PCR9 Hay 1984 -25 - KOREA FIRST PORT PROJECT PROJECT COMPLETION REPORT 1. INTRODUCTION 1.01 The need for greatly increased investments in the Korean transport sector was identified in 1965/66 by an overall transport study financed by the Bank and carried out by French and Dutch consultants. Successive economic missions found that bottlenecks in rail and road transport and in ports would hamper the continued growth of the economy. These findings led to a substan- tial lending program in the transport sector, including ports. 1.02 The Bank-s aim in the transport sector and in the port subsector in particular is to support the Government's strategy of: (a) increasing the capacity of the most vital elements of the system; (b) impre'ving the effi- ciency of the syst=,; and (c) creating and developing appropriate policies and institutions. This first project addressed all three objectives. It increased the capacity of Korea-s most important foreign trade port in Busan; it improved port efficiency by introducing container facilities at Busan, and specialized bulk handling facilities at Busan and Mukho, a coal and cement port of the northeastern region; it assisted Government to establish a port authority to carry out the project and operate, maintain, and develop facilities at Korea-s main commercial ports. Subsequent to the First Port Project the Bank-financed the Second Port Project in 1977 (Loan 1401-KO), and the loan amount was US$67.0 million. 1.03 This project completion report is based on information provided by Korea Maritime and Ports Administration (KMPA) during a project completion mission in June 1981 and a review of the Bank's files in Washington. 2. PROJECT PREPARATION AND APPRAISAL 2.01 The project was based on a UNDP-financed and Bank supervised study which drew up a Master Plan for developing the two project ports and Korea's 15 other first class ports. Upon completion of the study in November 1972, the Government of Korea prepared a Five-Year (1972-1976) ports investment program totaling Won 91,400 (US$228 million), and requested the Bank to assist in financing improvements to the ports of Busan and Mukho. 2.02 The project agreed to at negotiations totalled US$131.05 million with a foreign exchange component of US$87.5 million and a Bank loan of 80.0 million. Its breakdown is given below: - 26 - APPRAISAL COST EST)IATES (US$ million) Local Foreign Total A. Civil works, Busan 22.670 42.610 65.280 Muhko 2.275 1.900 4.175 B. Mechanical, Busan 1.325 11.610 12.935 Muhko 0.375 3.100 3.475 C. Final design and supervision 1.350 4.900 6.250 D. Development study Phase II 0.190 0.800 0.990 E. Technical assistance 0.160 1.200 1.360 F. Physical contingencies 4.080 7.220 11.300 G. Price contingencies 6.125 6.660 12.785 Subtotal 38.550 80.000 118.550 Military wharf 5.000 7.500 12.500 Total 43.550 87.500 131.050 2.03 The main components of the project were as follows: (a) At Busan (i) a composite pier with two 330 a container berths and stacking area; and a 370 m long grain berth with storage silos of 80,000 tons capacity both with appropriate equipment; (ii) a bulk handling pier (No. 7) with one coal import berth, two ore and mineral export berths and one import berth for scrap and heavy steel with a total length of 585 m; necessary cranes and bulk handling equipment; (iii) dredging to provide a 13.5 a deep access channel, 10 a depth alongside at the bulk pier (for 15,000 dwt ships) and 12.5 a depth alongside at the composite pier (for 60,000 dvt ships); -27 - (iv) a new international ferry berth on pier No. 1 South with roll- onlroll-off ramp (RO/RO) and passenger facilities, and rehabilitation of pier No. 1 North for general cargo; (v) coastal ferry berth with passenger facilities; (vi) rehabilitation of pier No. 2 for general cargo; and (vii) a new military berth-pier No. 8 (Government financed). (b) At Mukho (i) Two new coal piers with improvement to the existing conveyor systems and new mechanical loaders; (ii) a new belt reclaimer system in the existing open storage area for the delivery of coal and limestone to the pier conveyor system; (iii) dredging to 8 m depth alongside the new coal piers (for 8,000 dwt ships); (iv) raising the existing East breakwater to an elevation of 5 m and strengthening tne side slopes; and (v) rehabilitation of the existing cement and general cargo berths. (c) Consulting Services (i) for detailed design and supervision of the construction of the above works (consultants employed were: Lyon Associates, USA); and (ii) to prepare a Phase II Development Plan (consultants employed were: King & Gavaris, Trans-Asia and A. D. Little, USA). (d) Technical Assistance to assist in formation of policies and procedures for KHPA and for on-the-job training of personnel. 2.04 The particular covenants included in the Loan Agreement are shown In Annex I, with the degree of compliance for each of them. The project comple- tion date was set at June 30, 1978 and the closing date at June 30, 1979. - 28 - 3. PROJECT IMPLEMENT.XTION AND COST Implementation 3.01 Except for the usual minor difficulties, implementation was satis- factory. Consultant's performance for feasibility studies as well as for detailed design and supervision (para. 2.03c) was good; and construction proceeded without significant problem. The only remarkable event occured at Mukho where work on the breakwater was seriously affected by storms during the winter season. This resulted in damage from high waves and the contractors were granted an extension of 108 days which brought the contract scheduled completion date to August 12, 1973. 3.02 The closing date was extended one year to June 30, 1980 in order to satisfactorily complete the technical assistance and training in commercial accounting procedures, and container operations, including computer programming in Busan. Terminal operating companies (TOCs') appointed by KMPA, are now satisfactorily operating the coal handling facilities at Mukho and the container, grain, coal, and scrap metal handling terminals in Busan. The computer control of the TOCs' operations is satisfactory. KMPA's coordination with port users including other government agencies such as the railways, municipalities, could, however, be strengthened. Cost 3.03 The total cost estimate for commercial facilities in the appraisal report was US$118.5 million equivalent, including US$80.00 million in foreign exchange. This estimate was revised in 1974, following the first major oil price increase, to a total cost of US$168 million including US$115 million in foreign exchange. At this time, the Saudi Fund for Development (SFD) agreed to finance the estimated US$35 million overrun in foreign exchange. However, in the end, the project cost was only Won 71.0 billion with US$101.2 million in foreign exchange. Details of actual project cost a compared to appraisal cost estimates are presented in Table 1. The actual SED expenditure for the project thus amounted to only US$21.2 million, and the SFD agreed with the Korean government to use the surplus of US$13.8 million in works outside the project scope. The reason for over estimating the foreign exchange component of the project cost in 1974 is the 20% Won devaluation which occured in December 1974. The Won previously valued at US$1 = 398 was changed to US$1 = 484; the latter rate remained unchanged until the end of 1979. Project Implementation Schedule 3.04 The Basic Data Sheet summarizes the appraisal estimate of project timing compared with actual achievements. Also, the actual Procurement Schedule for Bank financed items is presented in Table 2. The notable feature - 29 - is the long time taken by Government between Bank's agreement to the tender documents and the bid invitation for some of the contracts. For example, this period exceeded eight months for the completion contract for pier 7, and seven months for the rehabilitation contract for pier 2. The latter delay involved moving the completion date to June 1980. These delays were mainly due to KMPA's lack of experience of Bank's procurement procedures and the long time taken for Bank review and long mail delivery. Disbursement 3.05 The actual disbursement schedule as compared to the appraisal estimate is given in the following table: Cumulative (USS,000) Actual disbursement Bank fiscal Actual total Appraisal Z of appraisal year disbursements estimate estimate 1974 1,500 00 1975 - 17,100 00 1976 6,600 37,950 39 1977 22,872 57,700 60 1978 42,810 74,050 74 1979 69,464 80,000 93 1980 80,000 - 100 4. TRAFFIC Busan 4.01 Dry Cargo traffic at Busan port increased much faster than estimated at appraisal. Extremely rapid growth occured in the three years 1974 to 1977 when traffic almost doubled from 12 to 23 million tons (Table 3). Since then, traffic has remained at about twice the appraisal forecast, except for 1980 when it fell with the overall economy. -30 - 4.02 On the special berths financed by the project, the traffic in the first two full years of operation 1979 and 1980 has been somewhat below fore- cast in total, reaching 952 of the estimate in 1980. Traffic is however, expected to exceed the estimate in 1981. This aggregate hides major differ- ences in the use of the various specialized berths. While the container pier is already used at capacity, and the overflow is handled on the general cargo berths, the grain terminal, the bulk terminal (pier 7) and the ferry terminal arp used less than anticipated. 4.03 The lesser use of the grain pier is explained by congestion at the port's silo, in which grain is stored longer than planned to make up for insufficient storage facilities in the interior of the country. However, total grain traffic through the port matched almost exactly appraisal forecasts, as general cargo berths were used to make up for the inadequate use of the project grain berth. 4.04 Traffic on the bulk terminal Pier 7 is less than half the forecast (1.5 million tons in 1980 versus 3.4 million expected). The various reasons are: (a) the decision to limit the use of the pier to coal and scrap i.e. excluding the handling of ores because of their contamination by coal dust; (b) the lower volumes of coal shipped from Mukho due to lower coal production and more rail transport rather than coastal shipping; and (c) the poor perfor- mance of the equipment on the scrap pier. The expected Ro-Ro container traffic on the ferry terminal has not materialized either and is only a third of the forecast. The reason is that much traffic from Japan is now coming by air rather than by sea. 4.05 In the future, container capacity will remain the major bottleneck in Busan. The extension to the container berth being built under the second project will be fully used at opening, and preparation is being made for a further expansion. The situation of the bulk pier is less certain since the city of Busan plans to construct a new coal terminal in the outer harbor. The facilities for scrap will however be upgraded. Mukho 4.06 Traffic at Mukho is falling short of appraisal forecasts. In 1980 the port handled 4.5 million tons compared to a forecast of 7.4 million tons (Table 4). The reasons for the shortfall are (a) the lower production of domestic anthracite (total production for the country should have reached 24 million tons in 1981 according to the 1977-81 five year plan but is stagnating around 19 million tons), and (b) the diversion of cement traffic to the new industrial port of Bugpyeong about 10 km away from Mukho. No future traffic growth is expected at this time; further traffic decrease is even likely as more cement traffic (still accounting for 1.8 million tons/year compared with the appraisal forecast of 4.1 million tons) is diverted to Bugpyeong. The latter port was planned and built by MOC which was responsible for building "industrial ports" without prior coordination with MOT/KMPA. This major inadequacy in port planaing is discussed further in para. 8.02. - 31 - 5. FINANC[AL PERFORMANCE OF THE BORROWER 5.01 With respect Lo finances, tie objeCLiVeS of the project were to (a) have KMPA apply commercial financial procedures, planning, budgeting and accounting; (b) take action aimed at assuring the financial viability of the project ports of Busan and Mukho; and (c) assess conditions under which KMPA as a whole can become financially viable without depending on Government subsidies. 5.02 For reasons to be explained in Chapter 6, KMPA was established as an office operating under the government budget system and could consequently not manage its affairs, plan its future investments and maintain its financial position in accordance with appropriate business and financial principles and practices- as provided for under Section 3.02(c) of Loan Agreement 917-KO. As explained in para. 6.06 and 6.07 the switch from the administrative budge- ting system to the commercial financial system is difficult and is not expec- ted to be completed prior to January 1, 1983. Consequently, KMPA-s present administrative accounting procedures do not permit assessing KMPAs overall financial performance nor defining criteria necessary for setting its finan- cial goals. To assess the financial performance of the two project ports, KMPA prepares Busan and Mukho-s financial statements under a commercial form in parallel with administrative accounting statements. While these state- ments, which are not based on comprehensive subsidiary books do not provide fully accountable data, their accuracy is sufficient for analyzing the Project Ports- financial performance and situation. Busan 5.03 Tables 5 to 8 show Busans incw.e statement, sources and applica- tions of funds, balance sheet and significant financial ratios as anticipated at appraisal for 1973-81, and actuals for 1973-79, estimated for 1980 and forecast for 1981. The following table summarizes these statements for (a) 1974, the first year during which the loan was effective; (b) 1978, the first year during which project investments were fully utilized, and which was at the same time the first year during which the project-s port were expected to meet the rate of return target; and (c) 1980 the year of the loan's closing date. Income Statement 5.04 The following table shows that the port of Busan achieved rates of return on net fixed assets in use substantially higher than forecast at appraisal despite (a) the project-s cost overrun explained in para. 3.04 and (b) additional investments undertaken using excess funds under the SFD loan (para. 3.04), and (c) implementation of the Second Bank-s Port Project. The port-s better than expected performance is explained by (a) its such higher than forecast overall traffic performance, (b) higher than expected revenues per ton in current and real terms, and (c) lower than anticipated operating -32 - BUSAN SUMMARY OF FINANCIAL SITUATION (Won million) 1974 1978 1980 Appraisal Actual Appraisal Actual Appraisal Actual Income Statement Traffic (-000 metric tons) 13,109 14,165 17,494 27,212 20,904 25,590 Operating revenue 1,531 1,586 7,184 7,432 7,333 14,317 Working expenses 618 388 1,699 626 1,707 1,664 Depreciation 410 410 1,646 444 1,678 2,014 Net operating revenue 503 788 3,839 6,362 3,948 10,639 Financial charges 314 243 2,547 2,385 2,601 5,413 Book profit (loss) 189 545 1,292 3,977 1,347 5,226 Sources and Application of Funds Internal cash generation 913 1,204 5,485 6,806 5,626 12,653 Government subsidies 1,168 - - 7,508 - 12,920 Borrowing 3,770 665 4,910 13,584 - 11,614 Total Sources 5,851 1,869 10,395 27,898 5,626 37,187 Capital investments 5,940 1,626 7,753 25,091 1,000 29,582 Debt service 314 243 2,547 2,384 4,420 7,772 Total Application 6,254 1j86 10,300 27,475 5,420 37,354 Annual variations in working capital (403) - 95 423 206 (167) Balance Sheet Working capital - - 257 524 702 (251) Net fixed assets 19,331 23,601 67,522 95,566 66,396 131,320 Other assets - - - 456 - 18,391 Total Assets 19,331 23,601 67,779 96,546 61,098 149,460 Long-term debt 3,970 665 37,285 36,994 33,943 73,022 Equity equivalent 15,361 22,936 30,494 59,552 33,155 76,438 Total Liabilities 19,331 23,601 67,779 96,546 67,098 149,460 Ratios Working (working expenses/ operating revenue) 40 25 24 8 23 12 Rate of return on net fixed Assets in use 4.0 4.6 8.0 15.0 6.0 10.0 Current assets/current liabilties NA NA 1.8 1.5 3.0 0.9 Debt to equity 21/79 28/72 55/45 38/62 50/50 49/51 - 33 - costs per ton in both current and real terms, mainly thanks to the port-s staff high productivity which allowed it to handle additional traffic at low incremental cost. Financial Situation 5.05 The following table compares the Busan Port-s sources and applica- tions of funds cumulated over 1973-80 as planned at appraisal with actuals in won million and in percentage of totals: Sources Appraisal Z Actuals Z Internal cash generation 23,604 36 41,495 30 Government contribution to investments 4,642 7 33,601 25 Borrowing 31,335 57 60,644 45 Total 65,581 100 136,190 100 Applications Appraisal Z Actuals Z Investments 48,878 75 117,691 86 Debt services 16,001 25 18,750 14 Total 64,879 100 136,441 100 Variation in working capital 702 (251) The actual cash generation exceeded appraisal forecasts by about 76%. Despite this increase, the share of the cash generation in the financing of invest- ments was only 35% while appraisal anticipation was 48% due to the faster increase in investment cost. To make up for the relevant shortfall without unduly increasing the port-s debt service the Government provided won 29 bil- lion more than forecast at appraisal. However, this was not enough to main- tain the working capital at an adequate level as shown by the won 250 billion excess of short-term liabilities over current assets by the end of 1980. Based on KMPA's budgetary projections this situation is expected to continue in 1981. Under KMPA-s present status as an office operating under the Government budget system this situation does not require immediate remedial action. However, Busan port-a working capital will have to be raised to an adequated level by early 1983 when commercial financial procedures will be applied. 5.06 Except for the shortage in working capital, Busans financial situation is in line with appraisal forecasts as reflected by the 49/51 debt to equity ratio which matches appraisal anticipation. Tmplementation of the -34 - Second Ports Project, which consists mainly of a further extension of Busan's container handling capacity, will increase its profitability and allow it to generate funds needed for providing its share in the financing of the Third Project now under preparation. Mukho 5.07 Mukho-s port income account, sources and applications of funds, balance sheet and significant financial rates as anticipated at appraisal for 1973-81, actuals for 1973-79, estimated for 1980, and forcast for 1981 are given in tables 9 to 12. These tables are summarized below for the same key years used for analyzing the finances of the Port of Busan (see following page). Income Statement 5.08 The table next page shows that the Port of Mukho never met rates of return anticipated at appraisal and was somewhat short of meeting the target set under Section 4.05(a) of the Loan Agreement. The two main reasons behind this failure are the lower than anticipated traffic performance explained in para. 4.05 and the project-s cost overrun explained in para. 3.04. Financial Situation 5.09 The following table compares appraisal forecasts and actuals of the Mukho ports sources and applications of funds cumulated over 1973-80 in Won million and in percentage of totals. Sources Appraisal % Actuals Z Internal cash generation 3,607 49 3,192 38 Government contribution to investments 917 13 2,077 24 Borrowing 2,765 38 3,225 38 Total 7,289 100 8,494 100 Applications Appraisal % Actuals Z Investments 5,529 83 7,198 85 Debt service 1,170 17 1,291 15 Total 6,699 100 8,489 100 Variation in working capital 590 5 - 35 - MUKHO SUMMARY OF FINANCIAL SITUATION (Won million) 1974 1978 1980 Appraisal Actual Appraisal Actual Appraisal Actual Income Statement Traffic ('000 metric tons) 5,054 4.160 6,548 5 081 7,371 4,453 Operating revenue 327 R 94 7 1,023 -1747 Working expenses 156 97 255 203 266 707 Depreciation 56 56 175 100 200 255 Net operating revenue 115 41 511 490 557 785 Financial charges - - - 349 198 346 Book profit (loss) 68 14 314 251 359 439 Sources and Application of Funds Internal cash generation 171 96 686 590 757 1,P40 Government subsidies 326 - - 314 - 155 Borrowing 630 - 210 607 - - Total Sources 1,121 96 896 1,511 757 I9 Capital investments 1,080 70 610 1,558 400 735 Debt service 47 26 196 221 243 468 Total Application 1,127 96 806 1,779 643 1,203 Annual variations in working capital - - - (268) 114 (8) Balance Sheet Working capital - - 381 17 590 5 Net fixed assets 3,958 6,415 7,068 11,573 7,491 15,881 Other assets - - - 13 - 1,219 Total Assets 3,958 6,415 7,449 11,603 8,081 17,105 Long-term debt 630 - 2,755 3,225 2,699 4,253 Equity equivalent 3,328 6,415 4,694 8,378 5,382 12,852 Total Liabilities 3,958 6,415 7P449 11,603 .8081 17P105 Ratios Working 48 50 27 26 26 40 Rate of return on net.fixed assets in use 4.5 0.9 8.6 5.5 7.9 5.7 Current assets/current liabilities NA NA 5.8 1.1 8.6 1.0 Debt to equity 16/84 0/100 37/63 28/72 33/67 25/75 - 36 - Investment costs exceeded appraisal projection by about 30% while the internal cash generation was 12% lower than those projections. As for Busan the Government made up for most of the consequent shortage of funds by providing additional contributions rather than increasing borrowing and the relevant debt service. However, the port-s working capital is depleted and will need to be restored by early 1983, when KMPA will operate under commercial financial procedures. 5.10 Once its working capital is restored, the port of Mukho will be in a confortable financial situation as disclosed by the easy 26/74 debt to equity ratio anticipated by the end of 1981. This situation is not expected to deteriorate in the future considering that: (a) the investments constructed under the project are under utilized, i.e. no substantial additional invest- ments are contemplated, and (b) under present tariff levels it can generate enough funds to finance its renewals and serve its long term debt in addition to covering its working expenses. 6. INSTITUTIONAL PERFORMANCE AND DEVELOPMENT 6.01 The project-s main institutional objective was the establishment of a Korean Port Authority (KPA) to assume full control of Korea's 17 first class ports. In the past this control was fragmented between: (a) MOT, whose Bureau of Marine Transportation was in charge of supervising operation and adminis- tration; (b) MOC, whose Bureau of Harbor Development looked after design and construction; and (c) the Economic Planning Board (EPB), which approved and controlled port budgets. 6.02 Under the provisions of Section 3.02(c) of Loan 5 --KO, KPA (named KMPA by the Government) was to have "independence and-autonomy similar to that of Borrower-s statutory corporations in their day-to-day operations". This provision was further detailed in the Plan of Action (Schedule 5 of Loan Agreement 917-KO) which listed 1MPA-s functions and responsibilities, the most significant of which were the "maintenance of financial viability" and the formulation of budgets and tariffs for individual ports". 6.03 The Plan of Action provided that KMPA was to be established" as an Office (choug)" with: (a) a Director-General of Vice Minister-s rank assisted by a Deputy Director-General; (b) six main bureaus in charge of Planning, Technical Operations, Finance, Internal Audit, Administration and Data Proces- sing respectively, the last to be established at a later stage. The January 1979 supervision mission found that the introduction of the Korean term "chong" into the Plan of Action had "caused confusion", since a "chong" is an office operating under the government budget system, which Implied that KMPA's management and accounts would follow administrative rules and procedures. This is contrary to the intent of Section 3.02 of the Loan Agreement and of the Plan of Action which contemplated a commercial-type management and commercial financial and accounting procedures. -37 - 6.04 In July 1974, the consulting firm of Booz, Allen and Hamilton Inter- national (Bahint) was hired to carry out a study to formulate KMPA-s future optimal financial, operational and managerial procedures. Bahint recommended that KHPA be established as a commercial type entity with wide organiza- tional, managerial and financial autonomy. However, the Government-s literal interpretation of the word "chong" resulted in its refusal to accept Bahint's recommendations and legislation was drafted providing for an administrative-type organization and management, under which KMPA was established on March 13, 1976. This implied that KMPA's accounting would be in accordance with the budgetary system. However, mainly as a result of Bank pressure, the Government agreed in principle that KMPA would adopt a commer- cial accounting system. This implied a revision of Law 928 which regulates government agencies accounting procedures along the budgetary system. How- ever, this revision has not yet been carried out and KMPA-s official accounts are still kept under the budgetary system. The accounts of the project ports of Busan and Mukho are also prepared under the commercial form, but the relevant statements are not based on comprehensive and reliable subsidiary books and are consequently not fully accurate and not audited. Audits along Bank guidelines are planned to start in early 1984, upon completion of KMPA-s first formal commercial accounting fiscal year. 6.05 In June 1977, KMPA started procedures to select consultants to help in implementing the commercial accounting, costing and budgetary system recommended by Bahint. The Korean accounting firm Ahn, Kwon and Co., in association with Sycip, Gorres and Velayo (Philippines) (SGV) were selected. SGV started work in July 1978 and completed it in June 1980. Its activities consisted of updating Bahint-s manuals and training KMPA staff in comercial budgeting and accounting procedures rather than assisting KMPA to implement the Bahint system. The update of the Bahint manuals was necessary to adapt its recommendations to KMPA-s organization. The training effort was aimed at upgrading KMPA staff in view of KMPA-s inability to recruit qualified and experienced accountants due to its rigid and low administrative salary scale. 6.06 In order to grant KMPA the independence and authority originally intended under Section 3.02(c) of Loan 917-KO the Government and the Bank agreed during negotiations of the Second Ports Project that KMPA be vested not later than January 1, 1979 with "autonomous power including, inter alia powers to incur debt, fix emoluments of its staff, prepare its budgets in commercial form, maintain a bank account and keep its records in a commercial form" (Loan Agreement 1401-KO, Section 3.02(a)). The target date of January 1, 1979 could not be maintained, mainly because of several changes in key ministerial staff during the last two years. KMPA, the Government and the Bank have now agreed that formal implementation of KMPA-s commercial budgeting and accounting system will start on January 1, 1983. 6.07 However, despite continuous pressure by Bank supervision missions, the Government is reluctant to take the legal action required to implement the other organizational changes listed in Section 3.02 of Loan Agreement 1401-KO. To obtain compliance with all the provisions of this section, the Bank will have to convince KMPA-s new managerial staff and the newly appointed govern- ment officials in charge of supervising KMPA of the beneficial effect of such - 38 - implementation on KMPA-s productivity and profitability. While enforcing these changes at the time KMPA was established would most probably have been easy, it will now be a much more difficult process. The ongoing preparation of the Third Ports Project provides the Government and the Bank with an opportunity to reopen the dialog on KMPA-s status. 7. ECONOMIC REEVALUATION 7.01 At the time of appraisal, the main project benefits were expected to be those related to container traffic. They were forecast to account for half of the total benefits in the first year of operation (1977) and to increase to 87% of total benefits by 1986. The actual situation shows that the large benefits related to containers expected by 1986 were achieved already in 1980; when the container pier was used at capacity, handling almost 2.5 times the traffic forecast at appraisal. Since all other traffics through the project facilities are less than estimated, benefits of container traffic are domina- ting even more, accounting for over 90% of che project benefits. The reevalu- ated rate of return for the project is 52.5% versus the 32.5% estimated at appraisal (see following table). This high return, mainly for container berths indicates that a larger container terminal would have been justified; indeed the second port project was limited to the provision of more capacity for containers. REEVALUATED PROJECT COSTS AND BENEFITS (in 1972 $) Benefits Busan Mukho Total Composite Pier Ferry Year pier 7 terminal Total Costs Benefits Costs Benefits Costs 1975 - - - - 7.8 - - - 7.8 1976 - - - - 18.2 - 0.3 - 18.5 1977 - - - - 20.2 - 3.6 - 23.8 1978 - - - - 16.2 - 1.4 - 17.6 1979 49.9 1.0 2.3 53.2 9.6 0.56 0.7 53.8 10.3 1980 64.0 1.1 2.7 67.8 0.5 0.56 68.4 - 1981 75.4 1.1 3.0 79.5 - 0.53 80.0 - 1982 75.9 1.1 3.0 80.0 - 0.53 80.5 - 1983 77.0 1.1 3.0 81.1 - 0.53 81.6 - 1984 78.2 1.1 3.0 82.3 - 0.53 82.8 - 1985 79.6 1.1 3.0 83.7 - 0.53 84.2 - 1986-98 81.1 1.1 3.0 85.2 - 0.53 85.7 - Economic rate of return = 52.5%. - 39 - 7.02 As already mentioned under the section dealing with traffic, this high return for the project as a whole conceals major differences between various project components. While the composite pier is paid back within two years and the productivity on the container berths is high at some 20-25 containers per hour, the return on other investments is marginal. On Pier 7, coal traffic is only 65% of estimate, and scrap, ores and steel traffic only 27%. The productivity of the scrap section of this pier is far below estimate and even below the productivity of some 100 tons per hour indicated without the project. The reasons being that the scrap handling cranes have not achieved the rate of output for which they were designed; the magnet capability is low, the visibility limited, the down time high. Although the problem has been discussed with the supplier and operating personnel no conclusion has been reached yet about ways to improve productivity. This matter is being reviewed in the course of preparing the next project. 7.03 For Mukho, as already mentioned the expected coal traffic has not materialized and is not expected to increase in the foreseeable future. Furthermore, coal shipping has not been rationalized and the old small ships are still in operation. The combination of these factors give project bene- fits at about one third the expected level and a return of about 6% which is clearly below the opportunity cost of capital. The solution might have been to develop the project in phases, dredging only one side of the coal pier and installing only one loading system (reclaimer, conveyor belt) in the first phase, until traffic growth would justify the double operation. 8. THE ROLE OF THE IBRD 8.01 The objectives of the project were to assist the Government to (a) improve its control over the organization, planning, operations and finances of the Korean first class ports- system through the establishment of a Korean Ports Authority (KPA) which would concentrate responsibilities previously fragmented among numerous agencies spread over different ministries and report to the sole Ministry of Transport (MOT); (b) increase the capacity and rationalize operations of the ports of Busan and Mukho through the insti- tution of a container terminal and of passenger facilities and the expansion of dry bulk cargo handling facilities at Busan and by the expansion and improvement of coal and cement handling facilities at Mukho. Institution Building 8.02 The Government established KPA on March 13, 1976 under the name of "Korea Maritime and Ports Authority" (KMPA) under the sole control of MOT. However, for reasons explained in Chapter 6 KMPA was not vested with the managerial and financial independence, autonomy and powers needed for playing - 40 - its role efficiently. This is especially true with respect to port planning, a field which MOT/KMPA share with MOC responsible for planning and constructing "industrial ports" generally without prior coordination with KMPA. This inadequacy was noted during preparation of the Second Ports Project. To remedy the situation, the Government agreed at negotiations of the relevant Loan to establish an Inter-Ministerial Committee under the chairmanship of EPB, in charge of coordinating port planning and investment. In addition the Government agreed to a covenant in Loan Agreement 1401-K0 (section 5.02) providing for consultation between MOT and KHPA and MOC on the latter-s port investment budget. However the duplication of coal and cement facilities at Mukho and at the 10 kilometer distant industrial port of Bugpyeong shows that coordination on port construction planning between the two ministries is inadequate. The Bank is pursuing its action toward changing KMPA-s legal status and improving port construction and operation planning within the framework of the preparation of the Third Ports Project. 8.03 KMPA has broadly met the objectives for which it was established. Ports controlled by it, mainly Busan and Incheon, the two largest in the country, are well designed and work efficiently. Once the above mentioned inadequacies will be overcome it will satisfactorily fulfill its role in the Korean economy. The Bank-s suggestion to establish it was consequently constructive. 8.04 The suggestion to put it under HOT is however questionable. MOC has been responsible for planning and constructing ports for many years. As it remains responsible for designing and constructing large industrial ports, it has the planning capability which MOT lacks. An organization similar to that of the Korea Highway Corporation which is rasponsible under MOC for maintain- ing and operating toll roads designed and built by that Ministry might have presented several advantages, the main one being the unification of port planning, construction and operation under the same ministerial authority. The opportunity of switching the control over KMPA from MOT to MC will be studied during preparation of the Third Ports Project. Investments 8.05 Busan. The high economic rate of return and the satisfactory financial performance of the Port of Busan show that the decision to give priority to container traffic related investments in Busan and the design of these investments were right. The investments aimed at expanding and improv- ing dry bulk cargo handling facilities did not quite meet their objective mostly due to operating difficulties of the scrap pier caused by inadequate crane design. - 41 - 8.06 Mukho. Because of the lower than planned demand for cement and coal traffic, the investments constructed in Mukho mainly for handling coal have not been fully utilized. The low growth in coal traffic has been chiefly caused by the lower than anticipated domestic coal production during 1973-81, which adversely affected coastal shipments to the South and Southwest of the country. As mentioned in para. 4.05, traffic is not expected to increase in the foreseeable future. A substantial proportion of the shortfall in cement traffic is explained by a diversion to Bugpyeong which is closer and better connected to the cement plants than Mukho. The lack of coordination in port planning between MOT/KMPA and MOC has thus adversely affected Mukho-s cement traffic. Working Relationship 8.07 Mainly because of the misunderstanding between the Government and the Bank on the legal status of KMPA explained in Chapter 6 relations between the Bank and MOT/KMPA have been more difficult than is usually the case in Korea. To improve these relations Bank staff has tried to persuade their counterparts within EPB, MOT and KMPA of the advantage for KMPA to be reorga- nized along Bank's views. These efforts start to be fruitful but need to be continued in order to restore a climate of full confidence between government agencies concerned with Ports projects, KMPA and the Bank. A special effort will be made to reopen the dialogue on port planning and construction coordination betw,en MOT/KMPA and MOC. Conclusion 8.08 Despite some misunderstanding, the role of the Bank in project preparation and implementation has been widely positive. The establishment of KMPA has led to substantial improvements in ports planning, design and operations. The investments constructed under the project have helped the Government to cope with the increasing demand in port-s activities generated by the country-s fast growing economy. This action is being continued under the ongoing Second Ports Project and will be pursued under the proposed Third Ports Project. - 42 - ANNEX Page 1 KOREA FIRST PORTS PROJECT (LOAN 917-KO) PROJECT COMPLETION REPORT Degree of Compliance with Covenants in the Loan Agreement per Loan 917-KO Section Action required Action taken 2.03 Except as the Bank shall otherwise agree, Complied with. the goods and services required for the project and to be financed out of the proceeds of the Loan, shall be procured on the basis of international competition under procedures consistent with the Guidelines for Procurement under World Bank Loans and IDA Credits, published by the Bank in April 1972, as revised in October 1972. 3.01(a) The Borrower shall carry out the Project Complied with. through the MOT, or cause BMPU, and KPA, when established, in accordance with the Plan of Action, to carry out the Project. 3.02(a) The Borrower shall, not later than Complied with. January 1, 1974 (i) establish the Busan- and Mukho Project Unit, in which the Bor- rower's Ministries of Transport and Con- struction will be represented, in HOT, for the purpose of carrying our the Project and managing the Ports of Busan and Mukho and (ii) maintain the said Project Unit until KPA shall be estab- lished and in operation, all in accord- ance with the Plan of Action. 3.02(b) The Borrower shall, not later than June 1, KPA was established on 1975, establish and maintain a port autho- March 13, 1976 under the rity to be responsible for carrying out of name of Korean Maritime the Project and for the operation, mainte- and Ports Administration nance and development of facilities at (XMA). such ports of the Borrower as may be agreed between the Borrower and the Bank. -43 - ANNEX Page 2 Section Action required Action taken 3.02(c) Without limitation upon the generality of Not complied with. the provisions of Section 3.02(b), the Borrower shall establish KPA in such man- ner that (L) while being subject to policy directives of the :inister, MOT, KPA shall have independence and autonomy similar to that of Borrower-s statutory corporations in their day-to-day operations; (ii) the Director-General of KPA shall have the power to prepare KPA budgets ad shifts, subject to prior advice to the Minister, Economic Plannig Board, the funds within the amounts appropriated (including con- tingencies) under Borrower-s annual bud- get; and (iii) KPA shall have the power to propose to the Borrower tariffs and charges from time to time for the ports under IPA's jurisdiction. 3.03 The Borrower shall cause KPA to establish Complied with. and maintai. a Port Unit for each port controlled'by KPA, with tde duties, responsibilities, functions, staff, facilities and resources as set out in Schedule 6 to this Agreement. 3.04 In order to assist the Borrower in carry- Complied with. ing out (i) the detailed design and supervision of Parts A and B and (ii) Part C of the Project, the Borrower 'shall employ or cause to be employed consul- tants acceptable to the Bank upon terms and conditions satisfactory to the Bank. 3.05 In carrying out Parts A and B of the Complied with. Project, the Borrower shall employ or cause to be employed contractors accept- able to the Bank upon terms and condi- tions satisfactory to the Bank. 4.03(a) The Borrower shall cause KPA to maintain Complied with. records adequate to re[lect in accord- ance with consistently maintained appro- priate accounting practices the opera- tions and financial condition of KPA. -44 - ANNEX Page 3 Section Action required Action taken 4.03(b) The Borrower shall cause KPA tc: (i) have Under the present admin- its accounts and financial statements istrative system the (balance sheets, statements of income and audit of KMPAs accounts expenses and related statements) for each is carried out by the fiscal year audited, in accordance with Governments Board of appropriate auditing principles consis- Auditors which controls tently applied, by independent auditors strictly the materiality acceptable to the Bank; (ii) furnish to of IDPAs cash operarions the Bank as soon as available, but in any and their conformity case not later than four months after the with the Budget. Formal end of each such year, (A) certified copies implementation of the of its financial statements for such year Banks auditing proced- as so audited and (B) the report of such ures will only be possi- audit by said auditors, of-such scope and ble by the end of 1983 in such detail as the Bank shall have rea- after completion of the sonably requested; and (iii) furnish to first year of DIPAs com- the Bank such other information concerning mercial accounting the accounts and financial statements of procedures. KPA and the audit thereof as the Bank from time to time may reasonably request. 4.05(a) Except as the Bank shall otherwise agree, Tariffs were adjusted as the Borrower shall: (i) not later than of 11ay 1, 1974 i accord- January 1, 1974, establish or cause to be ance with the Loan Agree- established for Busan and Mukho such tar- ment. Tariffs were also iffs and rates as are set forth in Sched- adjusted as of May 1, ule 7 to this Agreement; (ii) in respect 1975 resulting in a sub- of each Scheduled Port, cause KPA, not stantially higher net later than January 1, 1974, to (A) estab- income for 1975 as co- lish a separate operating Budget, (B) pared to 1974. charge or cause to be charged all cargo- handling operators such concession fee as may be agreed upon among the Borrower, KPA and the Bank, (C) establishor cause to be established such tariffs and rates as may be agreed upon among the Borrower, KPA and the Bank; and (iii) take or cause KPA to take all necessary measures (including but not liited to adjustments Busan earned rates of re- of the tariff structures and rates at turn exceeding 10% in Busan and Mukho) to enable KPA to gener- each year since 1976 but ate sufficient to earn at Busan and Mukho ukho has ucen marginally In its fiscal year 1978 and therafter an short to meet its rate of annual rate of return of not less than 6% return target. on its net fixed assets in operation at Busan and Mukho, respectively. -45 - ANNEX page 4 Section Action required Action taken 4.05(b) Take or cause KPA to take all necessary For reason explained in steps (including but not limited to ad- Chapter 6 of this PCR justment of the tariff structure and rates accounting data needed of KPA to enable KPA to earn in fiscal for assessing the finan- year 1978 and thereafter a rate of return cial performance of ports which shall be agreed among the Borrower, other than Busan and the Bank and KPA on the basis of the study Mukho will not be avail- to be made for the purposes of Part C(ii) able prior to 1983. An of the Project on its net fixed assets in overall rate of return operation. on KMPA s fixed assets in use can consequently rnot be set prior to this date. - 46 - Table 1 KOREA FIRST PORTS PROJECT (LOAN 917-Ko) PROJECT COMPLETLON REPORT Actual and Appraisal Estimates of Project Coirs (aIllion) Appraisal Actual cost as Z Contract Actual cost estimate Contract Comple- amount Total Foreign Total Foreign Appraisal amount tion (Won) in Won exchange in Won exchange Loan catepory date (1) (2) (US$) (3) (ts) Civil Works Dredging 11/30/78 2.189 4,146 5.216 4,246 8.240 -2.3 +73.5 Composite Pier Rough grading 11/30/77 15,404 18,177 22.956) 11,428 19.220 +93.3 +15.2 Completion 09/25!78 3.562 3,911 4.919) r8.1 Pier No. 7 Rough grading 04/25/77 4,741 5,773 7.291) 4.178 5.620 +66.9 +2'.8 Completion 08/29!78 1,131 1,201 1.517) +6.0 Pier No. I - rehabilitation 05/30/78 6,030 6,868 8.674 3,588 5.170 +91.4 +13.8 Coastal ferry pier 05/30/7R 980 1,419 1.792 608 770 +133.4 +44.8 Pier No. 2 - rehabilitation 08103/79 940 2.033 2.917 606 840 +?35.5 116.2 Nfukho port 08/11/78 1,982 2,310 2.917 1,670 1.900 +38.3 +16.5 Grain silos civil works 12/08/78 1,935 2,408 3.041 1,450 2.750 +66.1 +24.4 Subtotal 39,096 48,246 60.931 27,78 44.510 +73.6 +23.4 Mechanical Mukho coal handling equipment 12/31/77 2,316 2,561 5.503 - - +10.6 Busan coal handling equipment 10/30/78 2,Z51 2.921 6.048 - - +29.7 Container crane 6 transfer crane 09/13/78 ) } ) 2 Scrap handling cranes 08/31/78 ) 3.770 4,792) 9.921 - - ) +27.1 10 Straddle carriers ) ) ) Grain faciLity equipmeatt 12/30/78 3,676 4,393 9.096 - - +19.5 Mobile Container & Mineral Handling Equipment 16 Yard tractors 02/13/78 ) 2 Tractors 01/12/78 } 2 Forklifts 04/19/78 } 2 Mobile cranes 12/03/77 } 967 1,121 2.312 - - +15.9 2 Front and loaders 11/05/77 ) 120 Chassis 03/27/78 } 6 Hopper loaders 04/02/78 } 6 Trailers 04/02/78 } Subtotal 1290 K 5,78 32.680 6.564 14.710 +140.5 +21.6 Consulting services 3,277 3,320 5.119 2,500 4.900 +32.8 +1.3 Technical assistance & training 1,857 3,685 2.515 940 2.000 +292.0 +98.4 Subtotal 5,1+ 7.005 7.j34 3.440 6.900 +103.6 +36.4 Contingencies - - - 9,633 13.880 - Total 57.2i0 71,(139 101.245 47,420 80.000 +49.8 +24.2 KOREA FIRST PORTS PROJECT (LOAN 917-KO) PROJECT COMPLETION REPORT Procurement Schedule for Bank's Financed Items Events /a Loan category I II III IV V VI VII VII Civil Works Dredging 06/12/74 06/29/74 07/19/74 09/07/74 (09/30/74) (10/24/74) 11/08/74 11/30/78 Composite Pier Rough grading 06/12/74 06/29/74 07/19/74 09/07/74 (09/30/74) (10/24/74) 09/03/74 09/30/77 Completion (12/15/75) (12/15/75) 08/23/76) 11/24/76 (12/20/76) 01/14/77) 04/08/77 09/29/76 Pier No. 7 Rough grading 06/12/74 06/29/74 (07/19/74) 09/07/74 (09/30/74) (10/24/74) 11/08/74 04/24/77 Completion (12/15/75) (12/15/75) 08/23/76) 11/24/76 (12/20/76) (01/14/77) (02/01/77) 08/29/78 Pier No. I - rehabilitation (06/10/75) (05/01/75) (08/28/75) 09/10/75 (09/22/75) 10/07/75 (11/01/75) 04/15/7G Coastal ferry pier (09/01/75) (09/01/75) (02/02/76) 04/23/76 (05/24/76) (06/14/76) 08/31/76 03/30/78 Pier No. 2 - rehabilitation (02/02/76) (02/02/76) (09/17/76) 12/20/76 (01/19/77) (02/14/77) 04/07/77 06/20/79 Mukho port (07/01/75) (07/01/75) (09/10/75) 12/02/75 (11/24/75) (12/15/75) (01/05/76) 08/12/78 Grain silos civil works (03/11/75) (04/01/75) (05/15/75) 09/02/75 06/00/76 06/12/76 04/06/76 11/31/78 Mechanical Hukho coal handling equipment 03/31/75 (05/10/75) - 07/15/75 09/25/75 - 12/17/75 12/31/77 Busan coal handling equipment 06/19/75 (05/12/75) (06/23/75) 09/26/75 (12/27/75) (11/17/75) 06/01/76 07/26/78 Container crane & transfer crane 04/17/76 (06/16/75) - 03/16/76 - - 12/29/76 09/15/78 09/14/75 - - - - - 02/15/77 09/30/78 Scrap handling crane & straddle carriera 04/17/76 (09/22/75) - 03/16/76 - - 12/29/76 06/13/78 Grain facility equipment (03/11/75) (04/01/75) (05/15/75) 09/02/75 02/11/76 02/12/76 04/06/76 12/31/76 Mobile Container & Huneral Handling Equipment 16 Yard tractors (03/11/73) 04/17/76 - 05/20/77 08/23/77 - 08/29/77 04/14/78 2 Tractors (03/11/75) 04/17/76 - 05/20/77 08/23/77 - 08/29/77 04/14/78 2 Forklifts (03/11/75) 04/17/76 - 05/20/77 08/23/77 - 08/29/77 04/14/78 2 Mobile cranes (03/11/75) 04/17/76 - 05/20/77 08/23/77 - 08/29/77 04/14/78 2 Front end loaders (03/11/75) 04/17/76 - 05/20/77 08/23/77 - 08/29/77 04/14/78 120 Chassis (03/11/75) 04/17/76 - 05/20/77 08/23/77 - 08/29/77 04/14/78 6 Hopper loaders (03/11/75) 04/17/76 - 05/20/77 08/23/77 - 08/29/77 04/14/78 6 Trailers (03/11/75) 04/17/76 - 05/20/77 08/23/77 - 08/29/77 04/14/78 /a Events: I - Bank's first comment on tech. spec.; II - Bank's agreement on tender documents; III - bid invitation; IV - bid opening (price quotation); V - bid evaluation and proposals for award submitted to the Bank; VI - Bank's agreement to award of contract; VII - contract date; VIII - completion and/or delivery. - 48 - Table 3 Page I KOREA FIRST PORT PROJECT (LOAN 917-KD) PROJECr COMPLETIrON REPORT Susan Port Freight Traftic Forecast and Actual b Type of Cargo ('000 metric tons) la Cumulative 1972 1913 1974 1975 1976 1977 1978 1979 1980 1983 total 1973-81 I. CARCO ON GENERAL CARGO BRRTHS Ocean In Appraisal Estimate Bulk Grain 1,000 1.060 1.120 1.180 1,250 1,100 - - - 5,910 Ores and min ralq 100 100 100 100 100 - - - - - 400 Coal 50 60 70 85 100 - - - - - 315 Total 3 1,22 1,290 1.365 1450 1.300 5- - Others 2,.32 2.267 2.057 1,862 1,652 1.023 945 866 797 709 12,158 Actual Bulk Grain 917 1,087 644 977 1.099 1.296 1,189 637 200 642 7,771 Ores and minerals 32 18 1 1 38 4) 25 24 25 8 187 Coal 50 18 11 26 29 22 133 49 8 286 658 Total 999 1.123 656 1.004 1.166 1.365 3 710 309 936 86 Others (tacl. oil in 1972) 7,638 5,320 4,599 3,667 5,187 6,180 7.490 6,808 5,061 5,568 49.880 Ocean Out Appraisal Estimate Bulk Ores and minerals 550 560 570 585 600 - - - - - 2,315 Cement 150 160 170 185 200 210 220 230 240 250 1,865 Others 625 686 749 812 80 865 850 835 820 800 7,297 Total 13Z5 40 .4.9...58 ___ 680 1.U75 1.071 1.6 1060 1050 1)7 Actual Bulk Ores and minerals 245 321 307 358 486 603 472 426 288 470 3,729 Cement 394 "66 367 559 1.169 1,690 520 195 207 - 5,073 Others (incl. oil in 1972) 2.388 872 1,113 811 1,601 1,665 1,820 1.828 1,623 1.397 12,730 Total 3.027 1.559 1,787 1J72 3 3.958 2J81 2A4 2 a . Containerized Ocean Appraisal Estimate Number of containers ('000) Inward full 3 7 12 16 20 30 - - - - 85 Inward empty 3 3 2 1 - 8 - - - - 14 Outward full 6 10 14 17 20 38 - - - - 99 Total 12 20 28 34 40 76 - - - - 98 Cargo in revenue tons ('Oo) Inward 30 80 130 180 240 360 - - - - 970 Outward 70 110 150 190 260 419 - - - - 1.109 Total 100 190 280 37r 480 759 - - - - Actual Number of containers ('000) Inward 19 65 70 82 110 146 158 177 174 180 1,142 Outward 16 37 63 91 128 166 189 225 242 320 1,461 Total 35 82 133 173 238 312 347 402 416 500 2.603 Cargo in revenue tons ('000) Inward 214 533 768 1,068 1,385 1,953 2,590 1.660 1,327 1,301 12,585 Outward 211 410 762 2,433 3.813 4,700 5,303 4.150 5,092 6,004 32.667 Total 625 963 1.530 3.501 5,9 6.653 7,9 %81 6.1 7,30 45.252 - 49 - Table3 Page 2 la Cumalativ 1972 1973 1974 1975 1976 1977 1978 1979 1980 198r total 1973-BI Coautal Appraisal Estimate Bulk coal 950 1,000 1,050 1,100 1,150 - - - - - 4,300 Others 350 400 525 525 700 350 350 350 350 350 3,900 Total 1.300 1.100 1.,75 J45 1.850 350 350 350 3-0 350 8 Bulk cement 850 920 1,000 1,100 1,200 1,300 1,400 1,500 1,625 1,750 11,795 Actual Bulk coal 333 428 714 924 777 761 740 238 135 65 4,782 Other. 999 1,284 2,142 2,772 2,331 2.283 2.220 2,208 992 1,909 18,141 Total 1I332 1,712 2.856 3.696 3.108 3.044 2.960 2.446 1.127 1*971. Bulk cement 570 562 665 1,080 1,479 1,906 1.691 1.386 912 1.753 11,434 Total Appraisal Fatiente Freight 7.157 7,383 7,691 7,904 8.310 5.803 3,765 3,781 3,832 3,859 52,328 Timber into floating area - 1,628 1,723 1,818 1,913 2,012 2,110 2.209 2.308 2,306 18,027 Total 7.157 9.11 9.414 j.72 10.223 7,815 5,875 5.990 6.4 6-165 70.355 Actual Total (including timber into floating area) i1 9 12I13 14I676 19,392 23,106 24,193 19,609 15.946 19.403 159.637 11. CARCO ON SPECIAL BERTHS International Perry Bert' Appraisal Estimate Containerized Inward cargo 70 130 190 250 310 310 310 310 310 310 2.430 Outward cargo 105 150 200 260 310 310 310 310 310 310 2,470 Total 175 280 390 510 620 620 620 620 620 620 4.900 Container numbers ('000) Inward 6 12 17 23 28 28 28 28 28 28 220 Outward 9 14 18 24 28 28 28 28 28 28 224 Total 15 26 35 47 56 56 56 56 56 56 444 Actual CDntainerized Inward cargo 94 93 91 278 Outward cargo 106 120 121 347 Total 200 213 212 625 Container ambers ('000) Inward 8 9 8 25 Outward 9 10 10 29 Total 17 19 18 54 Composite Pier Appraisal Estimate Containerized Inward cargo - - - - - - 428 515 602 690 2,235 Outward cargo - - - - - - 592 773 950 1,127 3,442 TOtaW - - - - 1,020 1,288 1.552 1.817 5.677 Container umbers ('000) Inward full - - - - - - 39 47 55 62 203 Inward empty - - - - - - I5 23 31 40 109 Outward - - - - - - 54 70 86 102 312 Total - - - - - - 108 140 172 204 624 Bulk grain - - - - - - 1,400 1.460 1.530 1,600 5.990 Total - - - 2.420 2,748 3.082 3,417 11.667 - 50 - a Cumulative 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 total 1973-61 Actual Contalerized Inward cargo 1.405 1.430 1,608 4,443 Outward cargo 1,827 2,354 2,875 7.056 Total 3.232 3,7B4 4.483 11.4" Container nmbers ('000) Inward 88 97 111 296 Outward 88 9B 112 298 Total 176 195 223 594 Bulk grain 1,014 1.255 1,166 3,435 Total 4.246 5039 5.649 14.934 Pier No. 7 Apprainal Ratimate Ocean in coal - - - - - 100 100 120 135 150 605 Coastal in coal - - - - 1,210 1,270 1.330 1,390 1.450 6.650 Ocean in ores - - - - - 100 100 110 110 125 545 Ocean out ares - - - - - 615 630 645 660 675 3,225 Ocean in scrap - - - - - 535 520 505 490 470 2,520 Coastal steel - - - - - 415 480 560 620 680 2,755 Total - - - - - 2 3 .100 3 270 3.405 3550 16.300 Actual Ocean in coal 297 423 456 1.176 Coastal in coal 493 589 583 1,665 Ocean in ores - 4 4 8 Ocean out area 16 65 81 162 Ocean in scrap 260 442 734 1.436 Coastal steel - - - - Total 1.06 1.523 1.858 4.447 Total Appraisal Atimate Port facilities - 280 390 510 624 3,599 6,144 6,644 7,109 7,587 32.887 Actual Port facilities 5.512 6,775 7,719 20.006 III. TDUR (unloaded into floating area) Appraisal estimate - 1,628 1,723 1.818 1,913 2,012 2,11C 2,209 2.308 2.306 18.027 Actual (included in I others) - - - - - - - - - - - IV. TOTAL PORT TRAPPIC, INMRR PORT Appraisal estimate - 9,291 9.804 10,232 10,847 11,414 12.019 12,634 13,249 12.752 102,242 Actual - 11,219 12.093 14,676 19,392 23,106 26,193 25,121 22.721 27.122 179.643 W. OIL Appraisal estimate - 2.875 3,305 3,800 4,330 4,890 5.475 6.135 6.855 7.630 45,295 Actual - 2,125 2,072 2.063 2.182 2,562 3,019 2,842 2,869 3,000 22.734 VI. TOTAL PORT TRAFFIC Appraisal estimate - 12,166 13,109 14,032 15,177 16,304 17,494 18.769 20,904 21.382 149,337 Actual - 13.34 14,165 16,739 21.574 25,668 27,212 21,963 25,590 30,122 196.377 /a Actual is the planned figure for 1981. which may be somewhat optimistic as to the recovery from 1980. - 51 - Table 4 KOREA FIRST PORT PROJECT (LOAN 917-KO) PROJECT COMPLETION REPORT Mukho Port Freight Traffic Forecast and Actual by Type of Cargo ('000 metric tons) Cumulative 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 total 1973-81 FREIGRT ('000 tons) Ocean In Appraisal Estimate Bulk 50 54 58 62 66 76 86 97 107 117 723 Others 10 10 10 10 10 10 12 13 14 15 104 Total 60 64 68 72 76 86 98 110 121 132 827 Actual Bulk 36 26 44 76 63 32 6 74 140 331 792 Others 41 75 117 82 59 108 298 252 12M 197 1,308 Total 77 101 161 158 122 140 304 326 260 528 2,100 Ocean Out Appraisal Estimate Bulk Mach. handled coal 300 300 300 300 300 300 300 300 300 300 2,700 Mech. handled cement 1,000 1,100 1,250 1,400 1,550 1,700 1.850 2,000 2.150 2.300 15.300 Others 5 5 5 5 5 5 5 5 5 5 45 Total 1.305 1-L0 1.555 1.705 1.855 2.005 2.155 2 2 2.605 18.045 Actual Bulk Xech. handled coal 217 210 29 - - - - - - - 239 Nech. handled cement 328 713 959 962 1,128 1,002 958 706 593 650 7,671 Others 3 19 13 14 11 4 13 2 3 3 82 Total 548 942 1)001 976 1139 1.006 971 708 596 653 7,992 Coastal Appraisal Estimate Bulk Mech. handled coal 1,500 1,600 1,667 1,733 1,800 1,880 1,960 2,040 2,120 2,200 17,000 Mach. handled cement 1,150 1,250 1,350 1,450 1,550 1,650 1,750 1,850 1,950 2,100 14,900 lech. handled limestone 60 66 265 265 265 325 385 445 505 565 3,086 Others 45 132 149 164 180 190 200 210 220 230 1,675 Total 2.755 3L048 3,431 3 3.795 4.045 4.295 495 5.095 36661 Actual Bulk Mech. handled coal 826 844 1,425 1,670 1,421- 1,593 1,506 1,572 1,619 1,397 13,047 Nech. handled cement 1,133 1,084 1,304 1,933 1,915 2,238 1,836 1,539 1,200 1,225 14,274 Nech. handled limestone 22 17 12 12 8 8 6 6 6 6 81 Others 167 264 237 412 275 466 455 689 772 680 4,253 Total 2.148 2,209 2.978 4,027 3.619 4.305 3.806 3.806 3.597 3.308 31.655 Total Freight ('000 tons) Appraisal estimate 4,120 4,517 5,054 5,389 5,726 6,136 6,548 6,960 7,371 7,832 55,533 Actual 2,773 3,252 4,140 5,161 4,880 5,451 5,081 4,840 4,453 4,489 41,747 GROSS REGISTERED TONNAGE ('000 tons) Appraisal estimate 3,760 4,230 4,700 5,010 5,265 5,710 6,090 6,470 6,850 7,270 51,595 Actual 11 12 12 13 13 12 12 10 10 10 115 KOREA plast r0li1 PRojgers pat 0F BU11 Inc~se Aecouft (No. Gill£-n) t973 1974 19'5 1976 197? 1970 1979 1980 18 A0raial AcuAl AnpraaM Actual AppraIal Atal Appralsal F Artal Apr,raial A ual Appralsal A t-al 4 ppraisal AW r i Appraa Accan Appras al Forecast Traffle (On0 Tetric tons) 17.166 13.144 13.109 14.145 14.032 16.319 15.177 21.474 14.3,4 25,668 17.494 27.212 18.769 21.963 20,904 25,590 21,2§2 30.122 Oiratli ,avenu. Light 4.ues 65 67.7 - 65.1 - 70.7 • - - - - - - - . part dua 210 239.1 100 227.7 122 240.0 406 73 426 84h 499 1.239 120 1.775 342 2,029 567 2.37 T"aARO - 122.0 179.9 • 216.0 - 22A - 277 - 372 - 454 - 47 - 601 Dockaln 110 110.1 450 436.6 624 653.4 A04 720 860 113 2,49 1.55 2.68 1.908 226 2.087 ;,741 2.600 tarvIce charg - - - - - 451 149 - 297 246 - 298 - 298 - Conceastla tea (carto) - • 52 - 112 - 112 - 112 • 112 • 112 - 112 - Trast shd charges 60 2.h • 66.1 49.6 - 4å - 3n - 71 0 - 113 - 141 Open gara* arga chargas 0 7!.9 - 93.0 - 131.1 • 173 $ 50 - 314 - 174 • 138 173 lUvnut fram terminal operations - - - - - - uharfagå • - 426 433.2 434 700.3 902 1,023 649 1,453 497 1,941 41 2,2,6 Ala 2.432 4946 31044 Anchoraxa - - - 50 42.1 - 682 - 1.264 - 1.101 • 1.311 • 1,06 - 1,335 plnging tranu • 29.2 • 31.4 - 40.9 - 2 • 30 - 39 - 43 • 5 - 7 Uent Of faclities - 26.3 20 5.4 30 3.8 625 64 1.425 7? 2.925 199 2,123 3.054 1.925 3.130 2,923 6,139 11-cellanov4 revenuft L 123 47.5 133 46.1 139 77.0 245 568 220 226 215 246 223 el9 232 80 243 vii Lsba 683 60.6 Lsu3 1.386.3 1.681 2-227.7 3.147 3.723 4.081 L5111 7.184 7-432 7.25 11.1121 7.L31 14.317 7.434 17.412 99!ation 9119 8.6 3 119.3 3 183.3 3 • • 3 • - Kalntefunc dradolng - - - - - - - - 70 70 • 70 - 70 - 70 - fort capttaia affie - - - - - 53 - 53 - 54 • 54 - 4 - 14 Genral metatenancc 80 49.4 336 568." 30 5.% 238 246 383 349 357 346 bi9 603 161 920 563 1.241 Seatl 1.rwices - 82 - 84 • 06 - 8 - 91 - 93 - 43 - l8 Mellaneous doch laber • • - • • - 223 - 230 - 530 - 50 - 50 • 154 .udry doche e - • - 2 - 26 • 27 2 27 - 27 - 21 - GeneraIland tdiiniskratioa 514 104.1 143 100.7 261 5M6.7 614 163 705 225 73 280 78 488 783 744 785 1,004 subtotal Torkång east@ M 202.1 68 38.2 13 11. 1.207 408 3 L ä74 99 L2 62 1 203 Ig891 1&707 l.644 4712 2.243 Deproelåalön 450 450.n 450 450 450 432.4 384 4.13 83 433 5.040 444 1.002 5.740 5.878 1.054 1.72* 3.524 Total oeratina E_..e . 2 1 028 haj. I.w 934 b .l01 14 2 406 0 j. 3 3 070 7.3ik 2 .8 - .-8 - - 5fj :lr..e j .5J 3n2 78813 354 l243.1 1444 43sk1 2824 0202 1 890 808'. 24148 406 11 "l.ti;iii!l.lu fr; ~ lii IW l78if ll7 I1 t "11I T1 .45.4 4 Exceptloal lnaa (rev=.) - - - - - - 3 - • - - - - !1!, i! lit 341.3 (l743 [.054.1 (021 2.227 (3403 3.78 ,.22 347 5544 970 jj47 3478 5.35% 6.842 Einha#e Ise (profit) • - - • - - - - - - . . . -.4. §dok profit ( 5,054.5 <62) 2.227 (348) 3,178 5,292 3,92 1,164 3,946 1,347 5,226 ,3519 4.92 , dc öe Paro Praject. Sikealudinq Carga demurrae charge. VIM5T TC515 FIkitc13 l0rorstA rori or lVSM0 tlae of 64.r1e and pgoicallon nI Punda - 97 te74 197176 1977 1978 16 last 3981Toa 9310 AnINaalGict AppraaI AcPua> cppraia A al ApoI Alpralal Altua AporaiTal Arl Apprail IrCaI ApräMTlal Arlugl LsprT9eI aA-al 0rpraleal eastel AppriiAie.k l. long' k0aeato LS0Ie Éj>,orktn rall Gt,..a..,.gp a,,... 460 4,.A 2.m1 ,1.s1. ,.sa, ,2,., ,,4, ,.,1. 4, ,,.. ,,04, r41.. ,.m1 3,.2 ,,m1 6.,7 ,..» I»,m laerni Untile roet. >91 202.> II9 182.2 Til 163.7 1,107 111.0 I.122 176.6 1,499 626.0 l.'O1 1,01 >,707 1.664 1.7>2 2,261 cab Genetfed from nparationa 41 147.1 911 1.2n4.1 9A& 1,726.- 2,041 1.314.n 2,55 4,46.n 1,4111 .06.6 1.113 >0,71>. 1,626 2.611 422 1.16? Other - - - - - - - - - Tute0 foterai Cah ceneratt.n l -4 167.1 LI1 .204.3 66 .2G.I 5.040 .114.0 0.a16 4.144,n 1.4x1 (.a4.o 151 107L3 5.626 >2,a61 1.12 37 21.604 4 04nrn1ntagn ationa - - - - - - - Oynarnaant agai awuteaon - r,=6* - 1,474 7,715.0 - , • ,473," - 7,"05.0 - 1.206) - >2,920 - 1653) Other - - - - - - - - - - - - - - - - - - Tal subeIdies , - A.j4 _-168 13474 0.75. .0 - 7.1.0 - .aj.i0 17.204> - 12.20 - <1 . 1 4 4 91 -0 200 - 3, 0 663,0 7,5 M 1.230.0 13 0 6.162.0 7.1 9 7,23..0 1,160 1,s16 .n 10 2,m - - - 3m10 14040 - - - - -l- - - - - - 43.0 - 2,0>7 - 6,69 - >6,>3 a70 . - - - - - - - - 6,03.0 - 3.17å.0 - 6,206 - 4,7>7 - 2,680 utber -- - - - - 2,7 - 1,17s - ,760 - - - - - - total Lans 200 - 170_ 661.0 7.j21 2.21n,f I0.j11 6.362,n j 1j L111.0 4.60 1110 L0 ta>06 -.- 14 3 223 7.121 60.644 _.INa Å% 26 17W. 17 2721=1 00 ulmFiratPra ct 200 475.8 5,940 1.626.1 10,921 10,131.1 I0.470 15,106.0 3,733 24,194.3 4,753 • 6 6.440 - - - >650 &@aand Projaet -. - - - 6.5,7 - 18,63> Other - - - - - 344.5 21 - 571 - 2,998 - ,000 3,66 3,000 22.683 3,000 4,3% 1ta1 2e.e6t49as 30 473.8 1.940 1.426.3 >0921 tn076.0 >0.4J 1 3.106.0 33jL> 24.194.0 77>3 25,01.0 1.06 >0.340 ag0 29.82 3.000 23.00 48. 878j.4691 1a 41.7 314 261.0 832 239.0 1,508 662.0 2,021 3,330. 2,567 2,384.0 2,726 3,21 2,403 4,61 2,65 6,396 Repdymenta - - - - - - - - ' 1.573 2.716 1839 3.333 3.854 6.621 tat Oa6t einf 14 jL. IL4 241.0 Mj 16 1.004 442.0 2Iå L 1.10.0 2.141 2.2860 4.211 6.028 4.420 7l2 4.16 33.036 01 ta38 OIA=D TOTAL AFjLCAT10E8 i6&23 3 27.4>.0 1 #Ama Talattsu ta verklag capIte 401 - <402) • 230 3,416.0 2 £,?81.0 (0 246.0 95 422.0 229 (608) 20 <3c7) 403 <2>7 102 (21) 11rig oapita> brought forvard - - 402 - • - 210 1,636.0 212 (145.0) 63 301.0 257 124 496 <84> 702 (251) verk,8a capliol a aend el year 403 - - - 210 1,616.0 212 (143.0) 162 101.0 217 126.0 496 (84) 702 (231) 1,105 (212) 702 (251) F113T PORU PRK Jcre BUSAN-DISTRICT MARITINJ AND PORT AUTiOITT lalace Sheet (Uan silltonj As of Deceber 3 ------ 1973 1974 1973 1g76 1977 1978 17 5980 1gg1 Attual ppratsal Actual Apprasal atuäl Appraleal Attual Appratal Actual Appratsal Attual AppraSiaI Atual Apprasl AtuaW Apprhlsal Preca t ELEt Angel@ Cash 403 110 1,593 112 1,460 62 930 107 1,079 296 2,132 432 1,833 805 2.116 Accous reeivable- - Il 286 sa 293 101 303 513 361 16 393 20 437 25 store - 100 12 100 1 150 3 130 - 183 - 200 Other 100 • 25 10 23 - 26 5 27 b 28 6 30 7 subtotal Current Asseta 401 2L0 "l 13 1.780 282 1.032 26 1.603 iåk 2.512 1.036 1.89 5.472 111 Accounts paya Le - - - - - 299 1,659 107 407 315 571 323 776 338 1,804 350 2,084 Current les aturatie - - -utyr Other - - - - 90 12 266 13 524 4 06 is 1,460 16 306 17 336 Subtotal Current ,tabilithia - - - -3 .921 320 M3 29 1.079 3 2.236 254 2.110 Le7 2.420 Total get Vorkina CIptal 3 L1 1.616 212 462 11 (84> 702 (251) C<7 rees va • land 2,673 2,673 7,816 2,673 7,916 2,673 8,456 6.313 8,995 9,124 8,993 9,124 17,747 9,124 38.702 9,124 53.290 drots valut - othr 10,949 10,949 13,431 10,949 13,676 19,063 13.284 31,149 13,869 58,298 l6,400 63,798 80,814 44,298 88,041 66.298 98,349 Accuamlated depreciation 742 1,132 - 1,362 433 2,156 423 3,039 1,291 4,683 1,733 6,348 3,926 8.026 5,493 9,764 7,624 Met value - other bssett In usa 10,207 9,797 13,431 9,387 13,243 16,907 12,859 28,110 12,578 53,613 54,673 57,450 76,888 56,272 82,550 56,334 0,723 Total flw Fad Asts la ute 12880 12.470 !!,4 92.060 21.139 19.380 a m 14.423 11.1 62.737 63.668 66.37* *4.633 63.396 525.212 61.658 144.013 Verk@ to progrejs 7 6.861 2.334 58.336 11aU .0M 23.14 49.732 4.785 31.898 .i- U186 1.000 50.068 - 12.866 Total get Fixed Asa5t 42.287 37.604 7.1 1.5f6 67 503.825 66.19 531,320 65.68 536.881 Deförred Annat& - - - . - - - - 75 - 456 • 816 - 18,391 - 26,422 LYM 1TAL MITs 5391 11 23.I 10.806 g=06 g=4* AM84 2747i alla7 677* M6ag4 A7U0 50j 1 6. 149.80 6M76&M 3.3 LLABILITIBB 200 3,970 665 11,495 3,895 10,675 ,07 26,023 17,339 29,185 29,206 29,052 32,75 28,583 43,279 28,039 49,239 MD 0 0---- - - 143 - 2,2U0 - 8,789 - 30,811 a- - - - - 6,07i - 7,645 - 11,205 - 18,914 - 22,274 Other - - - - 2,973 6,350 - 8,100 - 6,750 - 3,400 - 4,030 - Total .ona-Tere Deht 00 !.-70 661 55.4*1 3.891 25.830 52LL7 23.450 37.261 36.994 11.762 46.26t 33.943 73.022 32.089 502.344 ItaultyL.grivalent. 13,754 5.172 22,123 19,396 21,238 20,996 30,174 25,886 21,238 29,697 25,238 29,847 25,238 29,847 21238 29,847 21,238 subeidifes for Invstments - - - 7,77 • 52.506 - 20,379 - 27,887 • 20,681 - 3355 - 32,948 darsaluation of fåmed asaata - - - - - . - Rataånad earnings - l8g 65l (85) 1,161 (147) 2,112 (49) 6,450 797 10,427 1,961 16,373 3,308 2159* 4,827 26,501 Govt. sulsidies catgut öperating Total kulte lknl~ 112M 51.31 T2T936 19.31, !0åa a220e !7M ika i8v 0.44 j232 98.292 i1 7.8 ibf67 80.68 MåAk TOTAL L tAILITul 6 54776 ä71 A 7M 6706 1Uj.I60 fluST AM SECOIM O-Tm 91m7EC5 1.lected Finan.liaLl aies. 1971 1976 97 19749178 1979 90 91 AppraIsal Aatual AppraisaI Actal Apisal Ac~iiTu Appraisal AMtual Appraia Actua Appraia Atua Aperamsal Actual Appaisal Actus3 Appraisad lParer.a VerkIng ratio (1) 30.2 24.3 40.4 24.3 42.6 72.5 39.4 11.4 37.3 L0. 23.6 8.4 23.4 9.2 23.3 11.6 23.0 12.7 '2peratina rast. (1) 42.2 17.0 67.1 40.3 66.8 42.0 16.7 22.4 39.0 16.1 66.6 16.6 66.6 24.0 46.2 25.7 80.4 24.8 TImes Interest earnd 4.9 1.7 1.6 3.2 0.7 4.4 1.4 0.4 0.8 1.4 1.5 2.7 1.4 3.0 1.3 2.3 1.6 2.1 rubt service lovIest 7,9 6.2 1.9 3.0 1.2 3.2 1.1 4.0 1.1 3.7 2.2 2.9 4.3 I.1 1.3 1.6 1.3 1.2 4,t fIxed seess in 1e (oya atio) 12480.0 140.4 17,064.0 12.264.0 24,203.0 15,820.4 21,217.0 27,02.0 11.446.0 60. 4 0 0.0 43.820.4 64.656.0 3 .152.0 65.985.0 107,14.0 !.527.0 132.?34.0 et. rrr at lV cet flanhd assets In .as t (1) 1.2 4.0 i.6 6.5 6.0 .4.. 22.4 4.0 &L0 7.9 15.0 1.0 11.4 6.0 9.9 66. 10.0 irret rO* C/A N/A N/A N/A /A 21. 2.5 0.9 1 .1 6.1 1.4 . 2.5 1.0 3.0 0.9 4.0 0.4 flabe toeqit te 14/m l 2e/7a 2d/72 37/01 11/89 ../49 18/82 36/44 23/07 53/41 38/42 .3/47 44/46 40/00 61.11 .8/53 4/4 Nat t ud ete n UN F07Z0 FIRST POM FIpROJECtq _ott nr tsnr 2, Lese Account ron alIliln 1 971 1914 t17 |t 1977 l981979 14a0 1981 Appretsal Atuai Avgraeaul Actual A-tuaA Apa.uI Astsal P-p-atea- areal Aip eaI Arual pep.o4.ai Uea2 p .pratesa a,tua Appraal Nre..a.t. Trafjl ('00 setrie tonn) 4.11.0 1,212.0 .,054.0 4,,,.0 0,109," 161.0 5.726.1 6,ad.0 N.11h.n 1.312.0 6,144.0 1,nm:. &,4%60.0 å.S0.0 7,171.0 4.611.' 7.912.0 1.489.0 Oprtv " Veng* Lighftjd~ua 3.1 1.1 - 2. . - - - - - - - - - - - - - Fort duen 21.0 11.1 141.0 21. 150.1 21.n 11%.1 24.1 142.4 21,0 165.4 19.0 311.2 62.n 41.0 i.1.0 416.2 4.0 Tuggage - 23.7 - 41.1 - 40.9 - 13.0 - 49.0 - 6.0 - 12.0 - 26.0 - 24.0 6.chz. 4.2 20.0 44.7 t@.i :09.4 97.1 122.7 102.4 169.2 11.30 77.0 156.n 186.4 200.2 2.8 1200.0 204.6 72.0 le,enue frn termIal operatoens - - - - - • 0.2 • n.i - 2 • 0.2 - 0.2 • 0. - Trasait shed eharger 2.4 2.9 - 2.1 n 2.4 • 4.2 - 4,0 - 3.0 - - - - - - ope. um0ar are. charge. 2.) 3.1 0.% 1. 0.5 1.4 n.1 12.0 0.5 39.0 0.1 60.0 0.1 1.0 0. 86.0 0.1 21.0 tera e charge - - - - - - 2.5 - 2.1 - 2.1 - 2.1 - 2.4 297.0 2. 7ttag - - 71.0 47.9 82.2 07.6 47.4 41.j 124.4 1..n 211.1 119.0 1421 k71.0 144.9 42.0 119. 1in.0 Anoirage - - - - - 2.1 - 19.1 39.0 - 45.0 - 31.0 - - - s4.0 FlestIqing lae - • - • - - - - - - - - - - - bont of facLI;tes - - - - - 1.2 101.0 1.0 221.0 22,0 210.0 24;.0 210.0 178.0 250.0 427.0 210.0 e'.• Mecellaneus re:nue 12.6 1.2 12.6 11.2 22.6 1.7 12.6 8.6 12.4 24,0 12.6 66.0 22.6 57.0 12.6 44.0 12.6 b0.0 ICAI 2&iA 17.1 124.4 ai7 111.4 241.2 44. 121.t4 411.1 441.0 642.2 711.0 4:2.1 .in1.0 a0 2.2.4.0ra Onettoa ENsne n.1 14.5 1 2.4 .1 2.0 2.1 - . 1 - .3 1.3 1.3 aetene dredging0.0 20.0 6.0 - 16 •3.3 -3.• 1.0- tort tagsla Office - - 4.0 •C.0 - 4.0 • .0 - 4.0 - 4.0 - 4.0 - 4.0 - Genral niataca 1".0 th.6 45.3 4A.1 42.4 49.5 84.4 17.0 l09.. 12.0 12. 102.0 112.4 163.0 132.4 154.0 112.6 517.0 Ipeelal servlcea - - 21.1 - 21.1 - 24.1 - 21.0 - 21.1 - 26.C • 26.1 - 27.0 - Nlellmoeee dock laber - - - - - - 4.0 - 4.0 - 4.0 - 4.0 - 4.4 • 4.0 - SuOdty d.t epeare • - 1.0 • 2.0 - 1.0 - 1.0 - 2.0 i 2.n - 1.0 - 1.0 • General andeldstentrasion 56.1 21.7 9.1 24.1 4l.9 27.7 1i.0 31.4 19.0 a01.0 59.0 101.0 59.0 161.0 14.0 151.0 59.0 15.0 ehtotst verkla seeta 1.4 12.4 11.4 U72 242.2 2n2.2 2002 l.4 24M2 141,n 111.4 21.0 jA. 114.0 24.4 702.0 144. 1.0,.0 Depreeation 56.0 56.0 i4.0 1.0 56.n 93.1 122.2 90.2 1.1 I0.2 175.5 200.0 27.3 175.0 M39.1 253.0 211.5 308.0 Total Operatten Rapee$* j24. 08.4 222. 221. 2 1I2U 21.? 122.4 279.0 417.7 2 410.9 102.n 411.0 444.0 941.9 42.0 474.4 i171.0 st orstine røveme (13.6) (11.5) 115.2 40.1 138.3 89.4 322.3 144.4 449.6 162,0 S10.3 490.0 124.4 606.0 557.5 78. 187.3 909.0 taterest charge 1.2 9.1 471.1 ..1 264.1 13.4 166.1 40.0 174.3 145,0 16.4 219.0 2M.4 211.0 198.5 111.0 194.0 325.0 Eweept1oe04 1os. (revene) - - - - - - - - - ~ e • - 2.0 - 3.0 • 22.0 gnt te. (84.41 (60.6) 67.9 14.4 . 74.0 14.3 204.4 275.3 17.0 311.9 21.c 328.1 173.0 154.0 439.0 392.5 112.0 Tale .f tort9 andpi tationO tf F.aa villällio w1' .1t114IO FM 471 9 94 1975 & 176 1977 197 1979 198 1941 ToI ! I3- Apprafia! Actual Appråcal i Aual .a. Aptue MEMI AppraIa 7 Act-al A Ia AppraIl ! Atal Appraal Accual AvpraIa. FErcas ppra al Tat WIMIL7 rämh Generat1n rsg patarafena .23.4 77.2 4*.0 94.2 793.0 932 1,30.7 1,03,4 1,763.9 1,061.7 2 284.0 - Walvng tast, 65.4 >1.8 130.6 97.2 161.1 102.2 21i. 88.5 243.2 113.0 201.4 201.0 2NI.9 124.0 266.4 107.0 266.9 .067.0 Cash Asnratad fis aporulna (20.6) 4.1 171.2 94.5 196.3 114.9 444.5 211.6 635.1 262.1 AB1.8 190.0 116.4 78.0 757.0 - 195.8 1.Z17.0 - other . - - - - - - 30.0 - . . . - . . . . . total [atornal Ckhenration (21.64) s.1 j,j 1 4.1 1961 j6.j 23.6 661.1 26.0 .6A.i 90.0 7162 711.0 717.0 104ö.5 798.8 1217. m.607 2.192.0 nnat agalaat öpeaqtgsn - 4.6 126.1 • I6I.2 114.4 77.0 339.4 771.0 - 314.0 - 370.0 - lso.. - (0) • co-ernma.t agtnet inet.Inta 32. • - - - - - - - - - Other - - - - . . - - - - - - - - - - Toetal suboaldte 32.8 4.4 32J - 411.2 11.0 7 l . n Ill0 - 756j. 37.0 - 1.0 (6.03 9a.o 2.0.0 - - 63.4 - 925.0 124.n BR0.O 122.n 110.0 2,172 0 21ö.n 1i7.> 0.4 - - - - Total -eans . - jj0 2. -l. - - -0 - - 2- -j -5 AA 122.0 110.0 2.3720 -2.701.0 3.323.0 GLNSTOAL600051. jJ~ 1.271 96.1 16.0 4.9 Å"601.1 69 0. 77.1.000 833 1.1 2.4 -444. ia9. 788 JL,j LI& .6. låmo F irat e- - 1,050,0 70.4 1,494.0 239.0 1.361.0 A5.6 170.0 2.988., 310.0 I5319. 1.0 - - - - - milaa o,.reet - - - - - - Othar - - - - - - 400.0 - 00.0 92.0 600.0 735.0 400.0 692.0 - - Total1.080.0 70. 1.4.0 21.0 1jn jA 170.0 2.98j,0 50 .0 .118.0 j0.j0 792.0 40. Le 730.0 692. j 90 710 5.2 9.1 47.3 26.1 54. 13.4 166.1 40.0 184.3 45.0 16.4 221.0 200.4 239.0 Me.0 11.0 94.8 32 .0 - - RepaT.aeta - - - - - - • - - - - 21.1 117.0 44.4 157.0 47.8 133.0 - • total Dt ervice j. 9.1 4- ? j 16. 3.4 , 40.4 J3 14.0 596.4 221.0 21. 36.0 49l. 242.6 4. j509 1.91.0 Oan TMAL. APICAT0ss ja 9.1 1.127.2 96.0 268.9 jilu 03.6 31. j3.11.0 ELA 5.7790 JLL 0.0 62 jMåjl 642.6 1 1 0 LD knual variation§ In varklai eapIii l - - - - • 176.0 (129.60 (163.0) 424.8 272.0 89.4 (248.0) 96.4 (4.0) 116.1 (8.0) 15.2 2.0 arklns eapital braqht faard • - - -%- - - 576.4 (129.6) 13.4 251.2 285.0 3l.6 17.r 475.5 13.0 049.6 0.0 1oo4lng ospltal at anI al year - - - - • 076.4 1129 63 11.0 293.2 280.0 10.6 17.0 675.5 13. 099.6 0.0 740.8 7.0 090.0 1.0 Fprut PORTA PFCTx ~ r w~ m PIGT Pså i FE.1. l973 J974 167 1974 077 91* 5 1979 1970600 A Ataal taal Atual AaprtanI A1ta1 ApAå atsal 1 Actul Appratsal ltaa ApraL.a I Apprassal Ag104l Appra0sa1 Aas i sal recast t Auss~ 111.0 (166.6) 201.0 M. 610.0 33.6 07.0 423.5 07.0 532.6 195.0 683.6 161.0 Acceunte 0.ceVIble 3.0 66.0 11.0 47.0 02.0 96.0 06.0 98.0 35.0 12.0 5.0 106.0 7.0 fluak h.0 20.0 1.0 23.0 3.0 23.0 3. 23.0 •3.0 - 23.0 - oth, - 3.0 1.0 6.0 - 5.0 - 6.0 - 7.0 8.0 - gultmtsi ÖSta.t asett# 1,4.0 <16.00 241 343.1 505.0) 01.4 !04.0 330. 100.0 MåA ,3 0.0 181 0 14.0 iH Iia4oa ". tt 42.0 m41.0 62.0 224.0 a4.0 87.9 64.0 s0.0 .0 334.0 64.0 l2.0 curreftt lade uturgeten C04 T 8.3 8.0 60.0 10.0 96.0 11.0 - 00.0 9.0 11.0 61.0 11.0 9.0 schtotal 0aset Ljahålitice .0 50.0 201.0 2 .0 220.0 iLI iw 750 iho- iho0 193.0 n& 147.0 Tata0 Uet lm,kla egettal 176.0 (ULM9 iM. 21.2 2113 311M i7.0 470,0 il-o li ffä L-. o- 746 7.UG 9 I lånd 417.2 427.2 676.6 627.2 469.0 427.2 546.4 427.2 546.0 437.2 546.0 427.2 553.0 427.2 1.002.0 427.2 1.002.0 0roce Tala* - utMer 2,248.6 2,244.6 5.934.5 2.248.6 6.015.0 2.244.6 6.044.n 5.172.6 6,070.0 6.6.4 11.683.0 7.344.1 12.195.0 7.748.6 15.440.0 1,148.6 16.302.0 Actated depreciation 02.0 068.0 - 224.0 94.0 146.2 »84.0 321.7 204.0 697.2 5o.0 m4.7 831.0 1,044.2 014.0 5,295.7 1.111.0 6et valC- - .ther as. 0. ose .X34.6 2,040.6 1,932.5 3,026.6 1..4 .903.4 1,a60.n A.650.9 5,786.0 6,241.6 00.027.0 6,4§3.9 10.364.0 b,664.4 14,824.0 6,852.9 15,1.1.0 Total Ift 7t4d Aagfs $n deg 2,5b2.4 2.10 6.416.6 2.4.1.4 A.4A0.0 1.126.6 0640 3.070.0 5.1230 6,66154t 91.372.0 6.81 , 7.066 11.2.0 7.214.1 IG.193.8 Verka ta procreme 370.0 1,450.0 - 2,945.0 124.0 4,310.0 975.0 .356.0 3.12.0 400.0 - 400.0 276.0 400.0 53.0 400.0 82.0 Total kgI Flad Anseum 2.613.8 3.d65 70 .414. 0a12M 6.114.0 4.614.6 J.5j0 IÄM 10.144.0 7.A 11.373.0 7.360.0 12.091,0 7.491.4 j ,öjJ 7.40. 16.10.0 Deferred Micens 2.0 13.0 - 14.0 - 1,219.0 - 1.675.0 M -W LJAIMMIA,å ALLAd ~dl ihå Al å"i 11LI-I .L, 1= gu 1 08åuli 1i 1-i1i0 gå"li gih l : DU!!! .0l: ku=Lå, - ~ m0.0 - 1,555.0 2.0 ,431.0 346.0 2.543.0 2,600.0 3,755.0 3.35.0 2,743.9 3,13:.0 2,69.5 1.253.0 2.452.7 4.4VI.0 OtS.ar - - - - - - - - - - - - - - - - te1&I t4A-1ITer OehL 430.0 - 1.305..0 0 3.433.0 240.0 3.43.0 3.69400 2.733.0 3.22.0 2.743.6 3.13.0 2~.34. 4.23.0 31350 4.4z11.0 cig3al3.6 3.259.9 6,486.3 3,741.1 4,34.0 3,81. 6,38.0 3,804.1 6.38.0 3,0:0.1 6,34.0 3,08.1 63u.0 3,808.1 6.38.0 3,018.: 6.38.0 0..t,,g ..ise - - - - 000.0 - a57.0 ,2.-28.0 043.0 - 1,1.0 - 2.000.0 - 2.015.0 at t ..lO . .... 3110. ael- .8. 2.8. Lea ffe astets (<4.05 67.9 (16.45 l00.7 79.n 256.4 105.0 563.2 17.0 876.1 448.0 1,204.6 022.0 1,563.0 0,240.0 1,95.1 t7o. Total a3.3274 6.4Eiae j.1140J G.Snö. 4.07.0 7.1a5:0 MNJ80.3 7.ta3a0 4j14.1 0a378.0 1-a2,7 I.L126 1.11.7 .lI 4L 5.a14i1 13.12,: 0~A ga T lTA3. L141tlA I AjL7 bl 6 . LåjL3 0a0 a0 .0 10.40. 70 1 110 -0 UL! 1171? 107170fl h1neted Financial baies 1970 197497 1977 Øp 978ilcia979I 1880 18 Approfoe ATal iaTl Appuais åt Appratial Atal Appral al Antal Ac p Isa iat Apprataal Aruat Apprurast Ae~at Vril. raut. (> 16.0 92.0 41.0 10.0 45.4 26.0 31.0 27.5 28.0 41.i 27.0 25.5 21.0 29.0 26.0 60.0 21.0 7.0 Oprattød fato (M) 305.0 190.0 41. 79.0 61.0 69.0 50.0 n.0 48.0 b4.0 46.0 20.0 46.0 65.0 46.0 5.0 41.0 60.0 Tim& igterest arned 8/A MIA 2.4 1.6 1.3 6.? 2.0 3.6 2.5 1.1 2.6 2.1 2.6 2.6 2.8 2.1 3.3 2.8 Debt merglce C@eragne /A MIA 1.4 3.7 1.1 11.6 2.7 5.9 1.6 1.8 1.1 2.1 3.2 2.1 3.1 2.2 3.3 2.7 Net fa asse$ Is id d (Wes eltItiou 2,1413 2.162.8 2,3.0 0.102.9 2.479.8 6,412.1 2,390.7 1.108.0 2,702.9 4.209.0 1.871.4 1.912.5 4,779.9 33.701.0 1.991.4 13."73.*.k 7,182.1 I1,005.Ojj tale af retur.. oa set fIxed 1s1118 I% use () t/A n/A 0.1 0.9 1.6 .1.4 13.1 2.2 12.& 2.1 0.6 1.1 5.8 1.2 7.9 1.7 6.1 5.7 Curw*st rate 8/A VIA M/A 8/A I/A 23.0 W/A 1.1 5.0 2.3 6.1 1.2 7.2 1.1 8.9 1.0 10.9 1.0 lq9ld ratio MIA MIA M/A Ni /A 12.5 a 1.1 4.7 2.3 1.J 1.1 7.0 1.1 8.6 1.0 10.6 9.0 Dbt to qulty retl. 0/100 0/100 16/64 0/li 29/71 12/98 37/83 33/7 27/43 21/75 37/63 28/72 33/165 25/71 3/67 15/73 31/69 2/7 L1 hvaled. ＿乙。ー プ和βFz論，ゲ - 61 - KOM SECOND PORT PROJECT PROJECT COMPLETION REPORT I. PROJECT BACKGROUND AND SECTORAL SETTING The Transport Sector 1.01 Korea's export-led industrialization has been among the most successful examples of economic development in recent history. During 1962-78, real GNP grew by 1OZ p.a. and per capita income more than tripled in real terms. Coupled with industrialization and urbanization, major develop- ments and changes in the transportation sector complemented and supported the transformation of Korea's economy. Passenger traffic tripled between 1964 and 1971 and then tripled again by 1981; freight increased nine times and five times respectively during the same period. 1.02 The Government of Korea's (GOK) basic objective in the past has been to increase transport capacity in line with projected traffic growth and to avoid major bottlenecks. This objective has been largely achieved. Further- more, the transport system as developed is reasonably balanced, as there is no substantial uneconomic allocation of traffic among the various modes. 1.03 Large investments in transportation infrastructure have been comple- mented by a considerable effort to improve the efficiency of the transporta- tion system through the establishment and strengthening of institutions to plan, construct, maintain and operate the facilities and services. This is true both in the public sector, with the establishing and strengthening of institutions such as the Korea Maritime and Ports Authority (KHPA), or the Transport Coordination Bureau (TCB) in the Ministry of Transport, and in the private sector by the successful development of many contractors capable of handling a wide range of public works in Korea and abroad. 1.04 The Bank has played an active role in advising and assisting the Korean authorities in pursuing their transporc objectives. A summary of investments follows. - 62 - Signing Loan/ Amount Date Credit ($M) 1. Ports I 6/27/73 L-917 80.0 2. Ports II 4/28/77 L-1401 67.0 Subtotal 147.0 3. Railways I 8/15/62 C-25 14.0 4. Railways II 12/08/67 C-110 11.0 5. Railways III 4/14/70 C-183 15.0 L-669 40.0 6. Railways IV 11/22/72 L-863 40.0 7. Railways V 4/10/75 L-1101 100.0 8. Railways VI 4/10/78 L-1542 120.0 9. Railways VII 5/21/80 L-1863 94.0 Subtotal 434.0 10. Coal & Cement Distribution 4/29/83 L-2267 122.0 11. Grant for Transpor- tation Survey 9/13/65 0.2 12. Highway & Transpor- tation Coordina- tion Surveys 7/24/68 C-S4 3.5 13. Highways I 6/29/71 L-769 54.5 14. Highways II 1/25/74 L-956 47.0 15. Highways III 2/20/76 L-1203 90.0 16. Highways IV 12/22/78 L-1640 143.0 17. Provincial & County Roads 12/30/82 '-2228 125.0 18. Highway Sector Loan 3/22/84 L-2392 230.0 Subtotal 693.2 Total 1,396.2 The Ports Subsector 1.05 Korea's port network comprises 43 commercial ports and 12 industrial ports which in 1982 together handled a total of 160 million tons, of which 109 million tons were foreign trade and 51 million tons were coastal trade. In addition to these ports there are 416 fishing ports and about 1,300 other wharfs without basic facilities. Port traffic, starting from 11 million tons (mt) in 1965, and 70 mt by 1975 has grown rapidly to its 1982 figure. It is - 63 - now expected to grow at 8.1% annually through the Fifth Five-Year Plan until 1986, with ocean freight growing at 8% annually, and coastal freight growing at 9.7% annually. These growth rates would increase total tonnage to be handled through the ports over the next five years by close to 50% or up to 232 million tons. The resources allocated in the Fifth Five-Year Plan 1982-86 for commercial, industrial, and fishing port facilities amount to above Won 1,200 billion. 1.06 Of the 55 major ports, Inchenn, Busan and Ulsan together handle 50% of total cargo and 73% of general cargo. In 1982 Busan alone handled 68% of foreign trade general cargo. The port of Busan has a natural harbor, further protected by breakwaters, the northern section of which handles commercial shipping, while the southern section handles fishing vessels and other small craft. The entrance channel was deepened from 12 m to 13.5 m (40,000 dwt to 60,000 dwt ships) as part of the Bank-financed First Port Project (Loan 917- KO). 1.07 Berthing facilities consist of about 4,700 m available at four finger piers, and at a central wharf. Oil traffic is handled in the outer harbor, while 95% of the timber imports are unloaded in the stream. There are about 3,000 m of lighterage wharf and 24 ship anchorages with 5 m to 13 m depth. Containers are handled mainly at the new terminal or with ships' own gear at general cargo piers. There is also a privately-owned container crane on the north side of Pier 3 which is used in direct load/unload operations with semi-trailers, because there is very little space for container stacking at that pier. Mechanical equipment for handling general cargo is largely privately owned. 1.08 The berthing facilities were substantially expanded under the First Port Project Loan 917-KO, which was completed in July 1978. The project included: (a) composite pier with 600 m of container ship berths, four gantry cranes, and a grain berth and silos; (b) Pier 7 for bulk coal and minerals; (c) rehabilitation of Piers 1 and 2, which included provision for an international ferry terminal with roll-on/roll-off facilities; and (d) a corstal ferry terminal. A new Government-financed military pier was built nearby in order to free Pier 3 and the central wharf. The second project mainly expanded the composite pier and rehabilitated piers 3 and 4. Port Organization 1.09 In March 1976, following a 15 month study by consultants financed under Loan 917-KO, Korea Maritime and Ports Authority (KMPA) was established under the MOT for the purpose of administering the construction and operation of Korea's 20 first-class ports. The 23 second-class ports and numerous minor local ports continue to be operated by local governments. KMPA administers the first-class ports through ten District Maritime and Port Authorities (DMPA). Key personnel were appointed in April 1976, and personnel from MOC's Bureau of Harbor Development have since been transferred to KMPA to staff the construction and maintenance functions. The Korea Dredging Corporation has been transferred from MOC to MOT, and harbor dredging at first-class ports is now under the control of KMPA. Construction of "industrial ports," forming - 64 - part of industrial complexes, continues under the control of MOC, which is responsible for construction of industrial complexes. II. PROJECT FORMULATION 2.01 In June, 1973, the Bank agreed to a loan of US$ 80 million (Loan 917-KO) to finance the First Port Project which was mainly to provide for additional part facilities and technical assistance at the ports of Busan and Mukho. The project was based on a UNDP-financed and Bank supervised Master Plan study for developing the two project ports as well as Korea's other main ports. The study was completed in November 1972 and the project was completed in August 1978. 2.02 In mid-1973, the Government requested Bank assistance in financing and supervising a feasibility study for further development of the port of Busan. Terms of reference for the study were prepared and agreed upon with the Government in November 1973. A joint venture consisting of three American firms was retained on July 16, 1974 to carry out the study. The study was financed under Loan 917-KO and its final report was received in the Bank in March 1976. 2.03 The port development was intended to be consistent with the Govern- ment's Fourth Five-Year Plan (1977-81) and also in accordance with the recom- mendations of the above-mentioned feasibility study. The main objectives of the project thus formulated were: (a) to provide additional port facilities and equipment to handle containerized cargo; (b) to rehabilitate old port facilities so as to increase their operational efficiency; and (c) to provide technical assistance to improve port operations, cargo handling techniques, equipment maintenance, port planning, and accounting. 2.04 Loan negotiations took place in February 1977, Board presentation in April, 1977 and loan effectiveness in July 1977. Total project cost was esti- mated at about US$ 112 million equivalent, of which US$ 70 million in foreign currency. The Bank agreed to provide a loan of US$ 67 million equivalent to cover 95.7% of the project's foreign exchange cost. 2.05 Engineering consultants acceptable to the Bank were retained in July 1978 to prepare final engineering under terms of reference agreed upon with the Bank. The project was cimpleted in March 1983, about 15 months behind the appraisal schedule. The closing date was extended from December 31, 1982 to December 31, 1983. III. PROJECT DESCRIPTION, IMPLEMENTATION AND COST Project Description 3.01 The project consisted of the following: - 65 - Civil Engineering Work (a) construction of a 603 m deep-water berth 1 for container traffic, and reclamation of an area 335,000 sq m for stacking containers; (b) dredging to provide a depth of 12.5 m at LWOST 11 alongside and in front of the above mentioned berth; (c) construction of an access road inside the port limits and an 8,000 sq m container freight station for stuffing and unstuffing containers; (d) ancillary works, buildings and utilities including paving, drainage, water supply, electrical system, administration and customs build- ings, guard house, etc; and (e) rehabilitation of Piers No. 3 and 4, the central wharf and a lighter wharf. Equipment (a) procurement of container handling equipment: 4 container gantry cranes, 10 transtainers, 24 tractors, 72 trailers and 10 truck scales; and (b) procurement of two tug boats, 3,000 hp capacity each. Engineering Consultant Services (a) for project design; and (b) for supervision of civil works construction and procurement of equipment. Technical Assistance and Training (a) for cargo handling including containers; b) for maintenance of port facilities including equipment; (c) for port planning; and (d) for implementation of commercial accounting systems. 1/ This is an extension to the common-user container berth (Pier No. 5) financed under Loan 917-N0. 2/ Low Water Ordinary Spring Tides. Tidal range is 1.3 m. - 66 - Project Implementation Civil Engineering Works 3.02 The Busan Port Construction Office (BPCO) was responsible for the project, under the overall direction of the Korea Maritime and Port Adminis- tration (KMPA), and assisted by consultants for project design and super- vision. The appraisal report (March 25, 1977) assumed that the Government was about to appoint consuitants for project design and supervision and also that civil works construction would be completed by the end of 1981. However, consultants were appointed only on July 7, 1978 (one year behind schedule), resulting in tender documents being completed only by the end of 1979 and civil works were completed only by the end March 1983, 15 months behind schedule. The main reasons for the lagging schedules were (a) consultants delay in preparing tender documents and (b) delays in completing the techni- cal assistance and training component. As e result of these delays, the Bank agreed to extend the closing date from December 31, 1981 to December 31, 1982 and later to December 31, 1983. The formal completion ceremony for the project civil works was held on March 18, 1983. Due to the importance placed on exports in economic development, the President of Korea was the principal speaker at this ceremony. 3.03 Civil works were divided into four lots, each awarded separately to a different local constructing firm with BPCO was the contracting agency. The lots were: Lot I (Infrastructure of Pier No. 6) included mainly construction of a container berth 603 m long, dredging of 4.1 million cu m of spoil, sandfill reclamation of 4.95 million cu m, construction of a barge quay 52 m long and construction of part of the access road. Lot 2 (Pier No. 4) included rehabilitation of 1,690 m of existing berths, demolition of four transit sheds and construction of four new ones totalling 13,600 sq m of floor area, construction of seven buildings totalling 2,400 sq m of floor area, installation of lighting systems and utilities including orainage and water supply systems, and rehabilitation and construction of railway track totalling 2,200 m long. Lot 3 (Pier No. 3 and Central Wharf) included mainly rehabilitation of approximately 1,800 m of existing berths, paving of about 113,000 sq m of roads and open storage areas, construction of four transit sheds and laborer's and operations buildings, reconstruction of railroad and installation of area utilities (drainage, water and electrical systems). Lot 4 (Completion of Pier No. 6) included mainly construction of two stuffing and unstuffing sheds with about 20,500 sq m of floor area; con- struction of several operations buildings with approximately 5,500 sq m of floor area including eight guard and scale houses, 10 truck scales and an overhead catwalk; installation of area utilities; relocation and con- struction of railroad and crane rail totalling about 3,100 m; provision - 67 - of 154 kV substation and installation of underground transmission cables; and miscellaneous small buildings totalling about 2,200 sq m of floor area. 3.04 Pi7ticulars of the execution of the above-mentioned four lots were as follows:- Preparation of Contract Completion Contract Actual a/ Lot tender documents award date amount amount --- (Won million) Lot 1 Mar. 16, 1979 Jul. 14, 1979 Mar 31, 1983 26,637.7 28,569.4 Lot 2 Sep. 21, 1979 Dec. 24, 1979 Jun 30, 1981 5,237.5 6,079.1 Lot 3 Dec. 4, 1979 Aug. 13, 1981 Feb 8, 1983 b/ 6,708.8 8,131.9 Lot 4 Dec. 29, 1979 Aug. 12, 1981 Mar 26, 1983 18,564.5 20,430.9 Total 57,148.5 63,211.3 a/ Including change order costs, escalation and value added tax. b/ By that date the basic contract was completed, however two change orders Nos. 4 and 6 were completed later. 3.05 Pursuant to the Loan Agreement, BPCO, the agency responsible for project execution, was to be assisted by consultants acceptable to the Bank to design the project and supervise its construction. BPCO employed a joint venture consisting of an American firm and a Korean firm on July 7, 1978 to prepare final engineering and tender documents and later to assist in super- vising work construction and equipment procurement. All contracts were awarded on the basis of international competitive bidding in accordance with Bank Guidelines for Procurement. Construction encountered certlin difficul- ties as is normally the case during execution of port projects of this type and magnitude, however all problems were adequately resolved in due time without adverse effect on the project's technical standards and the project was successfully implemented. The super%ision consultants processed 8,586 requests for inspection and 2,471 requests for approval during civil works construction. 3.06 The main problems encountered during project execution were: (a) a general problem, common to both the civil works and equipment, was the floating Won rate. At the start of the project, the conversion rate was Won 484.9 to US$1.0. In January 1980, the rate was changed 3 Paras. 3.01 and 3.03 compare work envisaged at appraisal with work actually contracted and para. 3.06(f) discusses the change orders. - 68 - to Won 582.9 to US$1.0 as a floating rate. By the end of 1982, the Bank of Korea selling rate was Won 750.3 to US$1.0, a change of 54.7%. The average rate for 1983 was Won 781.0 to US$1.0. This, obviously, made direct conversion of construction costs an accounting problem; (b) the requirement for early completion of the container berth access road and its incorporation in Lot No. 1 resulted in some overall delays; (c) early dredging problems and lack of equipment caused delays for Lot 1. Government approval of the use of a 9,000 cu m capacity sea going hopper dredger settled these problems; (d) an unusually heavy rainy season in 1980 caused extension of the work period. Also there were delays by rhe Korean National Railroads (KNR) in railroad work which was under their jurisdiction; (e) the contractor for Lot 3 lacked adequate equipment in addition to having problems with his subcontractors. The problems were complicated by the contractor's poor scheduling of inspections and lack of experience and proper construction techniques; and (f) several changes, most of which were minor, were introduced during construction to ensure the best achievable technical standards and operational efficiencies. Contracts for Lots No. 1, 2, 3 and 4 were subject to 11, 9, 6 and 12 change orders respectively, a total of 38 change orders; the most important were: (i) deletion of the sprinkler systems and installation of smoke detectors at the container freight station; (ii) additional soil borings to determine possible future settlement; and (iii) dredging the turning basin in front of Piers Nos. 2, 3, 4 and 6 and in an anchorage area. The change orders resulted in a net decrease in contract amounts for Lot No. 1 and Lot No. 2 of Won 4,211.4 million and Won 25.8 million respectively, and a net increase for Lot No. 3 and Lot No. 4 of Won 1,570.8 million and won 2,164.0 respectively; a net decrease of Won 502.4 million for all civil works. Equipment 3.07 Para. 3.01 above outlined the equipment to be purchased under the project as stated in the Appraisal Report. Procurement of equipment was handled by the Office of Supply, Republic of Korea (OSROK). Specifications were prepared b- the same joint venture consultants responsible for civil works and approved by the Government and the Bank. Bids were analyzed by the consultants and BPCO before recommendations for procurement were made. Three main categories of equipment were purchased: - 69 - (a) Four con5ainer cranes (two 40.6 t and two 30.5 t capacity), and nine PACECO,- container transfer cranes (two 40.6 t and seven 30.5 t capacity). Contract included spare parts and training; (b) mobile container handling equipment including four forklift trucks, 18 yard tractors, 50 yard trailers, and 20 road trailers; and (c) One tug boat 3,200 hp capacity. 3.08 Details of the equipment procurement follows: Contract Delivery Actual /h Equipment - award date Contract amount Amount (US$ M) 4 container cranes Jun 13, 1980 Dec 27, 1982 Won 3,028 a/ million 4.624 9 container transfer cranes Jun 13, 1980 Dec 29, 1982 Won 2,407 b/ million 3.813 4 forklift trucks Dec 2, 1980 May 24, 1981 SKR 1.451 c/ million 0.281 18 yard tractors Dec 2, 1980 June 1, 1981 DM 2.598 /a million 1.106 50 yard trailers Dec 2, 1980 Various Won 227.6 e/ million 0.335 20 road trailers Dec 2, 1980 Various Won 120.6 f/ million 0.176 1 tug boat Apr 18, 1980 Apr 30, 1981 US$ 1.347 &/ million 1.185 Total equivalent US$13.049 million 11.520 a/ US$5.195 million equivalent based on a rate of exchange of US$1= Won 582.9. Rl US$4.129 million equivalent based on a rate of exchange of US$1= Won 582.9. c/ US$334,437 equivalent. ;/ US$1.457 million equivalents. e/ Payments made in Won (US$383,183 equivalent). Y/ Payments made in Won (US$203,040 equivalent). I/ Won 784.9 million equivalent based on a rate of exchange of US$1=Won 582.9. h/ Based on actual rate of exchange on the day of payments. All above equipment were procured on schedule and are operating satisfac- torily. Except for minor administrative issues, there were no major problems with the procurement of equipment. Of interest, were the following: (a) the container cranes were ready for use by July 1, 1982, however, since the new container berth was not complete insofar as final electricity and paving, they were idle until completion of all superstructure; and 4/ This type of cranes is being effectively used world-wide. - 70 - (b) commercial conditions of OSROK as spelled out in the tender docu- ments caused problems when the local supplier of the 50 yard trailers requested payment in US dollar instead of in local currency as specified in the tender documents. The supplier finally agreed to accept payment in Won. This however resulted in dollar savings. Technical Assistance 3.09 The technical assistance and training component included under the project was intended to assist KMPA in four areas of port operations viz: cargo handling, port maintenance, port planning and the implementation of commercial accounting. Later on partial funding for the feasibility study of Busan port Phase III development was also included in this component. The first three areas were mostly handled by the sending of about 50 KMPA employees abroad for training as well as training by the equipment suppliers. The engineering consultants assisted KMPA in selecting employees for placement at ports and institutions of higher learning in such diverse places as the UK, Taiwan, Japan, Singapore and the USA. It marked the first concerted effort to train KMPA employees in more modern and efficient cargo handling techniques and cost effective port operations and maintenance. These fields were not stressed previously in Korea and hence this component can be judged to have had a major impact as it has equipped KMPA with a core of knowledgeable port operations staff on whom it can plan a better future. Similarly, the fourth component, commercial accounting represented even more of a new area for KMPA staff who had so far only been doing administrative type budgets. A joint venture of Korean and foreign accounting and audit consultants were retained by KMPA to help prepare its first few years of commercial type accounting statements and subsequently train KMPA staff to do these themselves. This was probably the major achievement under the techDical assistance component, as by 1983, KMPA staff largely prepared their own statements with some assistance from the consultants. However, much more has yet to be accomplished in this area, as discussed in para. 6.02 under institutional development, but it is a commendable start. 3.10 The detailed engineering contract for the Busan third phase development was signed on December 1, 1981 and work started in January 1982. It was completed in December 1983 and recommended that Busan port be expanded further to meet the mid-term (to 1990) container traffic demand. However, due to budgetary constraints, the Government's EPB proposed postponing the project by three (3) years. The Bank did not agree with this and argued that traffic growth could allow no more than a 1 year postponement of the original early 1984 starting date for implementation. Among the reasons behind the EPB's recommendations was the fact that the project is costly ($300 million) and requires extensive dredging and breakwater construction. Furthermore, continued expansion at Busan would lead to severe inland traffic congestion and land use problems. The Government therefore accepted the study's main findings concerning the need to expand port capacity but has decided to launch a site investigation study in order to determine whether this additional capacity may be better installed elsewhere. This study is expected to be completed by end 1984. - 71 - Project Costs, Financing and Disbursement Project Costs 3.11 The project was estimated at appraisal to cost US$111.925 million equivalent (Won 54,283 million at a rate of exchange of US$1.0 = Won 485). The foreign exchange cost was estimated at US$70.0 million of which US$67.0 million were to be financed by the Bank Loan and US$3.0 million by the Government. The actual project cost is US$ 117.805 million equivalent (Won 81,121 million at an average rate of ephange of US$1.0 = Won 689). The foreign exchange cost is US$66.217 million.- The above cost includ g: (a) US$3.650 million equivalent (Won 2,515 million) value added tax - amoun- ting to 10% of local currency payments on civil works contracts; and (b) US$5.826 million equivalent (Won 4,300 million equivalent) for feasibility study and final engineering for a proposed Busan third port project; this was not included in the project at appraisal. 3.12 Details of the actual project cost as compared to the appraisal estimate are given in Table 1. Following is a summary of the said table. Total Project Costs Won (million) US$ (million) Local Foreign Total Local Foreign Total A. Project As Appraised - Appraisal estimate 20,334 33,949 54,283 41.925 70.000 111.925 - Actual cost 30,616 43,460 74,076 44.760 63.251 108.011 B. Total Expenditure a/ 35,465 45,656 81,121 51.588 66.216 117.805 a/ Including value added tax and feasibility study and final engineering for a proposed third port project. 5/ The balance of US$782,976.42 of the loan has been cancelled. 6/ The Government started levying this tax after loan signature. This is why it has not been included in the appraisal estimate. - 72 - 3.13 Several factors contributed to the actual cost in US$ being 3.5% lowef than the appraisal estimate, but 36.5% higher when expressed in Korean Won.- The main factors were: (a) the increase in the value of the US$ from US$1 = Won 485 in 1977 to US$1 = W 783 in 1983 with an average of US$1 = Won 689 during project implementation. (b) changes introduced on civil engineering works during preparation of final engineering as compared to the appraised project (paras. 3.01 and 3.03). These included mainly: (i) reduction in the length of the container berth from 700 m to 603 m so as to fit the available site; (ii) dredging the access channel to 13.5 m instead of 12.5 m; (iii) construction of a barge quay 52 m long; (iv) construction of two stuffing and unstuffing sheds about 20,500 sq m of floor area instead of one shed 8,000 sq m of floor area; (v) construction of eight new transit sheds on Piers No. 3 and 4; (vi) rehabilitation of piers returned by the army to civilian use; and (vii) several change orders during project implementation (para. 3.06f). In particu- lar, rehabilitation of Piers 3 and 4 was estimated to cost Won 3,090 million whereas, as a result of introducing additional works, the actual cost reached Won 14,211 million. All of these changes proved to be justified and contributed to more efficient port operations. (c) reduction in the price contingencies from the appraisal estimate of 36.6% of all project costs to an actual of 9.6% of such costs. In fact, procurement of equipment totalling Won 8,025 million was not subject to price escalation. Project Financing 3.14 The financing plan envisaged during appraisal represented Won 54,283 million (US111.925 million equivalent) of which Won 33,949 million (US$70.9 million equivalent) was in foreign currency. The Bank loan provided for US$67.0 million equivalent, ind the Government undertook to provide the balance of US$3.0 million equivalent in foreign currency as well as all local currency costs. Actual foreign currency costs were limited to US$66,217,023.58, and the Government ffilled its commitment by providing all local currency needed for the project - amounting to Won 45,656 million (US$51.588 equivalent). 7/ The wholesale price index was: 1976 = 100, 1977 = 104.4, 1978 = 116.6, 1979 = 138.4, 1980 = 192.3, 1981 = 235.5, 1982 = 247.6, 1983 = 249. 8/ Including value added tax and feasibility study and final engineering for Ports III project. - 73 - Disbursements 3.15 Disbursements on the Loan were always behind schedule. Although the Loan Agreement was signed in April 1977 and the Loan became effective in July 1977, disbursements started only in March 1979, two years behind schedule. The main reason for such excessive delay was because the project itself was behind schedule. The appraisal report had assumed that the engineering consultant would have been employed in early 1977 and hence disbursements should have started in FY77 but events did not materialize this way. Table 2 which compares the estimated and the actual disbursement schedules is summarized below: Cumulative Estimated and Actual Disbursements US$(million) Bank Fiscal Year FY77 FY78 FY79 FY80 FY81 FY82 FY83 FY84 (i) Estimated 0.70 5.70 18.80 36.10 61.80 67.00 67.00 67.00 (ii) Actual 0.00 0.00 0.77 6.48 31.12 47.18 57.76 66.22 /a % of (ii) to (i) 0.00 0.00 4.09 17.90 50.30 70.00 86.20 98.80 a/ The exact amount is US$66,217,023.58. It should be noted that even though slower than appraisal estimates, disburse- ments were quicker than the standard country profile which suggests a seven year schedule Reallocation of Loan Proceeds 3.16 At KMPA's request, the Bank Loan funds were reallocated on September 30, 1983 so as to utilize the unallocated funds. The following table shows the origina, and actual alLocation of loan proceeds. - 74 - Loan Reallocation Actual as Category Agreement of 9/30/83 of 8/23/84 ------------- (Us$ '000) -------------- 1. Civil works 25,000 47,885 47,722 2. Materials & equipment 17,600 11,521 11,520 3. Engineering consulting services for part C of project 4,000 6,094 5,497 4. Technical assistance & training 1,200 1,500 1,478 5. Unallocated 19,200 0 0 Total 67,000 67,000 66,217 Performance of Consultants, Contractors and Equipment Suppliers 3.17 KMPA employed several consultants to: (a) carry out a feasibility study for the project; (b) prepare project design and tender documents; (c) supervise civil works construction and equipment procurement; (d) carry out a feasibility study and detailed engineering for a proposed third port project; and (e) implement the commercial accounting systems. Performance of all consultants were satisfactory. The Contract for detailed engineering for the third port project (para. 3.10) was signed by KMPA and the same consul- tants who were responsible for the design of the second port project as well as the supervision of its implementation (para. 3.05). Unfortunately, strains developed in the relationship between KMPA and the consultants during the preparation of detailed engineering for the third port project. A reciprocal mistrust between the two parties resulted in KMPA's Construction and Jevelopment Office staff becoming reluctant to work with the consultants. They considered that the consultants were too costly, whereas the consultants complained that they were not paid for contractual work done. This matter was subsequently resolved. 3.18 Except for certain problems encountered by the contractor for Lot 3 (para. 3.06 e), the performance of all civil works contractors was satisfactory. All contracts were awarded to Korean firms on the basis of international competitive biddings (ICB). KMPA appreciates the advantages and merits of ICB, but, since the contracting industry in Korea is highly developed, KKPA sees no justification for advertising among foreign firms which have no chance in competition with Korean firms. Nevertheless, KMPA understands the reasons for which the Bank insists on all contracts to be awarded on the basis of ICB. 3.19 Performance of equipment suppliers was satisfactory. All equipment were delivered on time, according to specifications, and are performing without unusual problems. However, shortage of some spare parts resulted occasionally in undue work stoppages. - 75 - Fulfillment of the Main Loan Covenants 3.20 Compliance with covenants (Table 8) was generally satisfactory. Since this was a major operation with a new institution (KMPA), there were many major conditions to be met. They were all done to the Bank's satisfac- tion, except for Article 3.02 which dealt with KNPA autonomy. This has been settled by a mutual compromise (para. 6.02). IV. TRAFFIC AND PORT OPERATIONS Traffic 4.01 Busan port traffic (Table 3) exceeded appraisal forcast, in parti- cular as regards container traffic. Port Traffic reached 31.5 million revenue tons in 1983 as compared to the appraisal estimate of 26.7 million revenue tons, an increase of 18%. Of the above traffic, containerized cargo reached 16.18 million revenue tons in 1983 as compared to the appraisal estimate of 5.9 million revenue tons, an increase of 174%. Number of containers reached 617,235 in 1983 as compared to the appraisal estimate of 345,900, an increase of 78%. Traffic data is summarized below: Traffic (Million Revenue Tons) 1978 /a 1983 Appraisal Actual Appraisal Actual Ocean in N.A. 12.9 11.69 12.52 Ocean out N.A. 9.4 12.70 13.93 Coastal in N.A. 4.8 4.62 4.98 Coastal out N.A. 0.1 0.10 0.07 Total in 13.9 17.7 18.80 17.50 Total out 6.7 9.5 7.90 14.00 Grand Total 20.6 27.2 26.70 31.50 /b Of which containerized 3.8 7.89 5.90 16.18 /a First year after Lcan Agreement. 7- Of which 2.7 million tons of oil and the rest is of dry bulk and general cargo. 4.02 The above table shows that the actual total traffic for 1978 even exceeded the appraisal forecast traffic for 1983 and the actual containerized cargo traffic for 1978 exceeded the appraisal forcast for 1983 by 34%. Busan port was able to handle this unexpected increase in traffic mainly because of its efficient port operations and high productivity. - 76 - 4.03 The port operates 24 hours per day. General cargo traffic is handled mainly on Piers No. 1 to 4; average 1978 to 1983 productivity reached 225 tons per gang for a shift of eight hours. This is equivalent to 28 tons per gang hour which is high by comparison with ports even in the most developed countries. 4.04 As regards the new container terminal, persuant to the Loan Agree- ment, KMPA created the Busan Container Terminal Operation Company (BCTOC) on September 29, 1978 as an exclusive public-user container terminal. BCTOC is the sole authority responsible for overall control and operation of the termi- nal, including marshalling, stevedoring, storage, delivery and handling of container freight. Creation of BCTOC was a wise decision, its management and operations are, in general, successful. The main port facilities available to the terminal (Piers 5 and 6) and their capacities are as follows: - four berths totalling 1,262 m capable of accommodating four 50,000 dwt class container ships; - land space of 629,854 sq. m of which 359,118 sq. m are for storing containers, with a one time storage capacity of 18,379 twenty - footers; - eight container cranes (six 30.5 ton capacity and two 40.6 ton capacity) capable of handling 160 to 200 containers per hour; - three container freight stations totalling 25,616 sq. m for stuffing and unstuffing containers; and - nine yard transtainers, 12 straddle carriers, one rail transtainer and yard tractors and trailers. 4.05 The container terminal operates 24 hours per day as well as 365 days per year. Its theoretical maximum handling capacity is 720,000 TEU 9' annually. During 1983, 10/ the terminal handled 501,300 TEU with a berth occupancy rate of 47%, and handled 661,400 TEU in 1984. General cargo piers, mainly Piers No. 3 and 4, handled 382,300 TEU in 1983 and handled 392,900 TEU in 1984. Since the port receives 20 ft., 35 ft. and 40 ft. containers, it was found that the average container reaching or leaving Busan in 1983 is equivalent to TEU 1.414. The following table compares the number of containers (expressed in TEU) handled at the container terminal with those handled on the general cargo piers. 9/ Twenty feet equivalent unit. 10/ Pier 6 started operations only from April 1983. - 77 - (TEU Thousand) Year 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 Container terminal - - - 35.2 264.3 285.0 364.3 418.0 501.3 661.4 Ceneral cargo piers 260.9 351.0 454.8 471.3 332.2 347.8 379.6 368.7 382.3 392.9 Total Busan Port 260.9 351.0 454.8 506.5 596.5 632.8 743.9 786.7 883.6 1054.3 % Terminal/ Busan - - - 6.9% 44.3% 45.0% 48.9% 53.1% 56.7% 62.7 4.06 Since the maximum theoretical container handling capacity of Piers No. I to 4 is about 500,000 TEU per year, the total capacity of all existing part facilities that can handle containers at Busan, including the container terminal (Piers No. 5 and 6) is limited to 1,220,000 TEU annually. Future container traffic through Busan port is forecast to be as follows: Year 1984 1985 1986 1987 1988 1989 1990 1991 TEU million 0.984 1.060 1.166 1.279 1.402 1.538 1.636 1.849 The above table shows that the port, including Piers No. 1 to 4, will reach its maximum theoretical container handling capacity 6y year 1987. 4.07 During 1983, the new container terminal (Piers No. 5 and 6) which can handle up to 720,000 TEU, handled 501,300 TEU only. BCTOC has not managed to attract some of the other 322,300 TEU handled on the general cargo piers which arrive mainly on mixed cargo ships. This is due to a number of reasons, mainly: (a) it is unsafe, uneconomical and inefficient to handle feeder vessels, with mixed container and general cargo, at a terminal designed exclusively to handle containers by gantry cranes; (b) existing stevedoring and forwarding companies operating at the general cargo piers are well established there and own transportation equipment as well as 30 off-dock container yards, the majority of which are very close to the port area; and (c) since Japanese ports do not operate on weekends, shipping companies schedule their container vessels to arrive in Busan on weekends, thus usually 10 to 12 ships arrive at the same time and could not be handled at the container terminal alone. As a result, 70% of containers handled on the general cargo piers do so on weekends. In any case, since the new container - 78 - terminal cannot handle all containers arriving now at Busan port, and since the situation will gradually worsen, it is unwise to completely abolish handling containers on the general cargo piers. However, BCTOC should take all necessary measures to attract the maximum possible number of full container ships to use the new terminal. In addition, the Government should be urged to start constructing new container handling facilities in or near Busan port to cope with the forecast container traffic, taking into consider- ation that building such facilities would require about four years from the start of its construction. 4.08 Handling containers at the new container terminal proved to be a successful operation. Containers are handled at an average rate of 23 con- tainers per crane per hour and reaching a maximum of 28 containers per crane per hour. Such productivity is high even when compared with container terminals in developed countries. All equipment are operating satisfactorily and their maintenance is good despite occasional shortage in some spare parts. However, maintenance, repair and availability of spare parts should be seriously taken into consideration from now onward because equipment seems to be overutilized and some may need replacement in the near future. 4.09 The three container freight stations which are used mainly for stuffing and unstuffing containers are underutilized. In addition, the stacking area, which has a maximum theoretical one time storage capacity of 18,379 twenty-footers is also underutilized. The average number of containers available at one time is about 5,000 containers which is equivalent to 7,000 TEU, representing 40% storage occupancy. Although this figure is expected to increase in parallel with the container traffic, it is considered now to be low. The main reason for this underutilization is the existing rule giving advantage to the four Korean flag container lines by permitting them to stack free of charge outbound and inbound containers up to 15 and 21 days respec- tively as compared to 5 and 7 days for the 37 foreign flag container lines calling at Busan. As a consequence, the 30 off-dock yards which were esta- blished as backup in Busan still handle increasing numbers of containers. The Government, KMPA and BCTOC should be urged to take all necessary measures that would ensure the full use of the container terminal stacking area up to its maximum capacity. V. FINANCIAL PERFORMANCE OF BDMPA AND KMPA 5.01 At appraisal time in 1976, there were no qualified accountants in Busan District Maritime and Port Authority (BDMPA), nor any accounting staff familiar with double-entry bookkeeping. Under the then used Government budgetary system there was no meaningful cash balance and accounts receivable entries. Similarly, no record of accounts payable was maintained and no stores accounts were kept as purchases were regarded as current expenditure regardless of the period in which the stores concerned were actually used. Similarly, the adequacy of port tariffs varied from port to port and were generally not cost based. However, under the first and second ports projects major changes were to be made. Consultants financed under Ports I, Ln. 917-KO designed new commercial accounting, costing and management information systems - 79 - for KMPA. Under Ports II, the accounting component has been successfully implemented but much remains to be done in terms of implementing the costing system and the design of cost-based tariffs. It is now possible to review the performance of BDMPA and KMPA under standard commercial accounting procedures. BDMPA Performance. 5.02 Tables 4.1-4.4 compare and detail the actual highly successful BDMPA financial performance vis-a-vis appraisal estimates. The summary table overleaf provides a ready reference to most of the important indicators. BDMPA's performance is even more remarkable when it is realized that the Korean economy suffered a slow-down in growth over 1979-81. BDMPA's overall traffic performance exceeded appraisal forecasts by about 20%. Most of the increase 1s attributable to container traffic which was about three times higher than forecast at appraisal. To achieve this traffic performance, BDMPA for example in 1982 spent W 5 billion in operating costs while appraisal forecasts were W 6 billion. This discloses a substantial increase in produc- tivity. As tariffs were increased every year, in line with inflation, BDMPA's profitability improved and it achieved a 13.1% rate of return on average net fixed assets in use in 1981 against a 7.8% appraisal forecast and a 7% Loan Agreement objective. It has done even better since then with rates of return of 14% in 1982 and 17% in 1983. This is highly beneficial to the overall port sector as BDMPA's profits allow KMPA to cover some of the losses incurred on other ports, thus decreasing the overall Government subsidy level. 5.03 BDMPA's outstanding performance is expected to continue over the long term due to the favorable combination of continued traffic growth, increased productivity and positive tariff adjustments. Its financial position is sound as the balance sheet shows an excellent 45/55 debt to equity position in 1983. BDMPA is in a position to borrow adequate funds for expansion without severely affecting its debt position. It must be concluded that the investment at Busan was financially sound, is contributing adequate revenues to KMPA and all things considered, should in future continue to be profitable. KMPA Performance 5.04 KMPA did not exist at appraisal and hence no financial projections were included in the appraisal report. This review will focus on KMPA's actual performance and give some indications of its long term expectations. KMPA has Busan and nine (9) other District Maritime and Port Authorities (DMPA) under its control. KMPA's overall performance is thus more in line with that of the economy as a whole due to Korea's emphasis on export led growth. Tables 5.1-5.4 together with their extensive notes detail KMPA performance from 1979-83 and the summary table highlights the major indica- tors. In November 1982, the Government and the Bank agreed to target rates of return for KMPA. These were set at 3.5% in 1983, 4.5% in 1984, 5% in 1983 and 7% in 1986. As the summary table shows on pg. 21, the a:tual performance has been well in excess of targets with an 8% rate of return in 1983. - 80 - FINANCIAL PERFORMANCE AND SITUATION OF THE OF THE BUSAN-DISTRICT MARITIKE AND PORT AUTHORITY. (BD1PA) 1980 1981 1982 1983 Appr. Actual Appr. Actual Appr. Actual Est. Actual Traffic (million revenue tons) 22.9 25.7 24.3 29.8 25.4 29.1 30.8 31.5 Of which: containers 4.6 10.4 5.0 13.5 5.4 14.5 15.6 15.9 -- (won billion) Income Statement Operating revenue 14.2 14.3 16.6 22.2 19.2 26.3 31.5 34.8 Working expenses 1.9 1.7 2.4 3.5 2.7 4.5 5.2 5.7 Depreciation 4.9 2.0 5.2 2.4 5.9 2.8 3.1 3.5 Net operating revenue 7.4 10.6 9.0 16.3 10.6 19.0 23.2 25.6 Interest charges 4.4 4.7 4.7 5.1 4.6 6.2 6.4 6.2 Foreign exchange losses - 0.7 - 3.3 - 2.7 0 5.3 Net profit (loss) 3.0 5.2 4.2 7.9 6.0 10.1 16.8 14.1 Source & Application of Funds Own cash generation 12.3 12.7 14.3 18.7 16.5 21.8 26.3 29.1 Government contribution to - 15.0 - 0.9 - 28.2 - 17.3 investments Loan mobilization 9.7 11.6 10.7 16.7 1.2 14.5 8.9 6.8 Total Sources 22.0 39.3 25.0 36.3 17.7 64.5 35.2 53.2 Capital investments 18.1 31.7 14.5 31.5 5.0 48.6 22.9 22.8 Debt service 6.4 7.8 9.2 11.3 9.1 12.5 14.4 12.4 Total Applications 24.5 39.5 23.7 42.8 14.1 61.1 37.3 35.2 Annual variation in working (2.5) (0.2) 1.8 (6.5) 3.6 3.4 (2.1) 18.0 capital Balance Sheet Net working capital (0.7) (0.3) (0.5) (6.7) 3.1 (3.3) (5.4) 14.7 Net fixed assets 124.8 149.4 135.1 155.7 134.2 208.6 231.3 210.4 Total Assets 124.1 149.4 134.6 149.0 137.3 205.3 22S.9 225.1 Loan capital 67.7 73.0 71.0 71.4 67.6 91.8 92.8 102.5 Equity equivalent 59.4 76.4 63.6 77.6 69.7 113.5 133.1 122.6 Total Liabilities 124.1 149.4 134.6 149.0 137.3 205.3 225.9 225.1 Ratios Rate or return on average net 7.7 9.9 7.8 13.1 7.9 14.6 13.1 17.1 fixed assets in use Z Debt/equity 52/48 49/51 53/47 48/52 49/51 44/56 41/59 45/55 - 81 - ACTUAL AND PROJECTED FINANCIAL PERFORMANCE OF THE KOREA MARITIKE AND PORT ADMINISTRATION (KMPA) Actual Projected 198Z 1983 1984 19 1986 Traffic (million revenue tons) 124.5 134.5 141.6 146.4 159.9 Income Statement - _ (Won billion) Operating revenue 62.1 78.6 90.5 111.4 137.5 Working expenses 22.3 24.8 31.7 39.0 48.1 Depreciation 8.0 10.4 12.4 16.1 18.3 Net Operating Revenue 31.6 43.4 46.4 56.3 71.1 Interest charges 6.6 7.6 9.6 10.4 10.5 Foreign exchange losses 3.1 6.3 15.9 20.1 26.8 Net Profits (Losses) 21.9 26.6 20.9 25.8 33.8 Sources and Applications of Funds Mihb generation 42.5 53.8 58.8 72.4 89.4 Government contribution to investment 66.7 28.7 74.0 73.4 76.2 Loan mobilization 18.1 11.7 16.0 6.7 7.3 Total Sources 127.4 94.2 148.8 152.5 172.9 Capital investments 103.4 74.7 110.7 105.4 107.0 Debt service 13.1 14.9 19.4 22.1 23.7 Total Applications 116.5 89.6 130.1 127.5 130.7 Annual variations in working capital 10.8 4.6 18.7 25.0 42.2 Balance Sheet Working capital (7.3) (2.7) 16.0 41.0 83.2 Net fixed assets 563.1 685.2 756.3 845.6 934.2 Total Assets 555.8 682.5 772.3 886.6 1,017.4 Long-term liabilities 105.7 116.3 157.3 172.4 193.3 Equity equivalent 450.1 566.2 615.9 714.2 824.1 Total Liabilities 555.8 682.5 772.3 886.6 1,017.4 Ratios Kverage net fixed assets in use 397.6 490.0 692.1 785.9 874.9 Rate of return on average net fixed assets in use (Z) 5.1 8.8 6.7 7.2 8.1 Debt to equity 19/81 17/83 20/80 19/91 28/72 Working ratio 36 32 35 35 35 - 82 - 5.05 This performance is largely due to the outstanding contribution of DMPAs at Busan, Ulsan and Pohang as the table below shows. DISTRICT MARITIME AND PORT AUTHORITIES PROJECTED RATES OF RETURN ON AVERAGE NET FIXED ASSETS IN USE 1982-86 1982 1983 1984 1985 1986 RR/a NP/a RR/a NP/a RR/a NP/a RR/a NP/a RR/a NP/a Busan 14.8 5.4 17.1 1.2 10.1 2.2 13.3 5.2 17.1 7.7 Incheon 7.5 4.6 8.8 4.3 10.7 3.6 6.1 (0.8) 7.7 0.8 Donghae (Mukho) 1.4 0.1 -0.9 (1.1) 0.4 (0.5) 2.0 0.3 4.0 1.6 Kunsan -12.2 (3.1) -10.4 (3.3) 10.3 (3.7) -9.9 (3.9) -10.2 (4.3) Mogpo -8.3 (1.5) -6.2 (1.8) -5.9 (2.2) -4.6 (2.5) -5.5 (3.0) Yeosu -0.3 (0.1) 0.5 0.1 1.7 0.5 3.1 0.9 4.1 1.3 Masan -5.8 (0.5) -2.6 (0.3) -0.6 (0.1) 2.2 0.3 5.1 1.0 Ulsan 11.7 3.1 11.6 3.7 11.7 4.2 10.5 4.8 12.0 5.4 Pohang 20.3 4.6 23.3 5.5 24.4 6.4 24.5 7.2 25.0 8.3 Jeju -5.6 (0.9) -4.6 (1.0) -4.0 (1.3) -3.8 (1.7) -3.8 (2.1) /a RR = rate of return 2; NP = net profit (loss) in billion won. In terms of return on net fixed assets in use, the most profitable DMPA is Pohang, the activity of which is enhanced by the connecting industrial complex. It is followed by Busan which handles about 26% of Korea's port traffic. Ulsan is third, due to the industrial activity which surrounds it. Incheon follows but should do better considering that it is the last outlet to/from the heavily populated and economically active Seoul area. The utilization of the coal terminal financed under the First Ports Project is expected to improve Donghae's (Mukho) profitability from 1.4% rate of return in 1982 to 4% in 1986. The other 5 DMPAs (Kunsan, Mogpo, Yeosu, Masan, Jeju) handle together only about 12% of the country's port traffic. Yeosu and Masan are expected to achieve a low 4% or 5% rate of return in 1986, the remaining DMPAs will work at an operating deficit. 5.06 In spite of the significant debt service resulting from the substantial borrowing required for financing its investment plan, KMPA is expected to s>ow a net profit over 1984-86. This profit will be mainly generated by the Pohang, Busan and Ulsan DMPAs while the Donghae, Yeosu and Masan DMPAs are expected to break even and the others to suffer small to medium losses. KMPA's overall performance over the 1982-86 period is very commendable. Its net worth would double during this period although fixed assets would only increase by 65%, reflecting a better use of capacity. Finally its debt to equity would stay at a very comfortable 28/72 level, leaving room for substantial additional borrowing. As KMPA's assets will be operated at full capacity by 1985/86 this additional borrowing will be used for financing the new investments needed for meeting future demand for port traffic. - 83 - 5.07 The analysis shows that the project has led to the succesful growth and development of KMPA. Starting as a budgetary unit in the 1970s, KMPA should eventually become a revenue earning entity which will contribute to, rather than burden the Government of Korea financially. It will even be able to contribute funds to its own future capacity expansion investments. This is a long way from when it needed financing even for recurrent expenditures. VI. INSTITUTIONAL DEVELOPMENT 6.01 In addition to assisting the GOK in attaining its port expansion goals, the second Port Project contributed to the development of all institutions involved in the port subsector. The main beneficiaries were the KMPA and MOT. KMPA 6.02 The training program has helped to build KMPA's technical capability in areas not previously emphasized in Korea. That this was done at the initial formative stages of KMPA development explains even further the tremendous impact achieved, especially on operations. It should be noted that certain aspects of this institution building component did not meet with the same degree of success. Under the provisions of Section 3.02 of Loan Agreement 917-KO (First Ports Project), KMPA was to be given substantieL independence, a wide manaLerial freedom, and the right to apply commercial budgeting and accounting procedures. However, mainly due ta a misundertstanding of the Korean term "chong" in Schedule 5 (Plan of Action) of the same Loan Agreement, the Government established KMPA as an office operating under administrative managerial and financial procedures. To make up for this misunderstanding, the Goverment and the Bank agreed that Section 3.02 of Loan Agreement 1401-KO (Second Ports Project) would reiterate part of the directives of the previous project. However, the Government has not complied with the provisions of this article for various reasons which also affe't the intended full usage of commercial accounting procedures. KMPA's man.gement explained that it was reluctant to fully switch from administrative to commercial budgeting and accounting procedures because relevant legal provisions would prevent it from receiving Government contributions needed for meeting its consolidated operating deficit and financing its investment plan. Instead, starting January 1, 1983, KMPA implemented the commercial budgeting and accounting system in parallel with the existing administrative procedures. This procedure was carried out under the written instructions of the Ministry of Transportation and the commercial accounts were audited in accordance with auditing procedures acceptable to the Bank. Performance under this procedure was reviewed and agreement reached with a Bank mission on August 23, 1984. The terms of this agreement and the minutes of the meeting are included as an attachment to Table 8. Essentially, it stipulates that the parallel a-:=ounting methods be used indefinitely and the Bank is now considering the agreement. - 84 - MOC and HOT Relations 6.03 MOC is in theory responsible for industrial ports and in the past implemented its program after little or no dialogue with the MOT and KMPA. Under the project, steps have been taken via the establishment of an inter- ministerial committee to ensure that KMPA views have been solicited and considered before major investments are undertaken. This process has however only just begun and the degree of consultation must still be branded as minimal. Extensive efforts will be required in future to improve the institutional setting of the Korean Ports System and to ensure that port investments are properly coordinated. VII. ECONOMIC RE-EVALUATION 7.01 The ERR at appraisal (17%) was based solely on the expansion in container traffic. It was then estimated that over the period 1976-83 general cargo traffic would grow at 4.43% p.a. and that containerization would increase from 41.5% to 53.2% of all general cargo. Measurable project benefits would be the savings in ship waiting time, the reduction of double handling due to non-use of off-dock container yards and savings in transport costs for Seoul-area bound containers which were handled at Busan rather than at Incheon. The project would also encourage the use of larger, full container ships directly serving Busan rather than offloading Korea bound containers in Japan for transhipment by other vessels. Also the new container terminaL would be substantially lower in capital costs than equivalent break bulk facilities and Busan site was the least cost alternative for such a terminal. 7.02 The re-estimated ERR is about 40%. This analysis was made with similar parameters as at appraisal. The higher rate of return was caused by a combination of both higher growth in general cargo volumes and in the percentage containerized. Overall, general cargo traffic during the period 1976-83 (Table 3.4) grew at an annual average rate of 11.28%, almost triple the appraisal expectation. This was due primarily to Korea's highly successful export led development as outbound general cargo traffic grew at 12.43% p.a. over the period and was more than 1.5 times inbound volume in terms of revenue tons. In addition the percentage of general cargo container- ized rose rapidly during the period to exceed 80% in 1983. There was therefore more cargo and more of it containerized, hence the higher economic return. 7.03 This was not true for the second benefit stream - the elimination of container yard double handling cost. As discussed in para. 4.07, the offdock container yards are still utilized extensively. The volume of traffic double handled has not grown significantly, but it is estimated that the new con- tainer yard is underutilized and little savings have been had. Hence, this component was set to zero. The benefits for containers bound for Seoul but handled via Busan are estimated to have materialized but on 30% of total Busan volume rather than about 50% at appraisal. The rate of return at both appraisal and completion excludes investment in studies, technical assistance and training. VIII. THE ROLE OF THE BANK 8.01 The Bank has played an important role in the preparation and satisfactory completion of a technically sound, economically justified and financially viable project. Also KMPA and BPCC achieved excellent results from the technical assistance and training programs - both leading to improved management and more efficient port operation. However, much remains to be done and the Bank has a continuing role to play in the area of port planning as well as in the preparation and implementation of a third port project to provide additional container handling facilities. KMPA has commented on the Bank's role, as well as on the difficulties encountered and how to deal with them in future. KMPA's main comments were as follows: (a) KMPA and BPCO benefited extensively from the technical assistance provided by Bank staff, especially during supervision missions. Timing and duration of supervision missions were adequate. (b) Although KMPA understands the reasons why the Bank insisted on International Competitive Bidding, they see no practical results to this procedure since the construction industry in Korea is well developed and does not afford foreign contractors any chance of winning in competitions with local firms. (c) KMPA is of the opinion that fees paid to foreign consultants entrusted with feasibility studies and construction supervision were excessive. In particular fees paid for the preparation of final engineering for Pier No. 6 (Second Port Project) were unwarrantedly high since the design was similar to that for Pier No. 5 (First Port Project) and was provided by the same consultants. KMPA also feels that local consulting firms are now competent enough to conduct feasibility studies as well as supervision of construction. As a step in this direction the Government is currently using local firms in a joint venture with foreign 3pecialists to conduct a feasibility study of the optimum location for new container facilities. (d) KMPA had no problems with the Bank taking timely decisions and considers that communications and cooperation with the Bank were excellent. - 86 - IX. CONCLUSIONS 9.01 The project has been very successful and largely achieved its major objectives of meeting traffic needs and institution building in the KMPA. The investments have resulted in the creation of extensive and ultra-modern container facilities at Busan which will support Korea's vital export drives. The economic and financial returns exceeded expectations and the training components contributed to the development of KMPA. The extensive studies also helped to develop the Korean consulting industry. The project must both be considered as a success in terms of physical execution and be judged as having a major impact in terms of technical assistance. OREA SECOND FORT PROJECT (LOAN 1401-KO) PROJECT COMPLETION REPORT Estimated and Actual Project Costs Won million equivalent US$ million equivalent Estimated /a Actual /b Estimated /a Actual /b Local Foreign Total Local Foreign Total Local Foreign Total Local Foreign Total Civil works /C 11,389 13,963 25,352 24,927 30,257 55,184 23.480 28.'90 52.270 36.031 43.734 79.765 Equipment 1,054 8,536 9,590 - 8,025 8,025 2.170 17.600 19.770 - 11.520 11.520 Engineering services 581 1,940 2,521 1,676 1,833 3,509 1.200 4.000 5.200 2.855 3.123 5.978 Technical assistance and training 150 582 732 118 586 704 0.310 1.200 1.510 0.164 0.886 1.050 Subtotal 13,174 25,021 18,195 26,721 40,701 67,422 27.160 51.590 78,750 39.050 59.263 98.313 Price contingency 5,060 8,928 13,988 2,523 2,759 5,282 10.435 18.410 28.845 3.646 3.988 7.634 oa Customs duty on equipment 2,100 - 2,100 1,372 - 1,372 4330 - 4.330 2.064 - 2.064 Total /d 20.334 33.949 54.283 30.616 43460 74,076 41.925 70.000 111.925 44.760 63.251 108.011 Value added tax on civil works 1L0 - - - 2,745 - 2,745 - - - 3.968 - 3.968 Feasibility study - Ports III /f - - - 429 374 803 - - - 0.679 0.592 1.271 Final engineering - Ports III Lf - - - 1,675 1,822 3,497 - . - - 2.182 2.373 4.555. Total Prolect Cost 20L334 33,949 54.283 3541al 45,656 81.121 41.925 70.000 111.925 51.589 66.216/g 117.805 /a Based on a fixed rate of exchange of US$1.00 w Won 485. Lb, Based on actual rate of exchange on the date of payment (average US$1.00 * Won 689). 1c; Including physical contingencies. Ld Total project cost as originally appraised. /a Introduced by Government starting July 1, 1977, two months after Loan Agreement. i Not included in original project but was added when the project description was amended on March 30, 1981. & The exact foreign exchange cost is US$66,217,023.58. Table 2 KOREA SECOND PORT PROJECT (LOAN 1401-KO) PROJECT COMPLETION REPORT Schedule of Disbursements (000' US$) Bank fiscal Appraisal forecast Actutal year Quarter Quarter Cummulative Quarter Cumulative 1977 4 700 700 1978 1 750 2 750 3 1,000 4 2,500 5,700 1979 1 3,200 2 3,300 3 3,300 4 3,300 18,800 800 800 1980 1 3,400 400 1,200 2 3,400 3,300 4,500 3 4,500 300 4,800 4 6,000 36,100 1,700 6,500 1981 1 7,500 3,300 9,800 2 6,500 3,500 13,300 3 6,200 7,200 20,500 4 5,500 61,800 10,600 31,100 1982 1 4,800 3,000 34,100 2 400 67,000 1,500 35,600 3 7,600 43,200 4 4,000 47,200 1983 1 5,500 52,700 2 3,340 56,040 3 1,620 57,660 4 100 57,760 1984 1 374 58,134 2 7,722 65,856 3 27 65,883/a 4 334 66,217 /a The undisbursed amount of US$782,976.42 has been cancelled. - 89 - Table 3.1 KOREA SECOND PORT PROJECT (LOAN 1401-KO) PROJECT COMPLETION REPORT Busan Port Traffic - Dry Bulk Cargo /a ('000 Revenue tons) Inbound Outbound Year Appraisal Actual Appraisal Actual estimate Total Grain Coal Others/b estimate Total Cement Lumber Others/c 1976 6,886 7,470 1,099 806 5,565 1,518 3,325 1,169 919 1,237 1977 7,154 8,945 1,296 784 6,865 1,523 4,075 1,690 962 1,423 1978 7,440 9,410 1,189 874 7,347 1,192 2,644 520 785 1,339 1979 7,747 9,207 1,651 1,077 6,479 1,244 2,456 197 618 1,641 1980 8,079 7,278 1,455 1,294 4,529 1,300 2,567 209 353 2,005 1981 8,435 7,986 1,547 1,786 4,653 1,359 2,689 193 367 2.129 1982 8,672 7,725 1,501 1,434 4,790 1,361 2,157 61 217 1,879 1983 8,920 8,494 L,804 1,178 5,512 1,364 2,287 72 105 2,110 Growth rates (%) 3.78 1.85 7.3 5.6 0.0 -1.5 -4.5 -13.4 -12.6 7.9 /a Includes grain, iron, steel and scrap, coal, timber, cement and other dry bulk. /b Includes cement, lumber, salt, iron material and other ores. /c Includes grain (up to 1979), iron materials, iron ores and other ores. Sourze: KMPA, August 1984 Table 3.2 KOREA SECOND PORT PROJECT (LOAN 1401-KO) PROJECT COMPLETION REPORT Busan Port Traffic - Liquid Bulk and General Cargo ('000 Revenue tons) Inbound Outbound Year Liquid bulk /a General cargo /b Liquid bulk /c General cargo /d Appraisal Actual Appraisal Actual Appraisal Actual Appraisal Actual 1976 2,532 2,182 3,023 3,400 15 31 5,120 5,141 1977 2,830 2,563 3,178 4,036 10 58 5,327 5,987 1978 3,160 3,020 3,346 5,273 5 21 5,528 6,843 1979 3,524 3,450 3,529 5,613 0 19 5,733 7,206 1980 3,928 2,769 3,725 4,548 0 89 5,942 8,446 1981 4,377 2,692 3,940 5,893 0 99 6,155 10,409 1982 4,861 2,613 4,187 5,970 0 37 6,362 10,603 1983 5,399 2,636 4,457 6,371 0 42 6,572 11,673 Growth rates (Z) 11.42 2.74 5.7 9.39 - 4.43 3.63 12.43 /a Includes crude petroleum and other bulk liquids. /b Includes fertilizer, wood pulp, textiles, machinery and metal products, dry chemicals and other general cargo. /c Mostly petroleum products. /d Includes plywood, textiles, metal products and machinery, other general cargo. Source: KMPA, August 1984 - 91 - Table 3.3 KOREA SECOND PORT PROJECT (LOAN 1401-KO) PROJECT COMPLETION REPORT Busan Port Traffic - Container Cargo ('000 Revenue tons) Tear 1976 1977 1978 1979 1980 1981 1982 1983 Growth rates (%) Inbound No. of Containers ('000) Appraisal total 108 112 116 127 138 149 160 173 - Actual Full 77 107 134 157 136 166 180 203 - Empty 34 39 25 20 38 52 60 59 - Total 111 146 159 177 174 218 240 262 - Containerized cargo Appraisal 1,323 1,430 1,573 1,765 1,937 2,128 2,345 2,585 10.0 Actual 1,385 1,952 2,590 3,159 2,850 3,790 4,328 4,954 1Q.9 Oatbound No. of Containers ('000) Appraisal total 108 112 116 127 138 149 160 173 - Actual Full 124 160 180 195 236 282 276 305 - Empty 3 5 8 30 28 .27 36 51 - Total 127 165 188 225 264 309 312 356 - Containerized cargo Appraisal 2,052 2,131 2,211 2,408 2,614 2,831 3.054 3.286 7.0 Actual 3,812 4,700 5,303 6,084 7,565 9,688 10,200 11,008 16.4 Total Container Cargo Appraisal 3,375 3,561 3,784 4,173 4,551 4,959 5,399 5,871 8.23 Actual 5,197 6,653 7,893 9,242 10,414 13,478 14,529 15,962 17.39 Z of Total General Cargo Containerized Appraisal 41.5 41.9 42.6 45.1 47.1 49.1 51.2 53.2 - Actual 60.8 66.4 65.2 72.1 80.1 82.7 87.6 88.4 - Source: KMPA, August 1984 6 - 92 - Table 3.4 KOREA SECOND PORT PROJECT (LOAN 1401-KO) PROJECT COMPLETION REPORT Busan Port Traffic Summary ('000 Revenue tons) Year 1976 1977 1978 1979 1980 1981 1982 1983 Growth rate (Z) Dry Bulk Appraisal 8,404 8,677 8,632 8,991 9,379 9,794 10,033 10,284 2.93 Actual 10,795 13,020 12,054 11,663 9,845 10,675 9,882 10,871 0.00 Liquid Bulk Appraisal 2,547 2,840 3,165 3,524 3,928 4,377 4,861 5,399 11.33 Actual 2,213 2,621 3,041 3,469 2,858 2,791 2.650 2,678 2.76 General Cargo Appraisal 8,143 8,505 8,874 9,262 9,667 10,095 10,549 11,029 4.43 Actual 8,541 10,023 12,116 12,819 12,994 16,302 16,573 18,044 11.28 All Inbound Appraisal 12,441 13,162 13,946 14,800 15,732 16,752 17,720 18,776 6.06 Actual 13,070 15,547 17,704 18,271 14,596 16,522 16,311 17,503 4.26 All Outbound Appraisal 6,663 6,860 6,725 6,977 7,242 7,514 7,723 7,936 2.53 Actual 8,503 10,120 9,509 9,692 11,104 13,194 12,801 14,004 7.39 All Cargo Appraisal 19,104 20,022 20,665 21,777 22,974 24,266 25,443 26,712 4.91 Actual 21,573 25,667 27,213 27,963 25,700 29,716 29,112 31,507 5.56 Source: KMPA, August 1984 KOREA SECOND PORT PROJECT (LOAN 1401-K03 PROJECT COMLETION REPORT uusan-OLstrict Maritime and Ports Authority Incom Account 1973-83 (.on alllion) 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 Actual Actual -ppr. Actual Appr. Actual Appr. Actual Appr. Actual Appr. Actual Appr. Actual Appr. a rual Appr. Actual Actual Traffic ('000 rev ton) 13.344 14,165 14,032 16,739 15,177 21,574 16,104 25,668 17,494 27,212 18,769 21,963 20,904 25,590 21,382 29,784 25,400 29,784 31,508 LEMh dues 67.8 65.1 71.0 10.7 - - - - - - - - - - - 334 - 361 410 Port dues 239.0 227.1 240.0 240.0 555 575 672 846 792 1,239 899 1,775 953 2,029 1,121 3,194 1.284 4,637 5,874 Rental for use of port basit - - - - - - - - - - ,137 - .750 - Tuggage 122.0 179.9 216.0 216.0 220 228 254 217 300 372 339 459 357 487 419 747 460 1,022 991 Dckage 110.3 436.6 633.0 653.4 716 720 993 133 1,153 1,558 1,285 1,908 1,349 2,087 1,557 3,230 1,783 4,076 5,298 Transit shed charges 5.6 66.1 50.0 49.6 50 48 52 50 38 71 65 110 69 113 82 111 94 0 152 Open cargo area charges 75.9 91.0 132.0 131.9 180 173 189 163 211 556 242 176 233 136 295 158 338 49 185 Revenue froe terminal operations - - - * - - - - 3,274 - 7,130 3,000 7,741 5,000 9,106 4,918 10,401 7,677 - Wlharfage - 435.2 700.0 700.3 1,218 1,021 1,474 1,453 1,704 1,941 1,912 2,256 2,029 2,452 2,366 3,791 2,735 5,030 5,141 Acharage - - 42.0 42.1 674 682 818 1,265 946 1,191 1,052 1,119 1,095 1,068 1,265 1,549 1,435 2,168 2,594 Floating crane 29.2 31.4 41.0 40.9 50 42 60 30 68 59 71 43 82 5 9S 1 109 0 - Rent of factlites 26.3 5.4 6.0 5.8 30 64 30 73 32 199 35 34 35 130 38 2,422 41 0 6,932 witecellaneous revenue 47.5 46.1 77.0 77.0 156 168 166 226 189 246 214 139 225 808 264 379 304 592 963 Total 769.6 .386.S 2.224.0 2.27. 3.49 3.723 4.706 3.l! 8.729 7432 1il 1.62 1 14.1d8 14.317 16608 22731 19l204 26362 31160 _.__ 14aytaI ade 8.6 119.0 186.0 185.5 - - - - * - - - - - - - " " General maintenance 69.4 146.0 160.0 159.5 224 246 269 349 663 346 929 603 1,363 920 1,693 2,626 1,944 2,873 3,198 General and administration 104.1 100.7 156.0 136.7 162 163 214 225 399 280 472 k88 367 744 658 820 724 1,595 799 Subtotal Warkins Costs 202,1 388.2 502.0 501.7 286 409 485 574 1.062 626 1.401 1.091 1 930 1664 2A3SI 1446 2. 64 4.466 3.997 Depreciation 410.0 410.0 433.0 432.9 443 425 448 433 2,957 444 4,492 1,746 4,849 2,014 5,225 2,431 5,930 2,843 3,504 Total Oporatins Igienes 632. _ 8,2 933.0 9134.6 829 834 933 3,,007 4 019 1.070 5.893 2.837 6.779 3.678 3a1 j 1653 .598 7309 .Sl3 met operattn revenue 157.5 788.3 1,293.0 1,293.1 3,020 2,869 3,775 4,511 4,710 6,362 7,171 8,984 7,409 10,639 9,032 16,294 10,606 19,053 23,659 Interest charges 91.1 243.0 394.0 293.0 832 662 2,056 1,330 3,158 2,384 3,775 3,014 4,363 4,661 4,740 5,102 4.599 6,224 6,227 RXceptional loss (revenus) - * - - * - * 3 * I - - - - - - - - Net Income 65.8 545.3 699.0 1.034.1 2.188 2.227 1.719 3.178 1.352 3.977 3.602 3,970 3.046 MS3.9 4.292 11s192 6.047 1.29 137432 Exchange lose (profit) - - - - - - - - - - - 124 - 732 - 3,273 - 2,718 5,327 look profit (lose) - * - - - - - - - - . 5,946 - S,226 4,292 7,919 4,047 10,111 12,105 Sources KMPA, August 3984. t .cr a. KOPIA SECOND FART FROJCT (LOAN 1401-tKO) 11OJECT COMPLETION REPORT Ausen*District aritlme and Ports Authority galancShet ! 974-83 9y419S 176 Illy If9i8 199 1960 1981 1982 196 Appr. Actual P7 -T Appr. Actual Appr. Autaal AApr.AActualg Appr.-A-ta Appr. Actual Apppr. Actal Appr. Actual Actual AISIS Curreant Assets Cash59 1, 1,56 I' 930 1,500 I,13m 3,320 z.in2 2,905 1,433 3,383 - A,133 00 Accounts receivable 11 to s5 37 lO 1 515 i 674 14 594 20 Ila 400 3 4 Stores 1I 12 Is 31 43 i 7- - s0 . 121: Other S 0 * A 9 - 13 22 Total Current Assets IL 1,706 9 1.10 N0 I ON 2.241 1 $01 4 046 2 M 1518 1Asq 4.i6o 509 in 1 4#6 Leoss Currant Liabilities Accounts payable 464 1.212 1,09 2,191 401 1,049 113 1,112 , ng 1& 2,492 400 IS0 0 I,Sno Current Iran maturities - - - - - - 4,431 - 1,263 Other 22; 90 S2" 255 1,181 124 1,560 105 I,m 1,460 2,265 30 2.40? 43 2,109 0 Total Current Liabilities 91 90 1.195 5 1 372 931 2.729 1 079 1.1 2.23A 4.lG% a no 4.ag9 n9a 2 Ago 1i100 working Capital (680) 1.616 (1,761) (145) (3.312) 101 (442) 24 753 (AA) (21) (131) (6.6193,7 1.452 Floed Assats Croae value - land 2,573 7,A1 9 1,91 5 1 ,915 5,45 116 5,99 1 ,915 5,991 1,915 17,147 1,915 36,102 1,11 10,49 1,115 19,515 58,55 Gross value - other 10,959 11,431 13,676 11,515 11,676 11.2014 14,161 11,859 91.34? 16,405 95,414 fln,qI4 100.512 8,134S J48,01 Sq9,10 1 11, 55,244 164615 Accumulated depreciation 1,1%3 431 43 815 421 1,224 1,291 4,201 1,13 5,13 3,926 11,532 1,491 1847 4,553 24,311 1,510 11,219 Net value - other assets in use 9,191 13,411 11,243 11,243 12.80n 12,599 12,831 12,5 91,0454,513 57.641 14,8AS 55,991 52,11 127,231 14,142 124.2'1 17,434 11,425 Total Not Fixed Aspets In 11A 12,410 21241 21,19 21119 20,716 2111 011M 31-73 M L.9f2 ISM* 9LUL 4 19 121.252 1lS.147 124191 114jat 131,2$o i 41 Work in progress 6,551 2,314 11,711 11,294 24,511 .19 0,021 49,132 4,550 31R8 11,001 9,114 29,915 10,058 - 31,217 . 1* 39.1i Total Not Fined Agdotp 19,111 21.01 32,917 11.451 49,191 %4.494 A0.714~ .!10 9S.J . S6 lj 11 w56 103,81 124,85 131.320 115,147 ISS.6548 1141875 . 0., - 2 Ui 6i Other asts - - 11 45 - 15 . 18,391 17 - GRAND TOTAL ASSETS 11 23,601 32.237 47.624 %4.849 7 1 ,471 10.409 1546 111,14) 104.11) 124.078 149.460 134,617 1411917 117,264 208.231 zzl.601 LIABILITI&S LonpTer. Debt LnT194TK5 3,970 65S 3.895 1,891 11,6010 10,0SY 26.176 17,119 32,684 29,205 32,535 12,114 31,111 41,29 10,502137,155 29,154 31,805 35.992 IBRD 1401-KO 631 - 4,181 143 10,591 2 2 0,204 4, 2g,135 I8,00O 27,291 34,52 40,513 SF1ro 2.511 - I',1i0 5,3.63,35 15 13,902 11,301 11? 18,9S4 11,530 19,05& 1 0,493 21,35 25,921 Total Lant-Tore Debt, 1.910 651 3.593 1.011 14,111 101.,5 36.903 21.410 Sa3.702 21,994 5?.n]2 46J261 64.133 73.LG22 14.910 ;11404 6711j0 91,796 10215& Equity Equivalent. 14ty sIalen 11,172 22,121 22.935 21,218 22,916 In114 22,916 21,1 2596 21,218 25,935 21,218 23,916 21,218 28,935 52,520 28,916 10,739 32,12 Subsidles loI u . 4,3 27,55? 11,413 20,651 17,413 1n,v01 17,41n 1vsmn3 28,212 25, 74 Revaluation of fIned assetss 7,.73 Retained earningsi 1 811 599 1 .81 2,112 4,8n5 6,410 6,210 i13,427 9,940 16,373 11,00A 21,599 11,295 7,919 23,341 10,111 41,220 Government subsidies against operating loss - - - - - - 0 3,306 Total EquIty leUIV4100t 1161 22.916 24.411 30,174 1M) j5M , 49.069 j.M ILM S9.SS2 56.309 SA.29? $9,311 76,438 1.651 112 69,694 116uv5l 122en90 RADTLL*1M 24395o* 14660 71.w i M30U A 103,409 179 113,341 I34.12 124,016 1,83350 134,17 14-.916 13124 208.231 223.503 is* *1edquar1er' curre* account startIn3 In 19812 Sources KMFA9 August 11114, SECØND PORT PRIECT (LnAKf 1401-KM) PROJCT C0MPLIETI0N UPORT sugan-Detrict Marttime and Port Authorlty S0oircel and ADPplet eo ud (1911-811 1j31 1914 19 316 19 97A . 99 19610 19fl. 1982 3983 AAtoa AIn p Appr. A A.ts p Appr. AAtpp. Appr.Atua p. Actual Appr. Acatu Appr. Actual Appr. ACC&T Appr. Accual A7tual SOURCES no@,al Cash> Oeneratlon Cro, operatng revenue 769.6 1,586.4 2,22g 2,227.1 3,849,0 3,723.0 4,108.0 s,518.0 @,129.0 7,412.0 13,270.0 11,*21 14,1AR.0 14,111 16.608.0 22.111 19,204.0 26.162 14.813 Løase woking coote 202.1 382.2 j03 i01.7 166,0 409.0 48.0 514.0 1,062.0 626.0 1.401.0 1.091 1.93n.0 1,464 2,351.0 1,446 2,664.0 2,706 5,694 Cash generated froe operattono 61.9 1,024.3 1,124 1,26.6 1,461.0 3,114.0 4,221.0 4,44,0 ,66.0 6,06.0 u3,m69.0 10,110 12,19b.0 1,613 34,2N7.0 18,121 16,536.0 23,416 29,119 nther - - - - - - -• - • • • Total lnt9rnal Cab egneratton 561.9 .2204 , 1.12 1.n. ja9 1.114 0 4.333,0 4.1344,0 7.661.l 6.806.0 J3L& ' i0.10n 1jj38. 14 1 j4.i3s,n JI,3 j6.0 36.iu m 29.tg Oovernment Contrll.ution . For operatmon 1 • • • - - - 1 • • • • - • 0 11,269 Iors paustme •d o - 9,907 ,71,i.0 2,981.0 9,711.0 9,241.0 1,813,0 4,616.0 1,909.0 - 1,802 • 21,424 - ,1,3 - 29,233 71,63 Minui payont de to headquarter• - -- - 11,291 • 8,612 • .410• 0 0 Total ContrIbvtlon 4 I0 1.M.0 2.9610 4d11,0 34M) 1,83.0 4.66,0 1,j4.0 n (1,A9 • )1 - 3 -. ,12 10.1176 L.oans n tem a3-KO - 669,0 1,29 3,210.0 i,8.0 4,162.0 15,111.0 1,282.0 10,4§1.0 1l,861.0 7,066.0 6,441 - 6.99 - 0 - 0 0 IBRD 1403-KO • • • • • • - • 141.0 - - 9,11l.0 10,1.0 14,62 i,60.0 14,49? 6,89 SFD - - - - 2,411.0 - 1,139.0 6,011.0 1,618.0 1,574.0 6,..0 1,660 • 4,311 • • 0 0 Total Loåns - 69,.0 j.329 1.21,a0 jn.216,0 6.162.0 2M 1,0 11.351,0 14.29,0 11.54,0 7.151.0 i,je 9.711,0 1.614 10.l17.0 1A.62 j.160,0 34.41 6.899 CIAND TOTAL SOULRCES j6, J.8691 9.46. 12.711,0 16.662,n 14,2n,10 12 2,n 26.170,0 3.42.,2 21.49990 19010,0 IjL 1.969t0 = 19. . 2994.0 j12 ll.696.0 69.120 16.190 AFPP.UATIngsB Capleal Invo~tmnts 1IwB ftti t proeet 9,401 0,111.5 16,911.0 15,106.0 10,180.0 24,594.0 il,6i0.0 - m2.0 4,441 - 6,891 - • • 0 0 URD steond prolott - • • • • 1396,0 - I.394.0 - 11,132.0 • 16,631.0 24,157 14, 20.0 2 9,941 4,000.0 42,66 3i2,841 Othør • - 345 144. - - 465.0 910.• 485.0 1,460 485.0 - 131.0 11,§11 910.0 §,906 • Total Invenmants 419.8 j.4.1 9.148 j0X6,0 16.911,0 1§.306,0 11.810.O 24.9990 20.04,0 21.09,0a U.199.0 j0j,0 17.114.0 j3.614 31.§41.0 13.45 4.910.0 AI.Ma67 111.641 Debt Service 0nterst 91.7 243.0 194 2139.0 413.0 62.0 2,016.0 1,110.0 3,118.0 2,84.0 3,m.n 3,014 4,161.0 4,A61 4,740.0 %,t02 4,§0,o. 6,224 6,221 Repaymnt • - - - - • • • 390,0 - 821.0 81 i 2,030.0 1,133 4,490.0 6,194 4,560,0 6,231 6,194 Total Debt Service. 9&,L A20 1 2j0 i 3. j31. 662.n .56,0 im.na j.mojj 3 .o4.0 4.m6.n jå.8j uk 6;I,0 711 9.21nI 0 3196 9.39.0 jj .09 j1.41 omAll TOTAL AIP.ICATIONS j9.§ ,.869, j1"j 11.11%.0 17.7419.0 Is.96,0 3j.AI,0 2.924,0 .2.0 27.41.0 36.19j.0 Jiamj9 214110 jL.26 24171,0 432L 14-069,0 U&U 1L2M Annua varta$lonø tn boking Cep1tl • • • 3,660 (3,n03.0) (I16.0) (16i.0> 246.0 2,9l0,0 411,0 ,2,0 (609) (,o10.0) (, ) 361> 31.0 (4,41) 9 60,0 ,141 1,561 vorktn Capital brou8ht forward - - - • <680.0) 1.6t6.0 1,161.0 (14§,0) (1,13.0) i0.0 (442.0) 524 183.0 (84) (147.0) (250) lin30 (6,489) 3,452 orking eapital at end of year - 1 <693> 3,616.0 (161.0) (145.0) (1,112.0) 101.0 (442.0) 524.0 1?1,0 • (84) (741.0) <93) (30.0)(6,689 1,0.0 ,4 2 1,014 KnRPA 1ECOND PORT PRfRCT (l.OAN 1401-KO) PRnJSCT CnMPLP.TION REPORT RusanalDiptrict Maritime and Port Authority qelected Pinancial Ratjos. 1976-83 1976 1977 1978 1979 1980 1981 1982 1983 Appr. Actual Appr. Actual *ppr. Actual Appr. Actual Appr. Actual Appr. Actual Appr. Actual Actual Vorking ratio (1) 10.0 11.0 10.0 10.0 12.0 8.0 10.5 9.2 13.6 II.6 14.0 14.0 14.0 16.9 15.0 Operating ratio (2) 21.5 22.0 20.0 2A.0 46.0 .4.0 44.0 24.0 48.0 25.7 46.0 26.5 45.0 27.7 25.8 Times Interest earned 1.6 4.4 1.8 3.4 1.5 2.7 1.9 1.0 1.7 2.3 1.9 1.2 2.3 3.1 3.8 Debt service coverage 4.1 5.0 1.0 3.7 2.1 2.9 2.4 2.9 1.9 1.6 1.5 1.5 1.8 2.1 1.9 Net fixed assets in use 20,937 21,237 20,734 21,444 i9,867 42,620 97,269 19,151 95,212 107,943 115,027 122,822 134,667 110,621 164,480 (won million) Rate of return on net 14.4 13.6 18.2 21.0 7.8 2i.0 7.4 11.4 7.7 9.9 7.8 13.1 7.9 14.6 17.1 ftxed assets in use (2) Current ratio n.a. 0.9 n.a. 1.1 . 2.5 I.6 0.9 1.2 0.9 1.3 0.1 2.2 2.1 l.2 Debt to equity ratio 30/70 18/82 48/52 33/67 49/51 38/62 50/50 44/56 52/48 49/i 53/47 48/52 49/51 44/56 45/5; - 97 - Table 5.1 KOREA SECOND PORT PROJECT (LOAN 1401-KO) PROJECT COMPLETION REPORT Korea Maritime and Port Administration Income Statement (1979-83) (Million won) 1979 1980 1981 1982 1983 Traffic (million revenue tons) 90.8 94.1 105.4 108.5 118.3 Operating Revenue Revenue from port facilities 20,402 22,768 34,992 47,713 59,773 Revenue from equipment 1,381 1,434 1,857 2,434 2,443 Rentals 2,857 5,202 6,377 7,740 9,390 Others 2,247 2,337 4,290 4,613 7,C67 Total 26,887 31,741 47,516 62,500 78,673 Cost and Expenses Employee services 4,408 6,332 7,854 8,524 9,680 Repairs and maintenance 8,280 9,360 13,159 12,312 11,783 Depreciation 4,844 6,863 7,936 9,618 10,436 General administrative expenses 3,756 3,779 4,681 4,223 3,370 Total 21,288 26,334 33,630 34,677 35,269 Net Operating Income 5,599 5,4)7 13886 27,823 43,404 Other Income Foreign exchange gain 1,646 - - - - Miscellaneous 41 564 39 83 234 Total 1,687 564 39 83 234 Other Expenses Interest expense 3,492 4,244 5,836 6,722 7,653 Foreign exchange losses - 18,154 1,498 1,154 6,275 Subsidies for shipping companies 1,035 1,616 2,798 2,381 2,133 School operating expenses 162 248 511 740 717 Others 17 29 289 34 208 Total 4,706 24,291 10,932 11,031 16,786 Normal Income 2,580 (18,320) 2,993 16,875 26,652 Special Gain (Loss) Gain on disposal of properties 26 - - 1 - Loss on disposal of properties (114) (710) (271) (547) (964) Net Income 2,492 (19,030) 2,722 16,329 25,688 - 98 - Table 5.2 KOREA SECOND PORT PROJECT (LOAN 1401-KO) PROJECT COMPLETION REPORT "Korea Maritime and Port Administration Balance Sheet (1979-83) (Million won) 1979 1980 1981 1982 1983 Assets Current Assets Accounts receivable, less allowance for doubtful accounts of W 117 (1979), w 118 (1980), W 158 (1981), W 348 (1982) and W 340 (1983) 434 488 933 3,664 4,715 Inventories 1,381 1,700 1,770 1,865 2,784 Other current assets 4 6 29 30 74 Total Current Assets 119 14 5,559 ,573 Investments and other assets 278 317 318 318 317 Properties Land 72,210 127,485 141,036 153,326 172,695 Buildings 9,855 19,448 28,713 35,667 48,743 Structures 111,961 164,647 202,801 261,984 326,454 Machinery and equipment 13,825 13,826 15,772 21,048 21,275 Vessels 5,322 7,793 10,452 12,395 13,603 Construction in progress and others 26,511 67,163 92,350 137,174 151,029 Total 239,684 400,362 491,124 621,594 733,799 Less accumulated depreciation (4,842) (6,860) (14,821) (24,512) (33,623) Net Properties 234,842 393,502 476,303 597,082 700,176 TOTAL ASSETS 236,939 396,013 479,353 620,959 708,066 Liabilities and Equity Current Liabilities Accounts payable 2,059 7,258 12,209 14,253 11,765 Current maturities of long-term debt 2,345 6,588 7,091 7,718 8,971 Total Current Liabilities 42404 13,846 19,300 21,971 20,736 Long-term debt 46,757 67,597 80,989 94,278 107,353 Total Liabilities 51,161 81,443 100,289 116,249 128,089 Equity 185,778 314,570 379,064 486,710 579,977 TOTAL LIABILITIES AND EQUITY 236,939 396,013 479,353 620,959 708,066 - 99 - Table 5.3 Page 1 KOREA SECOND PORT PROJECT (LOAN 1401-KO) PROJECT COMPLETION REPORT Korea Maritime and Port Administration Sources and Applications of Funds (1979-83) (Million won) 1979 1980 1981 1982 1983 Sources of Funds Financial Transactions Involving Inflow of Working Capital Operations Net income 2,492 (19,030) 2,722 16,329 25,688 Add charges not affecting working capital Depreciation 4,844 6,863 7,937 9,618 10,436 Foreign exchange losses (gain) (1,646) 18,154 1,498 1,154 6,275 Loss on disposal of properties 88 710 271 546 964 Total 5i77 6,697 12,428 272647 43,363 Increase in long-term debt 12,967 9,275 18,984 19,854 12,843 Increase in equity: Contribution surplus 25,037 47,257 41,670 60,867 27,784 Total Financial Transactions Involving Inflow of Working Capital 43,782 63,229 73,082 108,368 83,992 Financial Transactions Not Involving Inflow of Working Capital Increase in long-term debt - - - - 2,928 Increase in revaluation surplus - 67,787 - - - Increase in equity-contribution surplus 2,651 32,829 20,260 30,626 40,740 Increase in equity-retained earnings - - - - 2,536 Total Financial Transactions Not Involving Inflow of Working Capital 2,651 100,616 20,260 30,626 45,934 TOTAL SOURCES OF FUNDS 46,433 163,845 93,342 138,994 129,926 - 100 - Table 5.3 Page 2 1979 1980 1981 1982 1983 Applications of Funds Financial Transactions Involving Outlay of Working Capital Increase in investments and other assets 76 39 1 - - Increase in properties 42,663 65,618 70,748 100,317 71,488 Decrease in long-term debt 2,345 6,588 7,091 7,710 8,971 Decrease in contribution surplus 56 51 159 176 284 Total Financial Transactions Involving Outlay of Working Capital 45,140 72,296 77,999 108,212 80,743 Financial Transactions Not Involving Outlay of Working Capital Increase in properties 2,651 100,616 20,260 30,626 43,006 Decrease in equity - retained earnings - - - - 2,928 Total Financial Transactions Not Involving Outlay of Working Capital 2,65i 100,616 20,260 30,626 45,934 TOTAL APPLICATIONS OF FUNDS 47,791 172,912 98,259 138,838 126,677 Increase (decrease) in working capital (1,358) (9,067) (4,917) 156 3,249 Total 46,433 163,845 93,342 138,994 129,926 Details by Components of Increase (Decrease) in Working Capital Increase (decrease) in current assets Accounts receivable (488) 54 445 2,730 1,051 Inventories 126 320 69 95 919 Other current assets 5 1 23 1 44 Decrease (increase) in current liabilities Accounts payable 270 (5,198) (4,952) (2,043) 2,488 Current maturities of long-term debt (1,271) (4,244) (502) (627) (1,253) Increase (Decrease) in Working Capital (1,358) (9,067) (4,917) 156 3,249 KOREA SECOND PORT PROJECT (LOAN 1401-KO) PROJECT COMPLETION REPORT' Notes to Financial Statements Detailed Long-Term Debt, 1979-83 Annual /a interest US$'000 equivalent Won million equivalent- rate (%) 1979 1980 1981 1982 1983 1979 1980 1981 1982 1983 International Bank for Reconstruction and Devel- oE!ment (TBRD) 1st due through 1998 7.25 58,251 57,663 55,393 52,993 50,418 31,589 41,593 40,396 38,454 40,209 2nd due through 1994 8.50 4,535 13,324 30,606 46,121 50,976 2,238 8,331 20,153 32,393 40,653 3rd due through 1998 Floating - - - - 59 - - - - 47 Subtotal 62,786 70,957 85,999 99,114 101,453 33,827 49,924 60,549 70,847 80,909 Asian Development Bank lst due through 1998 7.25 6,730 6,436 6,120 5,779 5,413 3,682 4,545 4,270 4,075 4,318 2nd due through 2004 8.10 - 7,472 2,043 214 13,477 - 131 1,465 5,710 10,661 Subtotal 8j163 13,M 19,190 3,682 4,676 5,735 9,785 14,979 Saudi Fund for Develop- ment (SFD) Due through 1994 4.00 23,310 28,716 31,009 28,619 26,239 11,593 19,585 21,796 21,364 20,4360V H Total 92,826 106,324 125,171 140,984 146,882 49,102 74,185 88,080 101,996 116,3244 Less: Current maturities 4,834 9,948 10,091 10,282 11,249 2,345 65,888 7,092 7,718 8,9710 , Long-Term Portion 87,992 96,375 115,080 130,702 135,633 46,757 67,597 80,988 94,278 107,353 / An Indirect conversion of foretn currencies. bnsed on US$ enuivalents. - 102 - Table 5.4 Page 2 of 5 Detailed Equity Account of KMPA, 1979-83 (Won million) 1979 1980 1981 1982 1983 Changes in Equity Account Balance at beginning of year 155,654 185,778 314,570 379,064 486,710 Net income for the year 2,492 (19,030) 2,722 16,329 25,688 Contribution surplus incre- ments - net of transfers to other government agencies 2,595 32,778 20,102 30,450 40,186 Revaluation surplus - 67,787 - - - Cash contribution 25,037 47,257 41,670 60,867 27,785 Balance at End of Year 185,778 314,570 379,064 486,710 579,977 Components of Equity at End of Year Initial capital : net assets as at December 31, 1978 155,654 155,654 155,654 155,654 155,654 Revaluation surplus : proper- ty revaluation increments - 67,787 67,787 67,787 67,787 Contribution surplus : pro- perty contributions subse- quent to January 1, 1979, net of transfers to other government agencies 2,595 35,373 55,475 85,925 126,111 Cash contributions subsequent to January 1, 1979 25,037 72,294 113,964 174,831 202,616 Accumulated retained earnings subsequent to January 1, 1979 2,492 (16,538) (13,816) 2,513 27,809 Total 185,778 314,570 379,064 486,710 579,977 - 103 - Table 5.4 Page 3 of 5 Summary of Significant Accounting Policies 1. The Korea Maritime and Port Administration (KMPA) was established on March 13, 1976, as a Korean government agency controlled by the Ministry of Transportation. Actual title to real property vests in the Government of the Republic of Korea. By statute, KMPA has the right of use or disposition of all property originally assigned or later acquired. 2. The significant accounting policies followed by the KMPA in the preparation of its financial statements are summarized as follows: (a) Allowance for Doubtful Accounts. The KMPA provides for estimated losses on receivables doubtful of collection based on collection experience and review of status of outstanding receivables. (b) Inventories. Inventories include vehicles and furniture and office equipment. To comply with governmental regulations, the KMPA excludes vehicles and furniture and office equipment from property account and includes them in inventory account. Accordingly, no depreciation is accounted for them. Under financial accounting standards in Korea, such fixed assets items are to be classified as a property account and depreciation should be made over the estima- ted useful lives of the assets. (c) Property and Depreciation. Property is stated at cost or appraised values. A revaluation is made every five years to comply with gov- ernment regulations. The latest revaluation was made on January 1, 1980. The bases used by the KMPA to revalue its property are summa- rized as follows: Land, buildings and vessels: Standard price for local tax pur- poses as set by the Korean government. Structures, machinery and equipment: Current replacement cost. Major renewals and betterments are capitalized; expenditures for repairs and maintenance are charged to expense as incurred. Interest incurred on loans used to finance construction projects are charged to expense as incurred. Depreciation is computed using the straight-line method over the estimated useful lives of the related assets as shown below: Buildings 15-60 years Structures 6-40 Machinery and equipment 10-15 Vessels 5-18 - 104 - Table 5.4 Page 4 of 5 (d) Pension and Severance Plans. All full-time government employees of the KMPA and certain nongovernment employees are covered under a contributory pension and severance plan administered by the Ministry of General Affairs of the Republic of Korea. Since no contribution is made by the KMPA to the Government Pension Fund, no accounting transaction is recognized for such Dension and severance vlans. (e) Foreign Currency Transactions. The KMPA maintains its accounts in Korean Won. Transactions in foreign currencies are recorded in Korean Won based on the prevailing rates of exchange at the dates of transactions. Accounts with balances denominated in foreign currencies are recorded and reported in the financial staements at the exchange rates prevailing at balance sheet date. Translation gains and losses (both realized and unrealized) on foreign currency denominated assets and liabilities are reflected in income determination currently. 3. Property. (a) Revaluation. As described in Cc) above, the property accounts include revaluation adjustments. Financial accounting standards in Korea require that property accounts be stated at cost or appraised value as determined by the Korea Appraisal Board as provided under the Assets Revaluation Law of Korea. To comply with governmental regulation, however, the KMPA revalues its property by itself every five years. These revaluations are applied to all property items administered by the KMPA, exclusive of construction in progress. The latest revaluation was made as of January 1, 1980. The results of the latest revaluation were as follows (in Won million): Net book value before Revalued Revaluation Description of property revaluation amounts surplus Land 72,210 121,490 49,280 Buildings 9,108 14,412 5,304 Structures 108,678 120,893 12,215 Machinery and equipment 13,305 13,806 501 Vessels 5,030 5,517 487 Total 208,330 276,117 67,787 - 105 - Table 5.4 Page 5 of 5 (b) Interest Costs During Construction Period. The KMPA does not capi- talize the eligible portion of interest cost recognized on borrow- ings which financed the construction of property. Financial accounting standards in Korea, however, require that interest cost during the construction period on long-term borrowings used for the construction of property is to be capitalized as part of the cost of the assets. Total interest cost incurred during the years of 1979, 1980, 1981 and 1982 amounts to W 3,492 million, W 4,243 million, W 5,836 million and W 6,723 million, respectively. - 106 - Table 6.1 KOREA SECOND PORT PROJECT (LOAN 1401-KO) PROJECT COMPLETION REPORT BDMPA Revenue Center Cost Report (Won million) 1982 1983 Revenue Cost Profit Revenue Cost Profit Port Facility Revenue Dockage 4,076 1,330 2,746 5,350 2,152 3,198 Anchorage 2,168 708 1,460 2,679 1,065 1,614 Wharfage 4,774 1,554 3,220 5,759 930 4,829 Light dues 381 121 260 411 71 340 Port dues 4,637 1,511 3,126 5,890 2,494 3,396 Other dues 308 104 204 356 50 306 Subtotal 16,344 5,328 11,016 20,445 6,762 13,683 Equipment Revenue Tuggage 1,021 328 693 997 444 553 Ship cranage - - - - - - Subtotal 1,021 328 693 997 444 553 Rental Revenue Container terminal rental 4,523 1,451 3,072 6,193 997 5,196 Grain terminal rental 1,571 466 1,105 1,550 248 1,302 Ore terminal rental 631 164 467 458 86 372 Coal terminal rental 278 86 192 363 56 307 Coal loading equipment rental - - - - - - Multipurpose crane rental - - - - - - Subtotal 7,003 2,167 4,836 8,564 1,387 7,177 Other Revenue Ship inspection fee 4 - 4 3 42 (39) Public surface charge 750 242 508 737 105 632 Land rental 937 302 635 1,177 169 1008 International passenger terminal rental 24 9 15 27 51 (24) Domestic passenger terminal - - - - - - Government property rental 260 86 174 2,646 209 2,437 Others 521 172 349 217 29 188 Subtotal 2,811 605 4 Total 26,864 8,634 18,230 34,813 9,198 25,615 Source: KMPA, August 1984. - 107 - Table 6.2 KOREA SECOND PORT PROJECT (LOAN 1401-KO) PROJECT COMPLETION REPORT KMPA Revenue Center Cost Report (Won million) 1982 1983 Revenue Cost Profit Revenue Cost Profit Port Facility Revenue Dockage 14,944 7,603 7,341 19,955 9,305 10,650 Anchorage 5,925 2,591 3,334 6,813 2,762 4,051 Wharfage 15,246 7,565 7,681 18,788 6,250 12,538 Light dues 939 475 464 1,033 629 404 Port dues 10,351 8,781 1,570 12,828 9,802 3,026 Other dues 308 134 174 356 77 279 Subtotal 47,713 27,149 20,564 59,773 28,825 30,948 Equipment Revenue Tuggage 2,434 1,836 598 2,443 1,887 556 Ship cranage - - - - - - Subtotal 2,434 1,836 598 2,443 1,887 556 Rental Revenue Container terminal rental 4,523 1,894 2,629 6,193 1,471 4,722 Grain terminal rental 1,571 620 951 1,550 367 1,183 Ore terminal rental 631 226 405 458 121 337 Coal terminal rental 278 113 165 363 84 279 Coal loading equipment rental 601 530 71 617 522 95 Multipurpose crane rental 136 93 43 209 124 85 Subtotal 7,740 3,476 4,264 9,390 2,689 6,701 Other Revenue Ship inspection fee 18 64 (46) 19 157 (138) Public surface charge 2,147 924 1,223 2,094 550 1,544 Land rental 1,308 543 765 1,567 353 1,214 International passenger terminal rental 24 11 13 27 53 (26) Domestic passenger terminal 73 167 (94) 80 126 (46) Government property rental 260 112 148 2,646 412 2,234 Others 783 395 388 634 217 417 Subtotal 4 2 2 7 1 5 Total 62,500 34,677 27,823 78,673 35,269 43,404 Source: KMPA, August 1984. - 108 - Table 7.1 KOREA SECOND PORT PROJECT (LOAN 1401-KO) PROJECT COMPLETION REPORT Economic Costs and Benefit. (1976 Won million) Economic Benefit: Ship Container Yard Transport Cost Economic Waiting Cost on Incheon Year Cost Time /1 Estimated /L2 Containers /-3 Total 1979 3035 1980 5553 1981 5848 1982 10339 1983 711 2197 0 3231 5428 1984 4326 0 3524 7850 1985 9478 0 3880 13358 1986 22693 0 4270 26963 1987 24260 0 4680 28940 1988 24353 0 5131 29484 1989 24353 0 5387 29740 1990 24353 0 5658 30011 1991 24353 0 5940 30293 1992 24353 0 6237 30590 1993 24353 0 6548 30901 1994 24353 0 6876 31229 1995 24353 0 7220 31573 1996 24353 0 7580 31933 1997 24353 0 7960 32313 1998 24353 0 8358 32711 1999 24353 0 8776 33129 2000 24353 0 9215 33568 ERR= 40.42 % / 1: Taken at US$ 3.500. /-2: Due to continued use of off-dock container'yards, this benefit stream was negligible. P3: Additional cost of transport on Seoul containers if routed via Incheon. Taker. at US$ 12.20 per container on 30% of all Busan containers. Source: KMPA and Bank staff. August 1984 K0REA SECOND PORT PROJECT (LOAN 1401-KO) PROJECT COMPLETION REPORT Operational Parameters Assumed for Economic Evaluation (for container berths and containers handled at general oargo berths) Existing Existing Proposed break bulk containera containers bertha bertha berths Berths (number) 3 2 2 Cranes per berth (number) 2 2 2 Average crane productivity per hour (TEUs) 15 23 23 Average working hours per day (hours) 18 18 18 Berth operating days per year (day.) 360 360 360 Average shipment size (TEUs) /1 200 400 400 Maximum berth utilization () 95 50 50 Maximum annual capacity per berth ('000 TEUs) 185 149 149 Ship arrivals (scheduled/random) Random Scheduled Scheduled Average daily ship cost in port (Won'000/day) 2500 4000 4000 Unloading/loading cost (Won'000/TEU) 14.00 8.50 8.50 Cargo value (import CIF, export FOB) (Non'000/TEU) 3200 3200 3200 /1 Assume an average container shipload of 400 TEU with 10 tons per TEU and 20% nmpties (actually 12.5 ton/TEU). H :. S ircet KMPA and Bank staff. August 1984 - 110 - Table 7.3 KOREA SECOND PORT PROECT (LOAr 1401-KD) PROJCT COMPLMETIO REPORT Container Handling Vithout and With Propoed Container Berth- 1980 1981 1982 1963 1984 1965 1986 1987 1988 A. TRAFFIC DERAND (000 TEg) _a 632 743 786 883 963 1060 1166 1279 1402 D. MITHOUT PROJECT EMisting Break Bulk Berthe / b / b /_b 1. Berths (uber) 3 3 3 3 3 3 3 3 3 2. Traffic (TEU '000) 313 370 389 438 476 524 577 630 693 3. Avraga lad per hip (TEUs) 200 200 200 200 200 200 200 200 200 4. Annual chip arrivala (number) 1565 1850 1945 2190 2380 2620 2885 3150 3465 5. Barth occup.ncy () 54 63 67 75 82 90 (95) (95) (95) 6. Annual ahip berth tie (days) 580 685 720 811 861 970 1069 1167 1263 7. Annu1 ship waiting tim (days) 87 185 167 479 9Ce 1950 4509 4923 5416 Existing Container BEarth. /b /_b /_b 1. erthe(number) 2 2 2 2 2 2 2 2 2 2. Traffic (TEU '000) 319 373 397 445 487 536 589 649 709 3. A ~rage load per hip (TEUM) 400 400 400 400 400 400 400 400 400 4. Anul ship arrivals (ntuber) 798 933 993 1113 1218 1340 1473 1623 1773 5. Bearth occupancy (M) 54 63 67 75 82 90 (95) (95) (95) 6. Anual ship barth tie (days) 385 450 479 537 588 647 711 784 856 7. Annal ahip saiting ti- (days) 58 122 163 312 600 1295 3067 3402 3716 C. mITH PROJECT Eating greak Bulk Berth. 1. Burth (nueber) 3 3 3 3 3 3 3 3 3 2. Traffic (TE58 '000) 313 370 389 289 315 348 384 418 460 3. Averag 1ad par ship (mfa) 200 200 200 200 200 200 200 200 200 4. Annual hip arrival (number) 1565 1850 1945 1445 1575 1740 1920 2090 2300 5. BEarth ccupancy (M) 54 63 67 50 54 60 66 72 79 6. Annuml hip barth tim (daya) 580 685 720 535 583 644 711 774 852 7. Ancual ahip waitir.g tl (day) 87 185 187 64 87 148 220 379 1056 Existing Container Berths 1. BEarthe (number) 2 2 2 2 2 2 2 2 2 2. Traffic (TEUO '000) 319 373 397 298 324 356 391 431 471 3. Average 1ad pr Ship (TUs) 400 400 400 400 400 400 400 400 400 4. Annuel ahip arrivale (nubar) 798 933 993 745 810 690 978 1078 1178 5. BEarth occup~ncy (M 54 63 67 50 54 60 66 72 79 6. Ann~1 ship berth tima (day*) 385 450 479 360 391 430 472 521 569 7. Annuel ahip waiting ti. (days) 58 122 163 11 16 26 47 68 176 Propoed Container Berth. 1. DErth. (number) 2 2 2 2 2 2 2. Traffic (T a '000) 296 324 356 391 ' 430 471 3. Averag 1ad par ahip (TEUB) 400 400 400 400 400 400 4. Ampåa ship arrivala (namber) 740 810 890 976 1075 1178 5. BErth occupancy (M) 50 54 60 66 72 79 6. &nual ship berth time (daya) 357 391 430 472 519 569 7. Annual ship maiting ti-. (days) 11 16 26 47 88 176 a: Frm Conultant'a report. b: Traffic mould exceed the practical capacity of those berths. For the purpose of *conomic avaluation it as aa~d that ways vill bo found, *.g., through ight.ring, to mve traffic thrugh the port with waiting ti~., not eceeding thos correponding to 95% barth oc~"rn"y. Source EMPA and Bank staff. August 1984 - 111 - Table & Page 1 of 6 KOREA SECOND PORT PROJECT (LOAN 1401-KO) PROJECT COMPLETION REPORT Compliance with Loan Conditione Action required Action taken Section 3.02 (a) The Borrower shall, not later than Jan- Partially complied with. This topic uary 1, 1979 or such other date as shall be has been subject to extensive debate agreed with the Bank, take all such action as as the Government has proven reluc- shall be necessary to vest KMPA with autonomous tant to give autonomy to KMPA. A powers including, inter alia, the powers (i) to compromise was proposed at a meeting incur debt, (ii) to fixed the emoluments of its in August 1984 (see Attachment ) staff, (iii) to prepare and submit to MOT and and the Bank is considering it EPB its proposed budgets in a commercial form, favorably.. (iv) to have reasonable flexibility in adjusting approved operating budgets to meet cost changes arising out of unexpected fluctuations in port traffic, (v) to open and maintain an account with the Bank of Korea for revenue receipts and payments of obligations, and (vi) to maintain its records in accordance with commercial accounting procedures. (b) The Borrower shall, not later than April 1, 1978 or such other date as shall be agreed with the Bank, submit to the Bank, for review, its proposals to meet the Borrower's obligations under paragraph (a) of this Section. Section 3.04 (a) In order to assist KMPA in the preparation Complied with, but there were some of plans and specifications for the Project, the initial delays. supervision of civil works and the erection and installation of equipment under the Project and (b) for the purpose of Part ? of the Project, the Borrower shall cause KMPA to employ consul- tants whose qualifications, experience and terms and conditions of employment shall be satisfac- tory to the Bank. Section 3.06 (a) The Borrower shall (M) not later than Octo- Complied-with. ber 31, 1977 or such other date as sh as shall be agreed with the Bank, submit to the Bank for review the detailed engineering of the road con- necting the Busan port to the Ausan-Seoul ex- pressway and the Nanhae expressway; and (ii) not later than December 31, 1979 or such other date as shall be agreed with the Bank, complete the construction of such road. (b) The Borrowen shall (i) undertake and submit Complied with. to the Bank for review, not later than June 30, 1978 or such other date as shall be agreed with the Bank, a study, under terms of reference . which shall have been approved by the Bank, of. citywide transport and land use in Busan over the period 1978-83 which shall identify the best medium-term solution to the city's traffic con- gestion and assess its feasibility; and (ii) Ia- plement the recommendations of such study by July 31, 1979 or such other date as shall be agreed with the Bank. - 112 - Table 8 Page 2 of 6 Action required Action taken Section 3.07 (a) Not later than July 1, 1977 or such other Complied with. date as shall be agreed with the Bank, furnish to the Bank for its comments its present proce- dures governing cargo movement within the cus- toms areas of all first-class ports. (b) By July 1, 1978 or such other date as shall Complied with. be agreed with the Bank, adopt and implement im- proved procedures acceptable to the Borrower, the Bank and KMPA. (c) Thereafter submit to the Bank for review any proposed modifications to such procedures. Section 3.08 The Borrower shall take all action required on Complied with. its part to allow mainline container shipping companies to serve directly the ports of Busan and Incheon. Section 4.01 (b) In order to assist KMPA in preparing finan- Complied with. cial statements in accordance with commercial accounting practices, and in implementing the new accounting, costing and managaement informa- tion systems designed by the consultants em- ployed for the purpose of the First Port Proj- ect, the Borrower shall cause KMPA to employ adequatcly qualified and experienced accoun- tants. - 113 - Table 8 Page 3 of 6 Action required Action t&ken Section 4.02 The Borrower shall cause KMPA to: (i) have its Complied with, but only from 1983 accounts and financial statements (balance because the implementation of cor- sheets, statements of income and expensis and mercial accounting systems had been related statements), including BDMPA's accounts, delayed. for each fiscal year from 1979 audited, in accordance with appropriate auditing principles consistently applied, by independent auditors acceptable to the Bank; (ii) furnish to the Bank as soon as available, but in any case not later than six months after the end of each such year, (A) certified copies of its financial statements for such year as so audited and (B) the report of such audit by said auditors, of such scope and in such detail as the Bank shall reasonably requested; and (iii) furnish to the Bank such other information concerning the accounts and financial statements of KMPA and the audit thereof as the Bank shall from time to time reasonably request. Section 4.03 The Borrower shall cause KMPA to establish, no Partially complied with. Implemen- later than January 1, 1979 or such other date as tation of the costing component is shall be agreed with the Bank, and thereafter still at the preliminary stages. maintain in the Busan port a cost-based tariff system satisfactory to the Borrower and the Bank. Section 4.04 Except as the Bank shall otherwise agree, the Complied with. Tariffs have been Borrower shall cause KMPA to establish and main- increased frequently (approximately tain port tariffs which shall yield total reve- once yearly) and in real terms. nues at least equal to the aggregate amount of operating, maintenance, loan interest and depre- ciation costs of (a) the ports of Incheon, Mugho, Yeosu and Pohang, respectively by Janu- ary 1, 1979 and (b) each of the other major ports (with the exception of Busan), as defined by agreement between the Borrower and the Bank, by a date acceptable to the Bank. - 114 - Table 8 Page 4 of 6 Action required Action taken Section 4.05 The Borrower shall cause KMPA to (a) undertake (i) Partly complied with. and complete by April 1, 1978 or such other date (ii) Complied with. as shall be agreed with the Bank a study to: (i) recommend measures aimed at encouraging greater use of container facilities at the Incheon port; and (ii) review the level of container charges at the ports of Incheon and Busan in comparison with the levels of such charges in competing foreign ports; and (b) establish by May 1, 1978 or such other date as shall be agreed with the Bank, a uniform tariff for each 20 ft equivalent container unit handled in the Busan port, on the basis of the study referred to in (a) above. Section 4.06 Not later than July 1, 1978 or such other date Partly complied with. as shall be agreed with the Bank, the Borrower shall cause KMPA to set and collect from each TOC appointed by KMPA in the Busan port charges at a level sufficient for KMPA to (a) recover the port's costs of servicing and maintaining the pier and equipment used by such TOC, (b) make adequate provision for depreciation and (c) fulfill its obligations under Section 4.07 (b) of this Agreement. Section 4.07 Except as the Bank shall otherwise agree, the Borrower shall cause KNPA to: (a) take all necessary steps (including but not Complied with, but after extensive limited to adjustments in its port tariffs and delays as agreement was not reached charges) to enable KMPA to earn, in fiscal year until November 1982. KMPA rates of 1979 and thereafter, an annual rate of return on return set at 4.5% in 1983, 4.5% in its net fixed assets in operation which shall be 1984, 5% in 1985 and 7% in 1986. agreed upon between the Borrower, the Bank and Operating results show that these KMPA; and rates will be exceeded. (b) take all necessary steps (including but not Complied with. Actual rate of re- limited to adjustments in the Busan port tariffs turn achieved is much higher (15% in and charges) to enable BDMPA to earn, in fiscal 1983). year 1978 and thereafter, an annual rate of return of not less than 7% on its net fixed assets in operation. - 115 - Table 8 Page 5 of 6 Action required Action taken Section 4.08 Except as the Bank shall otherwise agree, the Complied with. Debt service ratio Borrower shall not authorize KMPA to incur any was greater than 1.5 in most years. debt on behalf of BDMPA unless BDMPA's net reve- nues for any twelve consecutive months within the fifteen months next preceding such incur- rence shall be at least 1.5 times the maximum debt service requirement for any succeeding fiscal year on all debt, including the debt to be incurred. Section 4.09 Except as the Borrower and the Bank shall other- Complied with. wise agree, the Borrower shall not authorize KMPA to make investments on the Busan port (other than those required under the Project and the First Port Project and those related to nor- mal replacement of worn-out or obsolescent assets) in excess of $1,500,000 per annum after 1978 and until completion of the Project. Section 4.10 The Borrower shall cuase KMPA to prepare, and Complied with. not later than January 1, 1982 or such other date as shall be agreed with the Bank, to adopt a realistic schedule of depreciation of KNPA's assets for financial and cost accounting pur- poses. Section 5.02 The Borrower shall take all such action as shall Partly complied with. Inter- be required to cause (a) MC to (i) consult with ministerial coordination is MOT and KMPA on the need for port facilities practiced marginally and needs to be forming part of industrial complexes and (ii) strengthened. make available feasibility studies and designs of Industrial Ports to MOT and KMPA for comments prior to their submission to EPB; (b) MOT and KMPA to advise EPB on the technical soundness and the economic and financial justification of HDC's Industrial Port development proposals; and (c) EPB to take MOT's and KHPA's views into con- sideration before approving HOC's port invest- ment budget. - 116 - Table 8 Page 6 of 6 Action required Action taken Section 5.06 The Borrower shall cause KMPA to appoint, not Complied with, after some delays. later than March 31, 1978 or such other date as shall be agreed with the Bank, under terms and conditions satisfactory to the Bank, separate TOCs to be responsible for container handling and grain handling operations at the Busan port. Section 5.07 Complied with. Except as the Bank shall otherwise agree, the Borrower shall cause KMPA to appoint, under terms and conditions satisfactory to the Bank, a single TOC to be responsible for breakbulk cargo handling operations at each pier, or other de- signated area, of (a) the ports of Busan, Mugho and Incheon, respectively, by March 31, 1979 and (b) each of the other first-class ports by a date acceptable to the Bank. For this purpose, KMPA shall submit to the Bank, for its approval, a standard form of contract applicable to all TOCs. Section 5.08 By July 1, 1982 or such other date as shall be Not complied with; it is debatable agreed with the Borrower and the Bank, depending if this should be done in view of on the degree of experience acquired by KMPA's how the TOCs are operating. staff in supervising the TOCs' cargo-handling operations referred to in Sections 5.05, 5.06 and 5.07 of this Agreement, the Borrower shall cause KIPA to take over the responsibility for all such operations. Section 5.09 The Borrower shall cause KMPA to operate 24 Complied with. hours a day Busan port's container wharf, in- cluding the ccntainer freight station included in Part C of the Project. - 117 - Page 1 KOREA MARITIME AND PORT ADMINISTRATION 263. Yeuni-dong. Jongro-ku. SEOUL. KOREA Minutes of the meeting of August 23, 1984 at the Ministry of Finance. 1. A meeting was held to discuss KMPA'S legal status and impact of this status on its inances. 2. The meeting was attended by Mr. P. Levy for World Bank, Mr. R.Y. UHM for MOP and Mr. B.C. Kwon for - MPA. 3. Mr. Levy pointed out that Section 3.03(a) of Loan Agreement 2267-KO repeated and superseded the pro- visions of Section 3.02 of Loan Agreement 1401-KO dated April 28, 1977. Under the latter agreement, the provision*of Section 3.02 were to be applied by JAN. 1, 1979. At negotiations of the Coal and Cement Distribution Project dated March 1983, the Government stated that it has been understood that to comply literally with the agreed provision, KMPA should be set under Commercial Budgeting and Accounting Law, and that it felt that this could not be done prior to 1986. 4. KMPA explained that the main reason for this postpon- ement is that its submission to the Law would prevent it from receiving government contributions even for carrying out its non-revenue generating obligations as Section 3 of the Law stipulates "expenditures are only allowed within the limit of revenues". Under present projections, KMPA estimates that it will need Government financial assistance into the nineties to finance its non-revenue generating administrative obligations, investments in second class ports, and operation and capital expenditures of first class ports. KMPA stated, however, that it wishes to comply with Section 3.03(a) of Loan Agreement 2267-KO to the greatest possible extent. - 118 - Table 8 Attachment Page 2 5. To this effect, KMPA proposes that A. The parallel implementation of KMPA'S commercial budgeting and accounting system started in 1983 would become permanent under formal instructions of MOT. B. The presentation of commercial budgetswould be initialed by MOT to ensure conformity with the administrative budgets. C. The commercial accounts would be audited in compliance with Section 4.02(g) of Loan Agreement (2267-KO). D. The instructions referred above(A) will be issued by MOT prior to JAN. 1, 1985. Measures A to D would qomply with provision(ii) and -(V) of Section 3.03(a). 6. In addition, KMPA explained that it considers complying partly with the other provisions of the same section such as: Ca) it can borrow from other Government agencies, (b) it has powers to adjust its approved budget to meet cost changes subject to EPB approval; and (c) it maintains a sub-account with the Bank of Korea for revenue and payment. 7. Mr. Levy answered that he welcomes the Government and KMPA'S willingness to implement the above agreed actions and that he would recommend that the Bank agrees with Government/KMPA'S proposals and explana- tions although they reflect partly the intentions of the Loan Agreement to transform KMPA into an autonomous entity with large managerial and financial freedom. - 119 - Table 8 Attachmept Page 3 1984. 8. 28. Mr. P. Levy TransportatiOn Division Project Department East Asia and Pacific Regional Office IBRD Mr. R. Y. Uhm Director Government Loan Management Division MOF Mr. H. C. Kwon Director Finance Di,-ision RMPA - 120 - APP"NDIX ZCZC DIST8966 RCA8456 OEDOD REF : TCP MC RCA8456 248423 WORLDBANK KMPA K26528 MR. YUKINGRI WATANABE DIRECTOR OPERATIONS EVALUATION DEP. WORLD BANK 4 JULY 85 RE YOUR LETTER DATED APR. 26P 1985 REGARDING PROJECT PERFORMANCE AUDIT REPORT ( LOANS 917 AND 1401-KO ) WE HAVE THE FOLLOWING COMMENTS ON YOUR ABOVE MENTIONED REPORTPAND WOULD REQUEST TO REFLECT THESE COMMENTS IN THE FINAL AUDIT REPORT: (1) SDUE TO LONG TIME TAKEN FOR BANK REVIEW AND MAIL DELIVERY& IS MORE PROPER THAN &DUE TO KMPA'S LACK OF EXPERIENCEZ ( REFER TO LINE 5 PAGE 57 1ST PROJECT COMPLETION REPORT) (2) DEEP WATER BERTH IS 603MP NOT 700. (LINE 2y PAGE 5v 2ND PROJECT) (3) BECAUSE OF THE SAME REASON IN ITEM (1), DELETION OF THE SENTENCE STHE MAIN REASONS FOR - - - - - CONSULTANTS.S IS RECOMMENDED (LINE 12P PAeE 6y DITTO ) (4) MODIFICATON OF CARGO VOLUME, 1984 IS NEEDED. CONTAINER IN CONTAINER TERMINAL IS 661.49 GENERAL PIERS 392.9, TOTAL BUSAN PORT 1,054.3, AND TERMINAL/BUSAN 62.7 BEST REGARDS. LEEf JAE BOCK. DIRECTOR GENERAL, PORT CONSTRUCTION AND DEVELOPMENT BUREAU. K.M.P.A Changes to reflect the Government's comments have been made on pages 29, 65, 248423 WORLDBANK 66, 76 and 77. KMPA K26528MM =07060409 =07060839 ALT RTD FROM:OEDM NNNN ’可 〕 .BRO .O382RllPCㅐ， 기 爾 IU細寧H909之亂OH日I