LIKCULATING COPY muVuIVntu V1 UL RlUKNL TO REPORTS DESK The World Bank FOR OFFICIAL USE ONLY Report No. 109 PROJECT PERFORMANCE AUDIT REPORT on TTTNTTCTA CDAPTT RT DPODATTPT T AAM 479.TITAT1 February 26, 1976 Operations Evaluation Department 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. FOR OFFICIAL USE ONLY PROJECT PERFORMANCE AUDIT REPORT TUNISIA SECOND PORT PROJECT (LOAN 573-TUN) PREFACE This report presents an audit of achievements under the Tunisia Second Port Project, for which Loan 573-TUN in the amount of US$8.5 million was fully disbursed in January 1975. This performance audit is based mainly on correspondence and reports in IBRD files (Loan and Guarantee Agreements, President's and Appraisal Reports, Progress Reports, Supervision Reports, and correspond- ence between the Bank and the Borrower), as well as on discussions with staff members of the Office des Ports Nationaux Tunisiens (OPNT), Societe Tunisienne d'Acconage et de Manutention (STAM), Office des dreales, Ministry of Transport, and IBRD. A Project Completion Report, prepared by the EMENA Regional Office in March 1975, also was useful in the prepa- ration of this report. In June 1975, a one-week visit was made to Tunisia in connection with this performance audit. The valuable assistance of the OPNT, STAM, Office des Ce're'ales, and Ministry of Transport is gratefully acknowledged. 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. PROJECT PERFORMANCE AUDIT REPORT TUNISIA SECOND PORT PROJECT (LOAN 573-TUN) PROJECT DATA Loan Amount US$8.5 million Amount Disbursed US$8.5 million Appraisal Mission Date May/June 1968 Loan Agreement Date November 29, 1968 Original Effectiveness Date February 28, 1969 Actual Effectiveness Date April 29, 1969 Original Closing Date December 31, 1972 Final Disbursement Date January 1975 Exchange Rates: Tunisian dinars (D) 1968 - 1970 ------------US$1 = D .52 1971 ------------------- US$1 = D .48 1972 ------------------- US$1 = D .48 1973 ------------------- US$1 = D .45 1974 ------------------- US$1 = D .41 1975 ------------------- US$1 = D .39 PROJECT PERFORMANCE AUDIT REPORT TUNISIA SECOND PORT PROJECT (LOAN 573-TUN) TABLE OF CONTENTS Page No. Project Performance Audit Summary i - iv Annex: Project Performance Audit Report I. Introduction 1 II. The Bank and the Loan 1 III. Project Implementation and Costs 5 IV. Financial Performance of OPNT 8 V. Operating Performance of the Ports in Handling General Cargo 11 VI. Economic Justification 14 VII. The Role of the Bank 21 VIII. Conclusions 23 List of Annexes Annex 1: Detailed Project Description Annex 2: Estimated and Actual Project Costs Annex 3: OPNT's Forecast and Actual Income Statements, 1969-74 Annex 4: Forecast and Actual Total Traffic in OPNT Ports Annex 5: OPNT's Operating Revenue, Port Tunis-La Goulette Annex 6: OPNT's Estimated and Actual Cash Flow Annex 7: Port of La Goulette: Draught of Iron Ore Vessels, 1970-74 Annex 8: Port of La Goulette: Draught of Phosphate Vessels Annex 9: Draughts of Grain Vessels Before and After Construction of the Bulk Grain Installations Map: Tunisia Transportation Network PROJECT PERFORMANCE AUDIT SUMMARY TUNISIA SECOND PORT PROJECT (LOAN 573-TUN) Loan 573-TUN for the Tunisia Second Port Project, a natural con- sequence of the successful completion of the First Port Project (Loan 380-TUN of 1964 for US$7 million), was intended to help finance the continuation of improvements in port infrastructure. The Government of Tunisia first contacted the Bank regarding this Second Project in August 1966. At that time, the Government requested Bank assistance in financing capital dredging and cargo handling equipment for the port of La Goulette (the main Tunisian port, near Tunis) and construc- tion of an access road to this port from Tunis. The Bank declined support for the last item because it represented an unfulfilled covenant under the First Project. Possible components of a Second Port Project were identified in May 1967, and the project was appraised in November 1967 and May/June 1968. The appraisal missions specified the need for investments in several other ports, financial consultants' services, and training for accounting staff. The Bank also considered the possibility of including construction of a bulk grain facility by the Government as a covenant in this project. But since a similar covenant under the First Project had not been fulfilled and another covenant under the Second Project was not likely to be ful- filled because of the Government's financial situation, the Bank suggested during negotiations inclusion of the bulk grain facility in the project. A loan for US$8.5 million was approved by the Board in November 1968. This loan was to finance the foreign exchange component of a US$10.7 million project, whose main components were: a) capital dredging at four ports (21% of project cost); b) provision of a dredger and a tug (10%); c) provision of cargo handling equipment and rehabilitation of portal quay cranes (10%); d) restoration of an island breakwater (8%); e) provision of a new bulk grain facility (41%); and f) staff training in accounting and financial management as well as financial and engineering consultants' services (10%). Most loan covenants were of an exclusively financial character, referring to the financial performance of the Office des Ports Nationaux Tunisiens (OPNT), the statutory body responsible for operation, develop- ment, and maintenance of Tunisian ports, and the appointment of financial consultants. The only conditions about port operations concerned the need for a satisfactory financial return from the leasing of the cargo handling equipment to the Societe' Tunisienne d'Acconage et de Manutention (STAM), which provides cargo handling services for general cargo. - ii - The project was physically completed by December 1973, about eight months later than expected, but with a substantial cost overrun of US$4.7 million (about 43% of the estimated cost). Of the total, US$3.6 million (76%) is accounted for by an 80% cost overrun in construction of the bulk grain installation, which is mainly explained by the underestima- tion of its cost at appraisal. The cost overrun in the second most import- ant item, capital dredging, was 11% and is explained by deeper dredging than originally intended, discrepancies with the survey from which the orig- inal quantities were estimated, and the need to remove two old breakwaters. Breakwater restoration was completed at a cost 35% lower than expected. The cost overrun in the other items (except the quay cranes) ranged be- tween 10% and 30% and is mainly explained by price increases. Rehabilita- tion of quay cranes cost over twice as much as expected and was completed one year behind schedule. The main reason was an underestimation of the extent of the required repairs. Despite the substantial investment in equipment, the limited in- formation available seems to indicate a lack of major improvements in the efficiency of Tunisian ports. The average tonnage handled per ship/day and gang productivity have remained fairly stable over the past five years. This lack of major improvement in the efficiency of cargo handling can be closely associated to two main factors: first, the inefficient working methods and the almost total absence of pallets and second, the institu- tional set up for cargo handling whereby responsibilities are split between STAM and OPNT. The financial performance of OPNT has been satisfactory, and since 1971 the financial rate of return on net fixed assets has been above the appraisal forecasts. Tariffs were increased in 1971, but until very recently there has been a general lack of studies on OPNT's tariff struc- ture. The main factors explaining the satisfactory evolution of the finan- cial rate of return are the tariff increase and sharp increase in revenue from goods stored in the port area for more than 30 days. The financial consultants gave valuable advice to OPNT in the early days, but their achievements under the present project were not as important as expected. They developed a management information system, but it was not implemented, partly because it was not well adapted to the particular legal and economic conditions of the country and partly because in several aspects it was not appropriate to OPNT's requirements. They also carried out a training program in accounting, but very different opinions about its long-term value were expressed by OPNT staff. With hindsight, it may be felt that the consultants provided good support in the early days of OPNT, particularly in bringing together the different accounting systems, but that their involvement went on too long. - iii - Despite the cost overruns, the audit rate of return on the main project components is satisfactory. This is primarily because of the favor- able evolution of factors exogenous to the project, such as the ship operat- ing costs and the price of grain, which increased substantially after ap- praisal. These exogenous factors have been particularly important in rela- tion to the bulk grain facility (54% of actual project cost), producing an audit rate of return of 14%, or quite close to the appraisal rate of return of 15%, despite the 80% cost overrun. On the second most important component of the project, capital dredging (16% of actual project cost), the audit rate of return is 17% while at appraisal a return of ll%-25% was expected in the different ports. In the case of the dredger and tug (8% of actual project cost), the audit rate of return is in the range of 6%-12%, with the best estimate close to the top of the range. The audit rates of return on the breakwater restoration and car ferry (3% and 1% of actual project cost, respectively) are very high: 45% and 60%, respectively. In the case of the cargo handling equipment and the rehabilitation of the quay cranes, a new estimate was not possible. How- ever, it seems that while the rate of return on the former is satisfactory, the profitability of the investment in the latter is less certain. The actual cost of rehabilitating each quay crane was US$87,250 and,at this level, the provision of alternative equipment might have been better. The Bank played an important role in the preparation of this pro- ject. The changes in the original Government request appear to have been justified in retrospect, but it seems that more emphasis on improved effi- ciency in port operations could have contributed to the success of the pro- ject. This greater emphasis could have resulted in more attention being given to improved cargo handling organization and methods. The cost estimates of some items included in the project proved to be inadequate. In the case of dredging and quay crane rehabilitation, it is doubtful that the Bank could have contributed to improved estimates, but in the case of the bulk grain installation, more attention to the composi- tion of the cost estimates and the supporting technical studies during the period of project preparation could have improved the cost estimates. In this case, where the late inclusion of the item prevented detailed cost studies, it would have been prudent to include a larger contingency item. Also in relation to the bulk grain installation, a broader approach that would have considered it as well as the grain distribution system could have improved the success of the project. The bottlenecks in this system have prevented the benefits of the bulk grain facility from fully materi- alizing. Supervision missions provided valuable advice for the successful completion of the project, but perhaps they focussed too much on financial matters. One item that did not receive full attention was the difficulties in provision of pallets, which has been a factor in preventing full ma- terialization of the benefits from the purchases of cargo handling equipment. - iv - The role of the Bank in relation to the financial consultants is the most difficult aspect of this loan on which to form a view. The success of the consultants' work was seriously hampered by the lack of close relations between them and OPNT personnel. This points out the need to give adequate consideration to the quality of those links to ensure suc- cessful implementation of the consultants' work. In the case of this pro- ject, the Bank could perhaps have played a more active role in ensuring that harmonious working relationships were achieved,if necessary by sug- gesting the replacement of consultants' personnel. The Second Port Project has been a successful attempt to con- tinue with the development of a modern port infrastructure in Tunisia. The favorable evolution of factors exogenous to the project has resulted in a satisfactory rate of return on the main components, despite cost overruns. The Bank has helped to create a financially viable OPNT, capable of play- ing a major role in the development of Tunisian ports. ANNEX PROJECT PERFORMANCE AUDIT REPORT TUNISIA SECOND PORT PROJECT (LOAN 573-TUN) I. INTRODUCTION 1.01 Tunisia's livelihood comes largely from agriculture and mining. Manufacturing is growing, and is largely directed toward processing of agricultural or mineral products, such as olive oil and fertilizers. Except for substantial trade of fuel and power with Algeria, Tunisia's external trade is carried by sea. Ports are, therefore, vital to the economy. Minerals, foodstuffs, and manufactured goods comprise the main dry cargo exports, and liquid fuels are a substantial part of import traffic. Traffic volumes were depressed at the end of the 1960s, partly because of economic difficulties which were exacerbated by severe floods in 1969. However, traffic has been picking up recently and a substantial upward trend can be detected. 1.02 The position of petroleum and grain is somewhat anomalous because Tunisia is both an exporter and an importer of substantial quantities of both commodities, regularly in the case of petroleum and occasionally in the case of grain, due to technical reasons associated with product types and quality. The principal ports (see map) are: La Goulette, near Tunis (approximately equal quantities of general cargo, dry bulk cargo, and liquid fuels); Tunis Old Port (general cargo); Bizerte (liquid fuels); Sfax (dry bulk exports and general cargo); Sousse (general cargo) and Gabes. Gabes,-a new port with relatively low traffic which is increasing rapidly, will be important chiefly for dry bulk cargo. II. THE BANK AND THE LOAN 2.01 The Second Port Project (Loan 573-TUN) was in large part a natural consequence of the successful First Port Project (Loan 380-TUN). The first loan, made in 1964 for US$7 million, helped finance construction of 375 m of quay with related preparatory works as well as provision of transit sheds and other ancillary facilities at La Goulette (about 10 km from Tunis), which was intended to supplement, and perhaps eventually to replace, Tunis Old Port. The loan was made in the context of major organi- zational changes in the administration of Tunisian ports, particularly the creation in 1965 of the Office des Ports Nationaux Tunisiens (OPNT), a statutory body under the Ministry of Public Buildings and Works, with general responsibilities for operation, development, and maintenance of Tunisian ports. OPNT also provides pilotage, towage, and navigation -2- controls, supervises quays and harbors, and provides railway service within the port. Since its establishment, OPNT has had a satisfactory degree of autonomy in both financial and administrative matters. 2.02 The new agency did not materially affect the organization of cargo handling in Tunisia. Arrangements for this vary from port to port and, with few exceptions, OPNT does not operate cargo handling services. Thus in Tunis Old Port and La Goulette, the Societe Tunisienne d'Acconage et de Manutention (STAM) provides all cargo handling services for general cargo. There are four firms of stevedores at Sfax and two at Bizerte. Labor supplied by the importer/exporter handles the cargo to and from the sheds, using where necessary equipment hired from and operated under OPNT's general supervision. The overall picture regarding the organization of cargo handling is not very satisfactory. 2.03 An important aspect of this reorganization was the bringing to- gether of a number of previously independent accounting systems into a single unified control. To facilitate the integration of these accounting systems, financial consulting services were included in the First Port Project. 2.04 A number of covenants in the First Port Project related to in- vestments and to organizational and financial aspects. The most important covenant from the point of view of later events concerns the agreement of the Government to proceed with construction of a new bulk grain handling facility at La Goulette. Another covenant referred to the construction of a motorway and associated access roads, between Tunis and La Goulette to serve the new port and a new ferry for the south side of the city. Neither of these covenants was fulfilled under the First Project. Construc- tion under this project was satisfactorily completed in November 1967. 2.05 The first contacts in relation to a possible Second Port Project were made in August 1966. At that time, the Government requested the Bank's assistance in financing three items at the port of La Goulette: (a) the Tunis-La Goulette motorway; (b) a dredger and cargo handling equipment; and (c) capital dredging. The Bank declined to finance the motorway because its construction by the Government had been a covenant under the First Port Project. This road was constructed in 1969-70 with financing from the Federal Republic of Germany. The revised request therefore was limited to the remaining two items. 2.06 Discussion in the Bank of the proposed project centered on the following main points: - 3 - (a) Certain items, included as covenants in the First Port Project, which had not been constructed. The most important were the motorway and bulk grain facilities. (b) Control of cargo handling equipment. Existing equipment was owned partly by OPNT and partly by independent stevedore firms. At issue was whether the new equipment should go to STAM, as the principal stevedore firm and, if so, whether the Bank could find a mechanism to lend money to STAM, 5% of which was privately owned. (c) Various additional items identified at ports other than La Goulette as worthy of consideration, including some capital dredging at Sfax. (d) The effect of any Bank investment in the port of Sfax on the Government's decision to go ahead with construction of the port of Gabes.l/ It seems that Bank financing of Gabes was not seriously con- sidered at that time. 2.07 During supervision of the First Port Project in May 1967, possible components for a Second Port Project were identified. A detailed cargo handling equipment list was prepared, with ore handling equipment added, and certain other items deleted, particularly two tugs. A proposal for a dredger and a tug was also considered. In addition, training needs for accounting staff were identified. Finally, the bulk grain facility was discussed although primarily as an unfulfilled covenant under the First Project. 2.08 An appraisal mission visited Tunisia in November 1967, and dis- cussions concentrated on the following items: (a) The economic case for inclusion of a dredger and a tug in the project: the possibility of dredging being carried out by contract at regular five-year intervals was studied. This study showed that the economic rate of return on the dredger was marginal, but this item was retained in the project at the Government's insistence. The Government's main reason for retaining this item was that it would enable OPNT to meet any emergency needs without incurring high costs or delays. The added cost of OPNT's dredger was regarded as an "insurance premium" to achieve these results. (b) Capital dredging: agreement was reached to take the dredged level to 9.5 m but to calculate the economics of a 11.6 m level, based essentially on the likelihood of iron ore exports. The merit of initial overdredging to reduce the frequency of maintenance dredging to a five- year interval was also discussed. 1/ The Government planned to build a new port at Gabes and a railroad line to connect the port with the Gafsa mining complex. Phosphate exports from this area were the main traffic through the port of Sfax, and some diversion of this traffic to Gabes was expected. (c) Certain items to be added to the list of project components: repair of the breakwater at Bizerte, provision of a dolphin berth for the proposed bulk grain handling facilities at La Goulette, and provision of accounting consultancy services. (d) Cargo handling equipment: agreement was reached that this equipment would be purchased by OPNT for its own use and for lease to STAM. 2.09 The various covenants which finally were to be included in the loan agreement were identified during this mission. These included, in particular, the need to carry out a comprehensive port development study (arising probably from the Bank's desire to be further reassured on the question of the development of Gabes and its effect on Sfax), the appoint- ment of independent auditors to OPNT, and the achievement of a 6% financial rate of return on average net fixed assets. Possible inclusion of con- struction of the bulk grain facility by the Government as a covenant for the proposed second loan also was discussed. 2.10 A follow-up appraisal mission went to Tunisia in May/June 1968 to settle the details of the proposed project and to update information. The recommendation of this mission for a US$5.3 million loan went to the Loan Committee in May 1968. At this stage, it was envisaged that the loan would be made under IDA financing and the question of construction of the bulk grain facility was still unresolved. 2.11 In June, the Bank suggested the inclusion of bulk grain handling facilities in the project, increasing the proposed loan amount from US$5.3 million to US$8.5 million. This suggestion was made because it had become clear that the Government was not able to finance this item with its own resources. It was further agreed during discussions that, contingent on the signing of a proposed contract for supply of iron ore to Italy, dredging at La Goulette should be increased to 11.6 m. During these discussions, the Director-General of OPNT expressed some criticism of the financial consultants under the First Port Project and asked the Bank to suggest alternative names for the continuation of these services under the Second Port Project, though this point does not appear to have been followed up. The Tunisian delegation also objected to a proposed covenant about the need to appoint a financial manager, because,they said,of the difficulty in finding a suitable appointee. 2.12 In September, the proposed financing arrangement was changed from an IDA credit to a Bank loan, and in November the Board approved a US$8.5 million loan to finance the foreign exchange cost of a US$10.7 million project. A detailed description of the project is included in Annex 1, while the main co ponents and their percentage participation in in the total project cost- were: 1/ Excluding contingencies. - 5 - (a) capital dredging at La Goulette, Sfax, Bizerte, and Menzel Bourguiba (21%); (b) provision of a small suction dredger and attendant tug for maintenance dredging of OPNT's ports (10%); (c) provision of cargo handling equipment at Tunis, La Goulette and Sfax, as well as rehabilitation of seven 7-ton portal quay cranes at La Goulette (10%); (d) restoration of the island breakwater at Bizerte to ensure adequate protection inside the harbor (8%); (e) provision of a new bulk grain berth and storage installa- tion on the south side of La Goulette harbor, including a dolphin berth (41%); and (f) training of OPNT staff in accounting and financial manage- ment, provision of accounting consultants and provision of engineering consultants to assist OPNT in the execution of the project (10%). 2.13 In addition to the standard loan covenants, special covenants were included requiring from the OPNT and Government: (a) employment of a qualified financial manager; (b) employment of independent auditors; (c) retention of accounting consultants until (a) and (b) above had been fulfilled; (d) revision of tariffs and their relation to the cost of ser- vices provided so that a 6% financial rate of return on net fixed assets could be obtained; (e) preparation of port traffic forecasts and a port development program; (f) availability of OPNT's cash funds deposited with the Treasury; and (g) the need to discuss with the Bank at the time of opening the port of Gabes whether this port should be included in OPNT. 2.14 It was further agreed that part of the cargo handling equipment would be leased to STAM, and the bulk grain facility leased to the Office des Cereales, on terms to be agreed by the OPNT with the Bank. Looking at the covenants, it is noteworthy that the majority were of an exclusively financial nature. The only condition relating to cargo handling concerns equipment and refers to the need for a satisfactory financial return from its leasing. III. PROJECT IMPLEMENTATION AND COSTS 3.01 The project was estimated to cost US$10.7 million and was expected to be completed by April 1973. In the end, its cost was US$15.4 million, - 6 - (a 43% overrun) and was effectively completed by December 1973, eight months later than the expected four-year construction period. 3.02 The cost overrun is mainly explained by quantity/price increases, which accounted for about 90% of the total. Out of the total overrun of US$4.7 million, US$3.6 million (or 76%) is accounted for by the higher than anticipated construction cost of the bulk grain installation. A detailed comparison of actual and expected costs is included in Annex 2, and the cost overrun by major project items is shown below. Proportion of Cost Overrun Project Component Actual Cost (Underrun) -----------------------------%---------------- Capital dredging 16 11 Dredger and Tug 8 10 Cargo handling equipment 6 30 Rehabilitation of quay cranes 4 106 Breakwater restoration 3 (35) Bulk grain facility (incl. berth) 54 80 Car ferry (late item) 1 n.a. Consultant services 8 23 3.03 The biggest item, the bulk grain facility, had a cost overrun of 80%. The only other large overruns were also on equipment items -- the purchase of new cargo handling equipment and the rehabilitation of quay cranes -- though neither was a major item in itself. The main project components are discussed separately below. Capital Dredging 3.04 This work was completed on schedule, and the 11% cost overrun is mainly explained by additional dredging over the amounts forecast at appraisal. In the port of La Goulette, the original plan was to dredge the entrance channel to 11.0 m and the interior of the port to 10.5 m. The natural depths were about 10.5 m and 9 m, respectively. It was agreed that, conditional on the signing of the proposed iron ore contract, the depth of the channel could be increased to 11.6 m. In the end, dredging was done to a maximum of 12.5 m in the entrance channels with an increase also inside the port. This increase resulted from what appears to be a unilateral decision by OPNT, taken with the intention of reducing the need for subsequent maintenance dredging over many years. Tender docu- mentsfor the increased depths were retroactively approved by the Bank, with the condition that the cost of the increased quantity could not exceed - 7 - the contingency for this item. This condition was met at the time of awarding contract. The additional dredging costs over the appraisal estimates are explained by three main reasons. The first was the deeper dredging mentioned above. The second was the survey from which the origi- nal quantities had been estimated: this had been made some years earlier and either because of the time interval or because of some misunderstanding about the chart data used, the seabed turned out to be 60 cm higher than expected. The third reason was the discovery of the remains of an old breakwater within the limits of the present harbor, and the additional work to be done for its removal. In the port of Bizerte,there also was a cost overrun because of the discovery of the unsuspected remains of an old breakwater which had to be removed. 3.05 In the port of Menzel Bourguiba, a number of unexploded shells had to be removed. Finally, in the port of Sfax, dredging turning out also to be more expensive than anticipated because of the need to restore the profile of the entrance channel after the floods of 1969. Dredger and Tug 3.06 Half of the 10% cost overrun on this item is explained by cur- rency adjustments 1/ and half by increases in international prices. The first trials of the dredger gave rise to certain technical problems; these were resolved and full operation commenced in December 1972. The dredger has subsequently been leased to Cogema, a state-owned organization designed to undertake maritime engineering works, in which OPNT has a 49% share. The tug has not been leased to Cogema with the dredger, but is presently being used on standby for all Tunisian ports. Cargo Handling Equipment 3.07 The 30% cost overrun on this equipment is mainly explained by price increases. Purchase should have included some ancillary equipment, especially pallets. A satisfactory overseas supplier for the pallets could not be found at a sensible price and the decision was taken to make them locally. This proved to be a very slow process; OPNT constructed some while STAM purchased others. Trailers to go with the tractors also were to have been purchased locally. The original supplier was unable to deliver, and eventually after some delay Sogema in Menzel Bourguiba constructed the trailers. Rehabilitation of Quay Cranes 3.08 This operation turned out to be much slower and more expensive than anticipated. Works were completed a year and a half behind schedule, and the cost overrun was about 106%. The main reason for this unsatis- factory performance was the substantial addition to work originally planned. 1/ Mainly the devaluation of the US dollar. - 8 - It appears that the original inspection on which the cost estimate was based was confined primarily to the mechanical parts of the crane, but when work began it was found that a major part of the electrical systems also had to be replaced. Breakwater Restoration 3.09 This work was completed on schedule and with a cost underrun of 35%, which is explained by the need for less repair work than was expected at appraisal. Bulk Grain Facility Cincluding Berth) 3.10 Although the loan became effective in February 1969, contracts for civil works and for supply of bulk grain handling equipment were not awarded until October 1971. This long interval was necessary for engi- neering surveys which had not been done at the time of loan signature. The appraisal report cost estimates were based on soil information from nearby installations, not from the site itself. The site for the bulk grain installations had been decided earlier considering only operational factors and without a knowledge of the soil conditions at the selected site. The surveys indicated that soil conditions were far worse than expected,and it is possible that-an earlier project assessment of soil conditions would have led to the selection of other sites. 3.11 The substantial cost overrun in this item is mainly explained by the underestimation of its cost at appraisal. The late inclusion of the item in the project meant that preparation of cost estimates was rushed, and no proper appraisal was possible. Contributing factors to the cost overrun were: the addition to the project of road and rail access, the devaluation of the US dollar, and the higher than anticipated prices for the handling equipment required. Consultancy Services 3.12 The 23% cost overrun on this item is explained by the additional design required for the bulk grain facility and the extension of the con- tract of the financial consultants until June 1972. IV. FINANCIAL PERFORMANCE OF OPNT 4.01 OPNT's financial performance has been satisfactory. The pro- jected rate of return on net fixed assets has been achieved, and the partici- pation of internal cash generation in the financing plan is better than expected. Achievements in relation to changes in the tariff structure and financial consultancy services have been less impressive. - 9 - 4.02 The actual financial rate of return on net fixed assets has been above forecasts since 1971, as shown in detail in Annex 3 and in summary below: 1970 1971 1972 1973 1974 Actual 4.6 7.1 10.0 9.8 10 Forecast 6.4 6.5 7.0 8.0 n.a. 4.03 As traffic growth (Annex 4) has been lower than expected, the main reason for the satisfactory financial performance has been a tariff increase in 1971 and a sharp increase in revenue from certain items, par- ticularly storage. Analysis of OPNT's sources of revenue indicates that most income is derived from goods traffic, and the largest item relates to the time goods spend in the port. A complete picture of the split of rev- enue of the port of Tunis-La Goulette (the main Tunisian port) is in An- nex 5, while the approximate split is as follows: (a) general port charges: - on ships (entry and berthing) -- 9% - on goods (per ton handled) -- 25% (b) specific port charges: - on ships (pilots, etc.) -- 13% - on goods (storage) -- 35% (c) plant hire -- 6% (d) leases and rents -- 9% (e) other -- 3% 4.04 OPNT's satisfactory financial performance can be explained largely by the sharp increase in revenue from goods storage, especially goods remaining over 30 days in the port, and equipment rental. In the case of Tunis-La Goulette, revenue from goods remaining over 30 days in the port has risen from 8.6% of the total in 1970 to 19.2% in 1973, and amounts to US$2,628,000 over the four-year period (Annex 5). This means that more goods are staying longer within the port area each year. The reasons for this development are not clear, and while the revenue is good for OPNT finances, the picture cannot be regarded as entirely satisfactory from a national viewpoint due to the implicit delay in processing of for- eign trade traffic. 4.05 Until very recently,studies on OPNT's tariff structure have been lacking. The Bank consistently raised the need for these studies during supervision missions. But its efforts were not successful until BCEOM was commissioned in 1973 for preparation of a Port Master Plan, including tariff studies. OPNT now is studying a draft of this report. 4.06 The participation of OPNT's own financing in the financial plan for the project was also larger than expected (Annex 6). At appraisal, - 10 - about 70% of the funds required for the project were expected to be pro- vided by net internal cash generation. But, because of the favorable evolu- tion of the net operating income, net internal cash generation actually ac- counted for 75% of required funds. 4.07 The financial consultants employed under the project gave valuable advice to OPN% but their relations with OPNT's management were never easy. OPNT's first Director-General and the chief accountant, appointed in 1970, clearly resented the consultants' previous position because they had been appointed in the days of the Regie des Ports. Therefore, personal relations fell to a low level. The present financial director, when appointed in 1972, took the view that the office had received good help from the consultants in theearly days, but was now capable of standing on its own feet. Consequently, he did not renew the consultants' contract after June 1972. 4.08 The work of the consultants can be divided into two phases. The main objective in the first phase of their involvement with OPNT was staff training in accounting and management techniques.According to OPNT, the staff benefited from this training but communication was very difficult be- cause of the consultants'imperfect mastery of the French language. 4.09 The second phase was the improvement of OPNT's administrative and accounting functions. According to OPNT, the achievements of the consultants in this area were only minor. The consultants designed a system aimed es- sentially at providing information to the Bank and taking into account only incidentally the legal and economic framework of the country. Even though there was a Tunisian Accounting Plan, they made no attempt to utilize it in the design of OPNT's accounting system. In addition, the system was defective in several ways: the documents for data extraction were not standardized, processing machines could be used only on a very limited scale, the statisti- cal data was very detailed at the management level and did not permit a synthesis, and the cost centers did not provide results for management. Therefore, the management accounting system designed by the consultants was not fully appropriate to OPNT's requirements and it was not implemented. 4.10 In general, the consultants provided good and necessary support in the early days of OPNT, particularly in bringing together the various accounting systems which previously covered port operations. Their con- tinued appointment under the present project was probably inevitable, given their knowledge of OPNT's systems. But the Bank seems to have given insuf- ficient emphasis to the consideration of alternatives, as requested by the then Director-General of OPNT at the time of loan negotiations. For a con- siderable period, the consultants provided OPNT's only effective accounting and auditing service. However, this task seems to have continued longer than it should have, and this situation may have contributed to the gradual deterioration of relations between the consultants and OPNT. OPNT now has a Tunisian independent outside auditor, approved by the Bank, whose perform- ance is reported to have been very satisfactory. - 11 - V. OPERATING PERFORMANCE OF THE PORTS IN HANDLING GENERAL CARGO 5.01 This chapter studies the changes in cargo handling efficiency during the period of this project. Improvements in efficiency can lead not only to better use of existing port infrastructure, but also to faster ship turnaround time. The appraisal of this project concentrated on pur- chase of new equipment as a means to improve efficiency. However, the ef- ficiency of cargo handling operations does not seem to have improved sig- nificantly during the project period. It seems that a more detailed study of cargo handling organization and methods could have helped to achieve important improvements in efficiency. 5.02 Changes in the efficiency in Trgo handling must be approached by an examination of output statistics,- of which the two most important are: (a) tons handled per ship per day, which determines the turn- around time of vessels; and (b) tons per gang hour, which measures the efficiency of the operation itself. 5.03 Since the equipment purchased under the Second Port Project came into service toward the end of 1971, the effect of its introduction should have been observable from say the beginning of 1972. This effect should have continued as further equipment purchases were made (though outside the project). Unavailability of information has limited this analysis to the general cargo traffic at La Goulette, and the analysis has been con- fined to a series of "snapshots" of typical months. Data from two sources were available: OPNT and stevedore statistics supplied by STAM. Certain minor though significant differences in definition prevent direct comparison between figures from the two sources. Tons Handled per Ship per Day 5.04 For selected months in 1971, 1972, 1973, and 1975, average tons handled per ship per day was calculated; this has to be analyzed together with the average tonnage handled per ship visit since in general bigger tonnages per ship had been found to permit higher tonnages per day.W The results were as follows, with average cargo per ship shown in parentheses: 1/ However, it is important to note that conclusions about the efficiency of cargo handling methods cannot be firmly based unless the cargo compo- sition can be proved to be unchanged over the period of analysis. This point should be borne in mind when reading the following paragraphs. 2/ National Academy of Sciences, San Francisco Port Study. - 12 - Source Nov. 1971 March 1972 Oct. 1973 Jan. 1975 Feb. 1975 Mar. 1975 OPNT 220 (402) - - 250 (522) - STAM - 302 (400) 288 (451) 349 (620) - 370 (550) 5.05 Thus OPNT figures indicate that for ships of equal cargo tonnage, there has been little change between 1971 and 1975. STAM's figures show some improvement between 1972 and 1975, though this can probably be at- tributed largely to an increase in cargo tonnage per ship, since the han- dling rate has increased 22% while the cargo tonnage per ship has increased 37%. Thus the general conclusion is that the tonnage handled per ship per day has not increased significantly over the past five years. Tons per Gang Hour 5.06 Gang productivity figures (tons per gang hour) were analyzed for selected months in 1973 and 1975, using data from STAM. Unfortunately, it was not possible to extend the analysis back to 1971, before the purchase of cargo handling equipment under the loan. Calculation of the average is not very useful because the figures for each vessel refer to widely differ- ent tonnages and types of cargo. However, comparison of the patterns gives a reasonable indication about trends toward increasing (or decreasing) gang productivity. The results of this analysis follow: Average Tons per No. of Vessels Gang Hour, by Vessel March 1973 Oct. 1973 Jan. 1975 March 1975 5 - 5.9 - 2 - - 6 - 7.9 3 10 5 7 8 - 9.9 5 14 19 13 10 - 11.9 20 12 10 15 12 - 13.9 12 6 5 7 14 - 15.9 9 1 4 4 16 - 17.9 2 1 3 3 18 - 19.9 - 2 1 2 Over 20 21 23 26 26 5.07 No discernible difference appears between 1973 and 1975. The gen- eral pattern, excluding the over 20 tons per gang hour category, which is strongly influenced by the way cargo is packed (e.g., in containers), does not appear to have improved. 5.08 This lack of major increase in the efficiency of cargo handling can be closely associated to the working methods in use. From direct observation at La Goulette, Tunis Old Port and Sfax, it is apparent that - 13 - working methods in general are not very highly mechanized. They were seen to involve manual labor as well as extensive double handling, and to result in low handling rates. Sfax was the best of the three, where methods ap- proximating mechanization were observed, although in the context of sub- stantial overmanning. Most noteworthy at La Goulette was the almost total absence of pallets, as well as the consequential bad effects on handling methods. This resulted in very confused shed organization and reduced ef- fective shed space, leading to storage of bagged cargo outside the shed. 5.09 The quay cranes are well used chiefly for general cargo, but also for heavy items such as rails, which once unloaded are placed on the back of the quay within reach of the crane until required for delivery, again using the quay crane. This practice, with heavy items, while minimizing handling, results in quay congestion and reduced efficiency for other opera- tions. It is surmised that lack of heavy duty trailers and an insufficient number of heavy lift mobile cranes may have prevented alternative methods. 5.10 A contributing factor for this situation of relatively low opera- tional efficiency is the split responsibilities arising from the present organization of cargo handling, and the divergent objectives of OPNT, which wants to see good use of the infrastructure they have provided, and of STAM, which wishes to keep the cost per ton of the cargo handling operation as low as possible. This difference has largely frustrated OPNT in encouraging the use of more modern handling methods. The situation is not helped by the unprofitability of STAM's present operations at Tunis and at La Goulette, which is clearly found discouraging and indeed appears to have led STAM to search for alternative sources of income. Also, the present arrangements for dock workers, who are recruited by OPNT and hired out to stevedores on a daily basis (with discipline being the responsibility of a third body, whose chairman is the OPNT president), are not unusual but do not encourage a sense of employer loyalty in the work force. 5.11 OPNT has a prime interest in efficient port operation because its finances depend on use of the infrastructure .1 One solution would be to extend its powers, possibly even to intervention in the cargo handling operation. Another solution would be to introduce competitors to STAM, though the linear layout of the port would not facilitate any distinct separation of firms. Moreover, some institutional mechanism would still be required, probably from OPNT, to ensure that a competitive situation was indeed implemented. 5.12 These factors were discussed no doubt at the appraisal stage, but it is a pity that the purchase of new equipment was not made the opportunity for introduction of new working methods. 1/ OPNT has recently carried out, with the assistance of a specialized firm, a general study of cargo handling methods. This study has been made available to the stevedores to enable them to plan a program of modernization. - 14 - VI. ECONOMIC JUSTIFICATION 6.01 The objective of this project was to ensure more efficient opera- tion of OPNT ports and of sea transport generally (ships). Quantifiable benefits at appraisal took the form of lower shipping costs resulting from the use of larger vessels, faster ship turnaround and improved port operating efficiency deriving from new facilities and equipment. The appraisal esti- mated rates of return for the different project components. Audit rates of return, using actual costs, quantifiable actual economic benefits until 1975, and projected benefits over the remaining useful life of the project, follow: Proportion of Actual Rate of Return Project Component Project Cost Appraisal Audit /a ---------------------- %--------------------0/. . . . . Capital dredgin a 16 11-25 17 Dredger and tug_ 8 10 6-12 Cargo handling equipment 6 17-20 /c Rehabilitation of quay cranes 4 17 /c Breakwater restoration 3 12 45 Bulk grain facility 54 15 14 Car ferry 1 /d 60 /a At appraisal, rates of return were estimated on dredging in each port varying between 11% at La Goulette and 25% at Sfax. At audit, only an overall rate of return has been estimated for this item. /b The range in the audit rate of return results from consideration of the cost of the tug. If this cost is included, the rate of return is 6% but if it is excluded, the rate of return increases to 12%. At appraisal, the full cost of the tug was included. Ic Lack of data did not permit estimation of an audit rate of return for these items. /d This item was included after loan signature and therefore no appraisal rate of return is available. 6.02 The reasons explaining the differences between the appraisal and the audit rate of return are discussed for each project component in the following sections. Capital Dredginr 6.03 Because of the methodological difficulties of apportioning dredging costs between the various ports (for instance, assuming that the La Goulette - 15 - dredging would have been done anyway, costs at other ports could be argued to be only marginal), the audit rate of return for capital dredging has been calculated only for all the ports together. The extent to which the expected benefits at appraisal materialize is discussed for each port. 6.04 La Goulette Capital dredging was expected to permit large ships carrying grain, iron ore, and phosphates to call. It also was expected to make large cruise vessels, which could not call before, willing to call. Annexes 7, 8, and 9 indicate the numbers and draughts in 1970 and 1974 of ships carrying iron ore and phosphates, and in 1973, 1974, and 1975 of grain carriers. The following conclusions about the materialization of ex- pected benefits can be drawn: (a) Dredging enabled the size of iron ore carriers to increase considerably. While before dredging (1970), 78% of arrivals drew 8 m-8.9 m and 22% drew over 9 m, after dredging (1974) 72% of arrivals drew over 10 m and 28% drew less than 10 m. This change would not have been possible with- out dredging. Two-thirds of the iron ore is exported to Italy and the re- mainder to Northern Europe, and the cost savings associated with the use of larger ships on those routes are estimated at US$0.13/ton and US$1.2/ton, respectively. (b) Dredging near the grain silo, coupled with construction of the bulk grain facility, enabled larger grain vessels to be used. Up to early 1974, when the silo was completed, the largest grain vessel had an 8.4 m draught. Since then, the maximum draught has gone up to 9.75 m, which would not have been possible at the general cargo berths. Currently one-third of all arrivals draw over 9 m, and this trend is likely to con- tinue. Quantification of this benefit is discussed below under the bulk grain installation. (c) Little or no change is apparent in the draught of phosphate carriers as a consequence of dredging. At most, three vessels out of 64 calling in 1974 could not have operated in 1970. Therefore, benefits in relation to this traffic have not been estimated. (d) In 1974, 12 out of 93 cruise vessels calling had draughts of 8 m or over. Some or all of these 12 vessels might have been reluctant to call before dredging. It has not been possible to estimate the benefits from this source; thus, to the extent that some of these 12 ships would not have called without dredging, benefits have been underestimated. 6.05 Sfax This port was dredged to widen the approach channel from 40 m to 60 m, thus permitting safe, fast ship access. The possibility of enabling some vessels to save the use of one tug was also identified. About the need of widening for safety reasons, there can be little doubt: 26m- 28mbeam in a channel only 40 m wide allows no margin for error and is par- ticularly dangerous for lightly laden bulk carriers in windy conditions, forcing them to wait outside for the wind to drop. No data are available, however, on this latter situation. - 16 - 6.06 The increase in speed permitted by widening can be evaluated in one of three ways: assessing the maximum speed sensible for safety, directly observing vessel speeds, or considering hydrodynamic constraints on large vessels moving in small cross-section waterways. The third ap- proach is necessarily a lower limit to the time saving, and has therefore been calculated here. Under conservative assumptions concerning the cross- section of the channel, speed is estimated to be improved from 4.36 knots to 6.04 knots. For a 6 km long channel, this means a time saving of 14 minutes. Safety considerations could well add 50% to this figure, and a sensible estimate might be 25 minutes saved for all vessels over 150 m length. The associated economic benefit is estimated to be US$52,000/year. No evidence could be found of any reduction in the number of tugs required. 6.07 Bizerte Dredging appears to have resulted in increased size of tankers bringing crude oil to the refinery, from 15,000 grt to 20,500 grt. Of the 1974 crude oil imports of 1,144,000 tons about 75% came from the eastern Mediterranean, about 20% from La Skhirra,1 and the balance from other sources. Considering only the more distant sources, freight savings are estimated to be US$0.86/ton. Applying this conservatively to only half of the present level of imports suggests an annual saving of US$497,000. 6.08 Menzel Bourguiba Of the 136,000 tons of coke imported in 1974, probably 40,000 tons came in vessels whose size would have precluded entry before dredging. These larger vessels came from Poland, and a freight savings of US$0.50/ton has been estimated. This figure may be expected to grow in the future with increasing ship size, although no allowance has been made for this in the calculation. 6.09 Another benefit to the dredging at Menzel Bourguiba is the clear- ing of the approach channel and berth of shells, explosives, etc. It is, of course, not possible to say what would have happened without this opera- tion -- at best, it would have severely inhibited the use of any vessel ap- proaching the limited depth. Dredger and TuB 6.10 Estimation of the audit rate of return on this investment raises two difficult issues. The first deals with the cost of the tug. A full- time attendant tug is not necessary for harbor dredging, and discussions with OPNT's staff indicate that the tug has not been used in this way. The tug can then be regarded as an addition to the regular harbor fleet. With- out it there would have been periods when the port was underprovided with 1/ La Skhirra is a port between Sfax and Gabes (see map), which handles liquid fuel exports. - 17 - tugs, resulting in delays to shipping. Therefore, by adding the full cost of the tug to the dredger the rate of return on the latter would be under- estimated. For this reason, two estimates of the audit rate of return on the dredger are being presented, with and without including the cost of the tug. In our opinion,.the best estimate of the audit rate of return on the dredger is close to the upper limit of this range. 6.11 The other issue is the prices that would have been charged in the alternative solution, dredging done by contract. The dredger has an annual output of 300,000 m3 and its operating cost is about US$1.6/m3. Unit prices for contract dredging of such an amount would be substantially higher than the operating cost of the dredger. Contractors are very reluctant to mobi- lize for such small quantities, and liable to apply deterrent mobilization charges. In addition, the dredging is geographically spread so several jobs cannot be grouped and the work is not suitable for a large trailer dredger. Estimates of contract dredging prices in Panama, based on October 1974 con- ditions, indicate that the 300,000 m3 bracket is US$2.2-US$3.3/m3 including mobilization costs. Mobilization costs to Tunisia should be less than those for Panama, which might reduce the range to say US$1.8-US$2.9/m3. It is very difficult to pick a number within that range as representative of dredging costs for Tunisia; however, it is unlikely that this cost would be less than US$2/m3. The following table shows the aud t rate of return for this case and for the mean of the bracket (US$2.35/m ): Audit Rate of Return Price/m3 Dredger and Tug Dredger Only (US$) - % ------ 2.00 6 12 2.35 14 25 6.12 Under conservative assumptions, the audit estimate is in the 6%- 12% range, and the best estimate is probably close to the upper limit of this range. Cargo Handling Equipment and Quay Crane Rehabilitation 6.13 New cargo handling equipment was expected to lead to faster ship turnaround time and more efficient port operation. Lack of detailed informa- tion to permit quantification of those benefits has prevented estimation of the audit rate of return for this item. The new equipment was mainly to replace old equipment and even though there has been no major increase in the efficiency of port operations (Section V), those operations were likely to have deteriorated without investments because of the bad condition of the old equipment. Therefore, the rate of return on the new equipment seems to be satisfactory. The profitability of the investment in quay cranes, however, is less certain. The cranes are making a useful contribu- tion to cargo handling. However, the rehabilitation of each crane cost US$87,250 and, at this level, a better alternative might have been to pro- vide alternative equipment, such as heavy duty mobile cranes with suitable trailers, for the heavier lifts for which they are principally used. - 18 - Breakwater Restoration 6.14 Without repair, the breakwater at Bizerte would have failed to offer protection to shipping which would consequently have been delayed in bad weather. Using the basic assumptions of the appraisal report, 4 large tankers of 25,000 grt each costing US$11,000/day would have been delayed by 2 days and 12 smaller tankers of 12,500 grt each costing US$9,000/ day each would have been delayed 3 days, making a total annual saving of US$412,000. Rehabilitation was estimated in the appraisal report to last 12 years before substantial maintenance was needed. Under this assumption, the audit rate of return is 45%. Bulk Grain Facility 6.15 This facility was constructed under OPNT supervision and leased to the Office des Cereales on completion in April 1974. The silo was built for annual traffic of 250,000 tons (200,000 tons of imports and 50,000 tons of exports). Actual traffic in 1974 was 226,000 tons, nearly all imports, and is expected to be about 250,000 tons in 1975. 6.16 Four sources of economic benefits were anticipated at appraisal: (a) lower transport costs consequent to the use of larger ships and faster unloading; (b) reduced grain losses, brought about by substitution of mechanized handling system for bagging on board ship be- fore discharge, open storage of bags on the quay, and re- weighing of bags before delivery; (c) reduced labor costs of discharge; and (d) freeing of a general cargo berth. 6.17 All of these expected benefits materialized. Ship size increased substantially as can be seen in Annex 9. Only 12% of ships arriving in 1973 (before the completion of the project) had draughts over 8 m, with a maximum of 8.4 m. After completion of the project (1974-75), this percent- age increased to 40% and the maximum ship draught was 9.75 m. 6.18 Before construction of the bulk grain facility, discharge rates varied between 700 and 850 tons/day, depending on ship size (larger ships permitting more gangs to be used). With construction of the facility, a mean daily discharge rate of 1,200 tons has been achieved. However, this includes two periods of silo congestion, when ships had to wait for dis- charge. Without these periods, a mean daily rate nearer 1,500 tons would have been achieved. - 19 - 6.19 Each of these two periods of congestion arose when two large ves- sels arrived within two weeks. The first time the vessels carried 27,114 tons and 24,321 tons; the second time they carried 27,536 tons and 20,963 tons. Since the maximum effective delivery rate from the silo now is not more than 1,000 tons/dayl/ and the capacity of the silo is 30,000 tons, congestion was clearly inevitable. The low delivery rate occurs because, except for some small percentage of bulk grain that goes by rail to the interior, no mill is equipped to take bulk grain. All grain is therefore bagged before delivery. This indicates that the problem of silo size con- cerns the rate at which the mills can receive the grain rather than the rate at which the grain can be delivered. 6.20 The effect of the increase in ship size and faster discharge rates is estimated to have caused a reduction in transport costs of about US$4.6/ton for grain from the US and Canada and US$3/ton for grain from nearer sources. Grain losses have been reduced following silo construction. The Office des Cere"ales estimated that the reduction is 1%-2% of all grain imports. Assuming a reduction of 1.5%, the associated savings in 1974 were about US$600,000. Also, the labor cost of discharge has been substantially reduced. The situation before and after the project is summarized below: Labor Requirements Operation Before Project After Project Discharge 200 men/day to 8 men/day to discharge 1,000 tonse discharge 1,200 tons Delivery 100 men/day to /b 48 men/day to deliver 500 tons- deliver 1,000 tons /a Bagging in the hold, discharge, and stack. /b Reweighing and delivering. Reduced labor costs are estimated at 77,000 man-days in 1974.- 1/ Bagging is done from two mechanized spouts each capable of delivering 800 x 48 kg sacks/hour, supplemented by three manually operated spouts, each supporting bagging at a rate of 50 x 48 kg sacks/hour, making a total of say 1,000 tons/day. 2/ This item has been allowed for in the estimation of the audit rate of return by including as a benefit the labor cost before completion of the project, estimated at US$520,000/year, and by including in the general operating cost of the bulk grain facility the new labor cost. - 20 - 6.21 The benefit of the freed general cargo berth is in reduced wait- ing time for general cargo ships. The number of occasions on which general cargo ships had to wait before silo (1973) and after silo (1974) was as follows:17 Port Before Silo After Silo (1973) (1974) La Goulette 40 22 Tunis Old Port 80 51 Total 120 73 The average wait was 27 hours (rounded to one day in the calculations). Thus the effect of freeing the berth in 1974 was a reduction of 47 days in ship waiting time, which in turn implies annual savings of about US$273,000.2/ 6.22 The comparison of the total benefits from the bulk grain facility with its costs produces an audit rate of return of 14%, which is close to the appraisal estimate of 15% despite the substantial cost overrun. The main reasons for this close relation are the substantial increases in wheat prices and shipping costs since appraisal. Car Ferry 6.23 The car ferry berth was constructed to provide a roll on/roll off facility, primarily for tourist vehicles. Two regular ferry lines now use the berth, carrying approximately 30,000 cars/year. Whether all or some of these vehicles would have entered the country in the absence of the berth is not known. However, it is perhaps significant that the number of accom. panied vehicles has remained steady since 1972, while the number of travel- lers by sea, other than passengers in cruise sips, has dropped each year. (Passengers on cruise ships have increased, with 70 vessels bringing 37,396 passengers to La Goulette in 1974.) It has been conservatively assumed that of the 30,000 drivers and vehicles using the berth, 3,000 would not 1/ These results have to be interpreted in the context of the berth allo- cation strategy which is that La Goulette is designed for big ships; specialized (bulk and other) vessels; vessels for export foodstuffs and mixed export/import vessels, while Tunis is mainly used by vessels carrying only imports. If no berth is available at Tunis, the vessel will normally go to La Goulette. 2/ Based on daily ship operating cost data estimated in Westinform Standard Vessel Types for Regular Liner Trades, January 1975. - 21 - have come to Tunisia in the absence of the facility, and that each of these drivers (and any passengers) spent US$100/car visit, or US$300,000/year. This gives an audit rate of return of 60%. VII. THE ROLE OF THE BANK 7.01 The Bank played an important role in the preparation of the Tunisia Second Port Project. Some items requested by OPNT were dropped and other items were added through the Bank's intervention, so the project finally approved was very different from the one contained in OPNT's orig- inal request. In retrospect, these changes appear to have been justified, but it seems that more emphasis on improved efficiency in port operations could have contributed to the success of the project. This greater emphasis could have resulted in more attention being given to improved cargo handling organization and methods. With regard to organization, this area is still under active consideration by the Government, and at the time of the loan the Bank could have applied leverage to play a useful role in helping the Government sort out this area. With regard to methods, a specific set of actions to effect improvements could have been identified at appraisal and followed up during supervision. As it turned out, supervision missions focussed too nch on financial aspects and not enough on port operations. More attention to port operations could have resulted in improved opera- tional efficiency. For example, in regard to provision of pallets, pur- chases should have been made together with the mobile cargo handling equip- ment but for various reasons were not. Construction by alternative means took an unreasonably long time and indeed the problem has not yet been fully resolved. The result is that some benefits from the purchase of cargo handling equipment have been lost. 7.02 Another interesting feature of project preparation was that in some cases the cost estimates proved to be inadequate and were later a major reason for the cost overrun on some project items. In the case of the cost estimates for dredging and quay crane rehabilitation, it is doubt- ful whether the Bank could have done better than rely on the figures pro- vided by OPNT and its consultants. As it turned out, the survey on which the cost estimates of these items were based was inadequate. But only in the case of the quay cranes might estimates nearer the actual have led to second thoughts about the work proposed. 7.03 In the case of the bulk grain facility, it seems that the Bank could have given more attention to the cost estimates; consideration of this item during project preparation was only on a purely institutional level, i.e., what to do about this unfulfilled covenant under the First Port Project. This meant that when the decision to include the bulk grain facility in the project was taken, insufficient attention had been given to it and, in particular, sufficient engineering and other studies had not been done. As it turned out, the substantial cost overrun on this item - 22 - was compensated by the favorable evolution of factors exogenous to the project: the price of wheat and ship operating costs. But in retrospect, detailed studies of different alternative sites for this installation might have helped avoid at least part of the cost overrun and therefore a higher return on this project component could have been obtained. 7.04 Another interesting issue about the bulk grain facility is that, in retrospect, a broader approach, considering this facility as well as the whole grain distribution system, would have been necessary. This ap- proach could have identified the two major bottlenecks in this system. First, the transport facilities from the port to the mills are not adequate, as trucks and rail cars are in short supply and operations are not ef- ficiently organized. Second, the mills do not have storage facilities and are not equipped to receive grain in bulk. These bottlenecks in the dis- tribution system have prevented the benefits of the bulk grain facility from fully materializing. In some cases ships have had to wait in the har- bor until enough empty space is available in the silo to be able to unload. This ship waiting time has resulted in important costs for Tunisia in the form of demurrage charges and might also have affected freight rates. 7.05 The role of the Bank in relation to the financial consultants is the most difficult aspect of this loan on which to form a view. The Bank can be credited with identifying the need for important financial changes, to be carried out by the consultants, which had a positive effect on OPNT. However, it does not seem that close relations were achieved be- tween the consultants and OPNT personnel. Insufficient weight was perhaps given to the quality of these links, although this must be a matter of judgment and is clearly something to which Bank staff gave a good deal of thought. The covenant to employ the consultants until the new financial manager had been appointed was not entirely satisfactory; indeed even with this covenant there seems in retrospect little reason why the con- sultants should have been employed on a full time basis toward the end of the contract period. 7.06 The Bank could have played a more active role on the prepara- tion of the port master plan. The loan covenant agreed with the Govern- ment specified that the port development program "will be produced (i.e., by the Government) in conjunction with OPNT ..." In fact it seems that the plan was produced at the initiative of OPNT. While this is credit- worthy, it has led to some duplication of efforts in development planning with the Ministry of Transport and Communications. The Bank could perhaps have had a valuable role in advising on the best Governmental/institutional framework for preparation of the master plan. - 23 - VIII. CONCLUSIONS 8.01 The Second Port Project has been a successful attempt to con- tinue with the infrastructural developments of Tunisia's ports. All major covenants and conditions have been met, albeit with delays, and the audit rate of return on the main components of the project is satis- factory. 8.02 What turned out to be the largest single item, construction of the bulk grain facility, was included very late. It had been the subject of an unfulfilled covenant under the First Port Project and earlier discussions had focussed on institutional aspects -- chiefly how to pro- ceed with the Second Project when a major covenant under the first was unfulfilled. This late inclusion meant that project preparation for this item was rushed, cost estimates were not based on proper surveys, and the site was chosen before the results of soil investigations were known. A higher contingency item should have been applied and in retrospect, it is possible that timelier consideration of this item could have led to better cost estimates, better siting and probably produced a higher audit rate of return. 8.03 The loan-has achieved the provision of modern port infrastruc- ture in Tunisia. The efforts of Bank staff have helped to create a finan- cially viable OPNT, able to play a major role in the development of Tunisian ports. However, the project overemphasized financial aspects, and more emphasis on actions to improve the overall efficiency of Tunisian ports by improved cargo handling organization and methods might have improved the success of the project. Some efforts were made by the Bank in this area, but as the missions did not have direct access to STAM, the pro- posals for improvement had to be made in an indirect way through the Government and OPNT. This indirect approach was not successful and there- fore another lesson from this case may be that if the Bank is going to finance cargo handling equipment, the cargo operating entity should be brought into the loan directly. Consulting services were provided only in the financial and engineering fields; some assistance in the organi- zation of operations might have been justified. The list of cargo handling equipment required was not based on a thorough analysis of working methods, and institutional checks were not established on the use of this equipment. Given some guarantee of proper use, a wider and larger list of equipment might have been justified. 8.04 OPNT's current financial position is good. This is partly because of the efforts of Bank staff in promoting several measures, and partly because of the large increase in revenue from goods stored in the port. The financial consulting services provided may not have been en- tirely appropriate to Tunisian needs at the time: technical, cultural and personal problems were present, and Bank staff could perhaps have played a more active role in ensuring, if necessary by suggesting the replacement of consultant personnel, that harmonious working conditions were achieved. ANNEX 1 Page 1 PROJECT PERFORMANCE AUDIT REPORT TUNISIA SECOND PORT PROJECT (LOAN 573-TUN) Detailed Project Description A. Capital Dredging La Goulqtte The entrance channel to La Goulette harbor was to be dredged to 11.6 m and a channel leading to the iron ore berth to 11.0 m so that the iron ore berth could be used by bulk carriers of 10.5 m draught and the proposed cereals berth by vessels of 9.5 m draught. The Government agreed that it would carry out necessary sheet piling of the front of the iron ore berth so that it could be deepened to 11 m, and eventually to 12 m; and has indicated the necessity for this dredging, to meet the requirements of its contract with ITALSIDER. Sfax The 4,500 m entrance channel at Sfax had a width of 50 m over 3,000 m of its length, increasing to 150 m at its seaward end. This was to be widened over the necessary length to 60 m, considered the minimum safe width for passage of single vessels. Bizerte The petroleum products berth at Bizerte, which serves the refinery, had an available depth of 9 m; the main entrance channel from the open sea had a depth of 12 m. Deepening to 12 m alongside the berth would provide accomodation for vessels of about 50,000 dwt, a size that was in regular use in the distribution of crude petroleum in 1968. Menzel Bourguiba Bulk supplies of iron ore and coke for the El Fouladh steel works were imported through Menzel Bourguiba; the depth alongside the bulk- cargo wharf was to be increased from 7 m to 10.5 m, to permit importation of coke by larger bulk carriers. ANNEX 1 Page 2 B. Provision of Dredger and Attendant Tug Maintenance dredging in OPNT's harbors was expected to amount to between 210,000 and 240,000 m3 per annum. The existing bucket dredger was beyond economic repair and could not do this work, although the ex- isting hopper barges could be used. A 200 m3/hour capacity suction dredger, with 1,000 m of delivery pipe, was therefore included in the project, to- gether with a 750 HP tug, to position the dredger for work in the harbors, to tow it between ports, and to move the hopper barges when necessary. This tug could also supplement the harbor tugs for ship movements when not in use for dredging operations. Entrance channels to the ports re- quired little annual maintenance dredging and this would be accumulated and done at.long intervals by contract. The new dredger would also have a surplus capacity for minor capital improvements or for use in maintain- ing Government fishing harbors. C. Cargo Handling Equipment The tractors, forklift trucks, and mobile cranes owned by OPNT and STAM were generally old and uneconomic to maintain and there was need for a 10-ton mobile crane at Tunis and La Goulette. Similar equipment was to be procured, appropriate to the needs of OPNT and STAM. The equip- ment required by STAM would be made available upon terms and conditions, acceptable to OPNT, STAM and the Bank, which have been agreed. The 1,100 m quay at La Goulette had three portal cranes in service, out of the seven available, due to poor condition of the elec- trical circuits and equipment. The cranes had been underutilized in the past, due to their unreliability and the small amount of general cargo traffic at La Goulette prior to its modernization. The newly completed port works were expected to increase the use of the quay cranes gradually to an average of about 1,500 hours per crane annually, resulting in more rapid turnaround of vessels. The cranes were in good overall condition, except for the electrical installations, and still had at least 15 years useful life. Accordingly, necessary improvements to the electrical in- stallation, together with ancillary work to bring the cranes into full service, were included in the project at an estimated cost of US$275,000. Spare parts at an additional cost of US$30,000 were also included. D. Bizerte Breakwater The oil berth serving the refinery at Bizerte is located in the outer harbor on one of the two breakwater arms. The entrance is pro- tected by an island breakwater about 610 m long, situated about 500 m from ANNEX 1 Page 3 the entrance in 17 m of water. The island breakwater had suffered serious storm damage and required substantial reconstruction to enable it to con- tinue to protect the harbor generally and the oil berth in particular. The work required special equipment and would include tests of the stability of the construction. E. Bulk Grain Berth and Storage Facility at La Goulette The bulk grain installation to be constructed on the south side of La Goulette harbor comprised concrete storage silos of 30,000 tons capacity with appropriate mechanical equipment for loading or discharging vessels and conveying grain to or from the silo at a rate of 250 tons/hour. The new berth which would serve the installation would consist of separate dolphins with the center one supporting the mechanical loader/discharger. It would be dredged to 10.0 m and would be designed for future dredging to 12.0 m. The storage facility would be leased by OPNT to the Office des Cereales on terms and conditions which have been agreed. F. Staff Training in Accounting and Financial Management and Accounting Consultants There was a need to strengthen the staff of the Accounts Depart- ment of OPNT. Estimated costs of the OPNT training program from April 1, 1968, and the provision of a fellowship abroad for a trainee financial man- ager were included in the present project, together with accounting con- sultant services to assist OPNT during the training period of the Accounts Department staff. PROJECT PERFORMANCE AUDIT REPORT TUNISIA SECOND PORT PROJECT (LOAN 573-rUN) Estimated and Actual Project Costs (US$ thousands) Appraisal Estimate Actual Cost (Including Actual as a Percentage Original Actual Project Component Contingencies) Cost of Estimated Cost Completion Date Completion Date Capital Dredging La Goulette ( ( ( July 1970 September 1970 Bizerte (2,275 2,531 (11 July 1970 October 1970 Menzel Bourguiba January 1970 January 1970 Sfax ( ( ( July 1970 September 1970 Dredger and Tug 1,090 1,206 110 February 1972 August/December 1972 Cargo Handling Equipment Forklift trucks ( ( ( July 1971 July 1971 Mobile cranes (663 863 130 October 1971 October 1971/January 1972 Tractors ( (8( August 1971 November 1971 Trailers ( ( ( April 1972 January 1973 Rehabilitation of Quay Cranes 338 698 206 July 1971 July 1971/July 1972/ December 1972 Rehabilitation of Bizerte Breakwater 810 530 65 October 1970 September 1970 Bulk Grain Facility (incl. berth) 4,530 8,155 180 April 1973 December 1973 Accounting Consultants 278 290 104 December 1971 June 1972 Engineering Consultants 742 970 131 Car Ferry- a 162 n.a. April 1972 April 1972 Total 10,730 15 405 143 a/ This item was not in the original project It was included in 1971 PROJECT PERFORMANCE AUDIT REPORT TUNISIA SECOND PORT PROJECT (LOAN 573-TUN) O?NT's Forecaqt gnd Actusl Income Saeqpt* .1909-74 (D'000) 1969 1970 1971 197. 1973 1974 Actual Forecast Actual Forecast Actual Forecast Actual Forecast Actual Forecast Actual ~W- - Operating Revenues 2,047 2,218.7 2,433 2,573.1 3,189 2,762.8 3,907 2,993.7 4,375 3,256.0 S,022 Other Revenues, including Rentals from STAM and Office des Cereales 42 19.6 14 63.8 23 100.6 20 180.6 17 291.4 100 2089 2,238.3 2,447 2,636.9 3,212 2,863.4 3,927 3,174.6 4 392 3,547.4 5,122 Operating Expenses 835 851.4 888 888.5 1,007 984.5 1,121 1,008.8 1,378 1,032.6 1,727 Depreciation and Amortization 493 459.3 681 513.4 686 537.9 624 584.6 656 645,0 0_ASO 1,328 1,310.7 1,569 1,401.9 12693 1,522.4 1 745 1,593.4 2 034 1 677.6 2,407 Net Operating Revenues 761 927.6 876 1,235.0 1,519 1,341.0 2,182 1,580.9 2,358 1,869.8 2,715 Add: Non-operating Receipts (Net) - (60.0) - (60.0) - (68.0) 2 (68.0) 14 (68.0) - Less: Interest Expense 286 354.0 81 423.0 131 505.0 443 545.0 429 539.0 499 Net Revenue Surplus 475 513.6 797 752.0 1 388 768.0 1 741 967.9 1 943 607.0 26216 Operating Ratio (%) 63.6 58.0 64.1 53.2 52.7 53.2 44.4 50.2 46.3 47.3 47 Financial Rate of Return on Net Fixed Assets (%) n.a. 4.8 4.6 6.4 7.1 6.5 10 7.0 9.8 8.0 10 Source: OPNT and appraisal report TO-648b. Z ANNEX 4 PROJECT PERFORMANCE AUDIT REPORT TUNISIA SECOND PORT PROJECT (LOAN 573-TUN) Forecast and Actual Total Traffic in OPNT Ports (thousand tons) Forecast Actual 1968 9,041 8,047 1969 9,569 8,024 1970 10,096 8,251 1971 10,662 8,514 1972 11,021 9,028 1973 11,388 9,220 1974 n.a. 10,215 Source: Appraisal Report To-648b and OPNT. ANNEX 5 PROJECT PERFORMANCE AUDIT REPORT TUNISIA SECOND PORT PROJECT CLOAN 573-TUN) OPNT's Operating_Revenue.Port Tunis-La Goulette 1970 1971 1972 1973 ------ in thousands D ------- 1. Ceneral Port Charges 1.1 On ships 95) 124) 150) 150.7) 7) 10)- 12) 14.1) 1.2 On goods 261 219 248 313.7 1.3 On passengers 53 141 157 132.8 Sub-Total 416 494 567 611.3 2. Specific Port Charges 2.1 On ships 2.1.1 Channel 19 25 27 27.4 2.1.2 Pilotage 45 68 80 82.9 2.1.3 Towage 42 104 130 139.6 2.1.4 Water 5 10 12 12.0 Sub-Total 111 207 249 261.9 2.2 On goods 2.2.1 First 30 days 372 294 430 458.2 2.2.2 Over 30 days 99 214 272 419.5 Sub-Total 471 508 702 877.7 3. Plant and Eq_uipment Hire 3.1 Floating plant 15 30 32 39.8 3.2 Rail mounted equipment 6 18 39 50.7 3.3 Mobile plant 40 72 109 129.1 Sub-Total 61 120 180 219.6 4. Leased Berths 4.1 Land 31 87 76 95.4 4.2 Fixtures 20 29 50 48.7 4.3 Specialized1berths 17 22 17 17.6 Sub-Total 68 138 143 161.7 5. Various 5.1 Access to quays 11 13 16 14.2 5.2 Use of railway 1 - 1 0.5 5.3 Other services 8 14 15 32.1 Sub-Total 20 27 32 46.8 6. Total 1,147 1 1,873 2,179.0 Source: OPNT PROJECT PERFORACY AVTD17 UEORT TUNISIA SECOND PORT PROJECT (OALN 573-TUM) OPNT's Estimatec and Actua' Cash Flow (D '000) 1967 1968 1969 1970 1971 1972 1973 Toral 1967-71 Actual Actual Forecast Actual Forecast Actual Forecast Actual Forecast Actual Forecast Actual Forecast Actual Funds Required Inveocenit Projects Costs Loan 8.-MN Local Currency 986.0 96.8 1,082.2 1,082.2 Second Port Proiect 573-TUS 105.0 1,100.1 504.4 2,331.3 1,332.8 1,855.6 1,875.0 241.0 2,262.4 1,327,8 5,633.0 7,407.4 Tugs on SupplierS Credit 383.3 383.3 383.3 Miscellaneous 175.0 200.0 200.0 200.0 200.0 204.0 200.0 211.0 200.0 261.0 200.0 304.0 1,375Q 1,555.0 1,544.3 401.8 1,300.1 704. 4 2,531.3 1.36.8 2,055.6 2,086.0 44Z.0 2,523.4 200.0 1631.8 8,473.5 10,487.9 Debt Service Interest 99.0 285.0 354.0 287.0 423.0 77.7 505.0 131.0 545.0 443.0 539.0 429.0 2,750.0 1,751.7 Rpyet246.0 304.0 311.0 541.5 339.0 723.3 326.0 482.9 303.0 567.0 282.0 536.6 2 091.0 3,401.3 Riayen 45.0 589.0 665.0 W628.5 740 801.-0 831.0 6139 848.0 1,010.0 821.0 965.6 *Ztl 5,153.0 Payments in Lieu of Taess 20.0 20.0 20.0 20.0 , 20.0 - 20.0 38.0 20.0 48.0 140.0 1,909.3 1,00. I91 1,53 =2939 . 2337.8 2.906.6 2,699.9 1,309.0 3,571.4 =.. 2.64-5.4 134. "S70. Sources of Funds \ot operting evenues 822.0 764.2 927.6 761.0 1,235.0 876.0 1,341.0 1,519.0 1,580.9 2,182.0 1,869.8 2,358.0 8,540.5 9,282.2 Depreciation 318.6 485.4 459.3 493.0 513.4 681.0 537.9 687.0 584.6 684.0 645.0 656.0 3.544.2 3.945.0 Accounts Receivable on Lang-Tet Credit 1-61.8) 102.8 102.8 _ 102.9 246.7 41,0 Total Internally Generated Funds 1,078.8 1,352 4 1,489.7 1,254.0 1,851.3 1,557.0 1,878.9 2,206.0 2,165.5 3,866.0 2,514.8 3,014,0 12,331.4 13,268.2 Stip#14rs Credit 306.636. 306 Second fort Project Loan 306.6 108.0 900.0 - 1,830.0 1,180.9 1.39.0 1,032 236.0 1,098.8 823.9 1,385.4 1,454.4 2,389.7 1,254.0 3, 681.3 21737.9 3,272.9 3,238.6 2415 4,964.8 2,514,8 3,3. 1719. Annual Surplus tPeitcitl (-523.9) 444.8 404.6 (278.9) 388.0 400.1 366.3 538.7 1,092 5 1,393.4 1,473.8 1.192.5 3,645.5 2,040.1 tSrb Source: OPNT modified by Bank Staff. ANNEX 7 PROJECT PERFORMANCE AUDIT REPORT TUNISIA SECOND PORT PROJECT (LOAN 573-TUN) Port of La Goulette: Draught of Iron Ore Vessels, 1970-74 Draught Number of Vessels (meters) 1970 1974 under 7 2 0 7 - 7.9 2 2 8 - 8.9 2 2 9 - 9.9 5 1 10 - 10.9 2 9 Average Cargo/vessel (tons) 16,486 27,140 ANNEX 8 PROJECT PERFORMANCE AUDIT REPORT TUNISIA SECOND PORT PROJECT (LOAN 573-TUN) Port of La Goulette: Draught of Phosphate Vessels Draughts Number of Vessels (meters) 1970 1974 under 5 3 7 5 - 5.9 10 16 6 - 6.9 21 21 7 - 7.9 23 17 8 and over 1 3 ANNEX 9 PROJECT PERFORMANCE AUDIT REPORT TUNISIA SECOND PORT PROJECT CLOAN 573-TUN) Draughts of Grain Vessels Before and After Construction of the Bulk Grain Installations Number of Vessels Draught After the First (meters) Before Six Months After Six Months under 6 6 5 2 6 - 6.9 4 5 2 7 - 7.9 11 4 5 8 - 8.9 3 4 3 9 - 9.9 0 3 6 Maximum draught 8.4 m 9.65 m 9.75 m % over 8 m 12.5 33 50 % over 9 m - 14 33 IBRC 10001 R SEPTEMBER1975 M E DIT ER RAN E A NV S E A T U NI SIA., TRANSPORTATION NETWORK - 3 T a b a r k D A b io d TGbu r bLoF L G F 7 U N / S / J - C A P B O N - .. .onou)0ba. 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Groupe de la Banque mondiale · Project Performance Assessment Report
Tunisia - Second Port Project
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Groupe de la Banque mondiale
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Project Performance Assessment Report
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Tunisie
Source
Banque mondiale