China - Xiamen Port Project

Document of The World Bank FOR OFFICIAL USE ONLY Report No. P-4919-CHA MEMORANDUM AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN IN AN AMOUNT EQUIVALENT TO US$36.0 MILLION TO THAE PEOPLE'S REPUBLIC OF CHINA FOR XIAMEN PORT PROJECT November 16, 1988 This doement has a restricted distribudon and may be used by raepients only in the performane of their ofllcial duties Its contents may not otherwise be disclosed without World Bank athorization.  CURRENCY EQUIVALENTS Currency Unit = Yuan (Y) Yuan = 100 Fen Calendar 1986 July 1988 $1.00 = Y 3.45 $1.00 = Y 3.70 Y1.00 = $0.29 Y1.00 = $0.27 FISCAL YEAR January 1 - December 31 WEIGHTS AND MEASURES 1 meter (m) = 3.28 feet (ft) 1 kilometer (km) = 0.62 miles 1 hectare (ha) = 2.47 acres 1 kilogram (kg) = 2.2 pounds (lb) 1 ton (t) = 1,000 kg = 2,205 pounds 1 kg = 2.2 pounds PRINCIPAL ABBREVIATIONS AND ACRONYMS USED GOC - Government of China XPB - Xiamen Port Bureau XMG - Xiamen Municipal Government  FOR OFFICIAL USE ONLY CHINA XIAM PORT PROJECT Loan and Project Summary Borrower: People's Republic of China Beneficiary: Xiamen Port Bureau (XPBl) Amount: $36.0 million equivalent Terms: 20 years, including 5 years of grace, at the standard variable interest rate Onlending Terms: 20 years, including 5 years of grace, at 5S p.a. interest. The foreign exchange risk and commitment fees would be borne by XPB. Financing Plan: Government $54.3 million IBRD $36.0 million- Total $90.3 million Economic Rate of Return: 311 Staff Appraisal Report: Report 7296-CHA f Map: IBRD 20285 Tho document hasarosuiteid distbution and may beusedby recipkntsonlyin the perfonnance1 of their officia dutie& Its contents maynot otherwisebedisckeed wihut World Bank authoriatiot..  MEMORANDUM AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL BANK FQR RECONSTRUCTION AND DEVELOPMENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN TO THE PEOPLE'S REPUBLIC OF CHINA FOR A XIAME PORT PROJECT 1. The following memorandum and recommendation on a proposed loan to China, for US$36.0 million equivalent, is submitted for approval. The loan would be for 20 years, including 5 years of grace, at the standard variable interest rate. 2. Background. The transport system in China has been severely taxed by the pace of recent economic development, and capacity constraints are evident in all modes. China needs to substantially expand its port and waterway facilities to relieve the growing hindrance to external trade and domestic transport caused by inadequate berth capacity and container handling capability. China's Seventh Five-Year Plan (1986-90) recognizes these needs. Substantial investments are envisioned: these include technological improvements such as container handling facilities and intermodal transport centers. To facilitate these improvements, major institutional changes are being carried out in the sector, including an extension of the policy of separating the functions of Government from those of operating enterprises, tariff reform and delegating greater authority to local managements. The Bank fully subscribes to the Government's objectives for developing the transport sector and is supporting its initiatives with both financial and technical assistance. Four port projects (Loans 2207-CUA, 2689-CHA, 2877-CHA/Cr 1845- CHA, and 2907-CHA/Cr 1875-CHA) are assisting in improvements at the ports of Tianjin, Shanghai, Huangpu and Dalian. 3. Rationale for Bank Involvement. Much of the Bank's previous involvement in the port sector has been motivated by an urgent need to expand China's port capacity so that it would not impede the continued expansion of the economy. The regions served by the project port are no exception and their future economic growth could be constrained by the limited throughput capacity of the port. This project will provide much needed additional port capacity. However,, as a result of the Bank's involvement in the project, far greater emphasis will be placed on improving the utilization of existing facilities and maintenance procedures so that future port investments can be kept to a minimum. Improvement plans were prepared and targets were set to be achieved within the proposed project. In addition, updating the master plans of the port will help to rationalize future investments. 4. Project objectives. The proposed project will focus on: (i) improving the operating efficiency and the level of maintenance at the port of Xiamen; (ii) expanding and modernizing physical facilities at Xiamen port; (iv) training of operational andmsnagerial personnel; and (v) improvement of the environmental impact of port operations and expansion.  5. prOiect j tsiription. The proposed project consists of the following: (a) updating the port's master plan; (b) execution of action plans to improve operations and maintenances (c) training of operational and managerial personnel; and (d) construction of one coal, one container and two multipurpose berths. The project will be implemented by XPB. 6. In addition, a companion project,(the Ningbo and Shanghai Ports Project) includes a port costing and management information system (PCMIS) study which will be carried out by the Ministry of Communications (MOC), the culmination-of the Bank's dialague with the Government of China on the need to introduce cost-based tariffs in the country's ports, in order, among other things, to encourage the use of more efficient cargohandling techniques and facilities, which will promote the growth of both domestic and international trade. The Government plans to introduce the resulting PCMIS initially in Xiamen, in Ningbo and Shanghai (which are the subject of a separate Bank loan), and in Dalian (which is currently assisted by the Bank through Loan 2907-A and Credit 1875-iCA). 7. The total cost of the project is estimated at $90.3 million, with a foreign exchange component of $57.0 million. The financing plan is shown in Schedule A and the procurement method and disbursements in Schedule B. B. Agreed Actions. The Government will onlend the proceeds of the Bank loan to XPB through the Xiamen Municipal Government (XKG). The on-lending' terms from GOC to XMG and from XMG to XPB will be the same: for 20 years including 5 years of grace at an interest rate of 5X p.a. These terms are satisfactory to the Bank. Assurances. were obtained from XPB to: (a) submit to the Bank its audited financial statements not later than 6 months after the end of each financial year; (b) carry out the updating of the port master plan on the basis of terms of reference agreed with the Bank; and (c) conduct its financial affairs so as to cover all its costs of operation from operating revenue and to meet from internally generated funds all its financial obliga- tions. Understandings were reached with XPB that it will: (a) carry out the training in accordance with the program agreed with the Bank; (b) carry out an environmental monitoring scNeme according to terms of reference agreed with the Bank; and (c) implement the agreed action plan to improve port operations, maintenance and the environment and reach the specified productivity targets. Approval of the loan agreement by China's State Council and execution of subsidiary loan agreements between the Government and XMG, and between XKG and XPB, are conditions of effectiveness of the proposed loan. 9. Justification and Risks. In 1987 the average waiting time for ships arriving at Xiamen port was obout 4 days. Projected increases in traffic would cause additional substantial congestion in the future. Economic benefits of the proposed project derive from: (i) ship time savings; (ii) cargo handling cost savings; (iii) cargo time savings. On this basis, the economic rate of return on the project at Xiamen is 31X. The only risks foreseen for the projects are of delays in construction attributable to domestic procedures for civil works international competitive bidding. While delays will not seriously affect the ERR, XPB will make adequate engineering preparation to minimize the possibility of any delay.  -3- 10. Recoumen4ation. I am satisfied that the proposed loan would comply with the Articles of Agreement of the Bank and reconuend that the Executive Directors approve the proposed loan. Barber S. Conable President Attachments Washington, D.C. November 16, 1988  Schedule A CHINA XIAMEN PORT PROJECT Estimated Cost and Financin8 Plan (US$ million) Local Foreign Total Estimated Costs /a Civil Works 23.9 29.6 53.5 Equipment 3.3 17.7 21.0 Technical assistance and training Xiamen 1.6 1.7 3.3 Base Cost 28.8 49.0 77.8 Physical contingencies 2.9 4.9 7.8 Price contingencies 1.6 3.1 4.7 Total Project Costs 33.3 57.0 90.3 Financins Plan XPB/Government 33.3 21.0 54.3 Bank - 36.0 36.0 Total 33.3 57.0 90.3 /a Exclusive of duties and taxes from which the project is exempt.  Schedule 8 CHINA XIAMEN PORT PROJECT Procurement Method and Disbursements (UM$ million) Project Element Procurement Method :otal Cost ICB LCB Other -----(US$ million) ) Civil works 29.00 30.70 - 59.70 (18.00) (0.00) - (18.00) Equipment 23.00 1.00 24.00 (15.50) (-) (1.00) (16.50) Technical assistance and - - 6.60 6.60 training - - (1.50) (1.50) Total 52.00 30.70 7.60 90.30 (33.50) (0.00).. (2.50) (36.00) Note: Figures in parenthesis are the respective amounts financed by the Bank. Disbursements Category Amount 2 (05$, million) Civil works 18.00 8SS of total expenditure Equipment 16.50 1002 of foreign expenditure, 1002 of local expenditure (eax-factory), and 752 of local expenditure Technical assistance and training 1.50 1002 of total expenditure Estimated Disbursement IBRD Fiscal Year 1990 1991 1992 1993 1994 (US$ million) Annual 12 12 7 3 2 Cumulative 12 24 31 34 36  Schedule C XIAEN PORT PROJECT Timetable of Key Project Processing Events Time taken to prepare O One Year Prepared by G Covernment and XPB First Bank mission : March 1987 Appraisal mission departure 2 March 15, 1988 Negotiations S September 26, 1988 Planned Date of Effectiveness 2 June 1989 List of relevant PCRs and PPAse : None  Schedule D Page 1 of 3 STATUS OP BANK GROUP OPERATIONS IN MHE PEOPL'S8 REPUPLIC OF CHTN A. SATEKENT OF BNK LOUNS AND IDA CREDITS (as of September 30, 1908) Loan/ Aount (US$ million) Credit Fiscal (less cancellations) Number Year Borrower Purpose Jank IDA Undisbureed /t One loan and two credits have been fully disbursed 202111167 81 PMC University Development 100.00 100.00 0.00 1261 82 PRC North China Plain Agriculture - 60.00 0.00 2207 83 PRC Three Ports 67.97 - 0.77 1297 83 PRC Agric. Education & Research - 75.40 3.45 2226/1313 83 PRC Industrial Credit Z (CIB I) 40.60 30.00 4.89 2231 83 FRC Petroleum I (Daqing) 162.40 - 20.43 2252 83 PRC ?etroleum II (Zhongyuan-Venliu) 100.80 28.68 2261/1347 83 PBC State Parms I (Heilongjiang) 25.30 45.00 1.24 1411 84 PRC Polytechnic/TV University - 85.00 27.02 1412 84 PRC Technical Cooperation 10.00 1.12 1417 84 PRC Rubber Development 100.00 22.53 2382 84 PlC Lubuge Hydroelectric 145.40 - 45.28 2394 84 PRC Railvay 220.00 - 34.82 1462 84 PRC Rural Credit I - 50.00 0.17 1472 84 PRC Rural Bealth & Medical Educ. - 85.00 21.80 2426 84 PRC Petroleum III (Karamay) 99.50 - 27.89 243411491 84 PRC Industrial Credit II (CID II) 105.00 70.00 21.22 2444/1500 84 PRC Agricultural Education II 45.30 23.50 16.02 1516 85 PRC Agricultural Research II - 25.00 10.66 1551 85 PMC University Development II - 145.00 63.78 2493 85 PRC Power It 117.00 - 38.07 2501 85 PRC Changcun (Luau) Coal Mining 120.50 - 107.09 1577 85 PRC Seeds - 40.00 15.00 1578 85 PRC -Rural Water Supply - 80.00 61.41 2539/1594 85 PRC Highway I 42.60 30.00 32.39 2540 83 PRC Railway II 235.00 - 197.21 2541 85 PIC Fertilizer Rehabilitation & 97.00 - 28.44 Energy Saving 1605 85 PRC Forestry Development - 47.30 34.92 257911606 85 PRC PiShiHeng-Chaohu Area Development 17.00 75.00 54.36 2580 85 PRC Weiyuan Gas Field Technical 25.00 - 14.93 Assistance 1642 86 PRC Rural Credit II - 90.00 26.41 265911663 86 PRC Industrial Credit III (CID III) 75.00 25.00 20.79 1664 86 PRC Technical Cooperation Credit II - 20.00 19.34 1671 86 PRM Provincial Universities - 120.00 71.23 267811680 86 PRC Third Railway 160.00 70.00 219.98 2689 86 PRC Tianjin Port 130.00 - 119.65 1689 86 PRC Freshwater Fisheries - 60.00 30.07-  Schedule D Page 2 of 3 Loan/ Amount (US$ million) Credit Fiscal (less cancellations) Number Year Borrower Purpose Bank IDA Undisbursed Jt 2706 86 PRC Beilungang Thermal Power 225.00 _ 184.32 2707 86 PRC Yantan Hydroelectric 52.00 - 30.52 2708 86 PRC Liaodong Bay Petroleum Appraisal 30.00 - 17.31 272311713 86 PRC Rural Health & Preventive Ned. 15.00 65.00 69.56 1733 87 PRC Red Soils - 40.00 20.92 2775 87 PRC Shuikou Hydroelectric 140.00 - 118.47 278311763 87 PRC Industrial Credit IV (CIS IV) 250.00 50.00 235.69 2784 87 PRC Shanghai Machine Tools 100.00 - 98.99 1764 87 PRC Xinjiang Agricultural Development - 70.00 68.29 2811/1792 87 PRC Beijing-Tianjin-Tanggu Expressway 25.00 125.00 131.48 281211793 87 PRC Gansu Provincial Development 20.00 150.50 158.82 1835 87 PRC Planning Support & Special Studies - 20.70 19.10 2794/1779 87 PRC Shanghai Sewerage 45.00 100.00 137.10 2838 87 PRC Fertilizer Rationalization 97.40 - 96.90 2852 87 PRC Wujing Thermal Power 190.00 - 190.00 1871 88 PRC Rural Credit III - 170.00 119.67 2877/1845 88 PRC Huangpu Port 63.0 25.00 88.55 290711875 88 PRC Dalian Port 71.0 25.00 94.49 1885 88 PRC Northern Irrigation - 103.00 93.81 2924/1887 88 PRC Coastal Lands Development 40.00 60.00 96.78 1908 88 PlC TeAchers Training _ 50.00 47.49 2943 la 88 PRC Pharmaceuticals 127.00 - 127.00 2951119171a 88 PRC Sichuan Highway 75.00 50.00 121.58 2952 ja 88 PRC Shaanxi Highway 50.00 - 50.00 1918 88 PRC Daxing An Ling Forestry - 56.90 53.04 2955 88 PRC Beilungang II 165.00 - 165.00 2958 /a 88 PRC Phosphate Development 62.7 - 62.7 2967/1Q32 88 PRC RSAL 200.00 100.00 109.06 2968 /a 88 PRC Railway IV 200.00 - 200.00 Total 4,374.47 2.822.30 of which has been repaid 83.82 - Sotal now held by Bank and IDA 4.290.65 2,822.30 Amount sold: Of which repaid - - Total Undisbursed 2.946.46 1.503.25 4.449.71 t_ . la Not yet signed. /b As credits are denominated in SDRs (since IDA Replenishment VI), undisbursed SDR credit balances are converted to dollars at the current exchange rate between the dollar and the SDR. In some cases, therefore, the undisbursed balance indicates a dollar amount greater than the original principal credit amount expressed in dollars. Note: The status of the projects listed in Part A is described in a separate report on all Bank/IDA financial projects in execution, which is updated twice yearly and circulated t the Executive Directors on April 30 and October 31.  Sch6dule D Page 3 of 3 S. STATEMENS OF IZC IUVESTIMETS (as of September 30. 1968) Invest- FiscaL Type of Loan Equity Total ment no. year Obligor business -_ (US$ mllion) -- 813 1985 Guangzhou and Peugeot Autoobile 15.00 2.00 17.00 974 1987 China Investment Co. Investment 3.00 0.04 3.04 1020 1987 Shenzen China Bicycle 5.00 - 5.00 Bicycles Co. Ltd. Manufacture Total Gross Commitments 23.00 2.04 25.04 Less cancellations, terminations repayment and sales _ _ Total Commitments now Held by InC 23.00 2.04 25.04 Total Disbursed 6.50 0.04 6.54 Total Undisbursed 16.50 2.00 1L 50 ..  18RD 202C \ 5 - ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~C H I N A XIAMEN PORT PROJECT rACAOQT oa so~I ,G!O EXISTING FIJITE l'OJEET C.1 RO~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ADS CSOlATHS IN TM A OEWADE - POVNCO ROUNDAIIS Cooo,,., ond ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~INTERNATIONAL BOUNDARIES 0 2fD 5lT ?fo lop T. Zh..gh.~ ~~~~~I.DITOC IC:t. Berth A HEPING X Z/< XIAMEN 9o j- :.FP pr/QS x /= __g;;;;? 0,AAWH ...... CrrY ISLAND ; / T:.,. > /'' ""- " Xf ~~ - S OTMhoo . /ds ''''~~~~~~~~~~~~~MI, Porpow ;i DONG01U P Zhoopkhou O__af.Io T XrVrsO ./ j'\, / - ~ ~ ///<"' / cont loJYMONGOLIA - Qusy ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~/ 'N ;=:.<- _ N" KO~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~,RLAEOTYr PHASE HIA PHASE I~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~UElS