China - Ningbo and Shanghai Ports Projects

D~ocumient Of The World Bank FOR OmFCL USE ONLY LA -3 oo6 - C c,. --/3006 - A - CEtPf . .3oo6 - I. -cHA. Repwt NoP-4920-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$76.4 MILLION TO THE PEOPLE'S REPUBLIC OF CHINA FOR NINGBO AND SHANGHAI PORTS PROJECT November 16, 1988 This document bas a restricted distdbuion and may be ued by reipient only in the performance of their official duties Its contents may not otberwise be disclosed without World Bank athorization.  CURRENCY EQUIVALENTS Currency Unit = Yuan (Y) Yuan = 100 Fen Calendar 1986 December 1987 $1.00 = Y 3.45 $1.00 = Y 3.70 Y 1.00 = $0.29 Y 1.00 = $0.27 FISCAL YEAR January 1 - December 31 WEIGHTS AND MEASURES i 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 i kg = 2.2 pounds PRINCIPAL ABBREVIATIONS AND ACRONYMS USED GOC - Government of China NPA - Ningbo Port Authority SHB - Shanghai Harbor Bureau  FOR OMCAL USE ONLY CHINA NINGBO AND SHANGHAI PORTS PROJECT Loan and Project Summary Borrower: People's Republic of China. Beneficiaries: Ningbo Port Authority (NPA) and Shanghai Harbor Bureau (SHB). Amount: $76.4 million equivalent (NPA: $30.0 million and SHB: $46.4 million). Terms: 20 years,-including 5 years of grace, at the standard variable interest rate. Onlending Terms: 20 years, including 5 years of grace, at 5 p.a. interest for NPA and 6.2X for SHB. The foreign exchange risk and the commitment fees would be borne by NPA and SHB. Financing Plan: Government/NPA/SHB $262.0 million IBRD , $ 76.4 million Japan and others jI $ 1.6 million Total $340.0 million Economic Rate. of Return: Ningbo Port Project 261; and Shanghai Port Project 181. Staff Appraisal Report: Report No. 7297-CHA Ningbo No. 7257-CHA Shanghai Mbps: IBRD No. 20932 IBRD No. 20284 IBRD No. 20746 IBRD No. 20747 1/ Inclusive of $0.7 million from Cr. 1664-CHA. This document has a ricted distribution and may be used by recipk*ti only in the performance of their official duties Its contents may not otherwise be disclosed without World Bank authorization.  MEMORANDUM AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT - TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN TO THE PEOPLE'S REPUBLIC OF CHINA FOR THE NINGBO AND SHANGHAI PORTS PROJECT 1. The following memorandum and recommendation on a proposed loan to China for US$76.4 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. Back3round. The transport system in China has been severely taxed by the pace of recent economic development, and capacity constraints are evi- dent in all modes. China needs to substantially expand its port and waterway facilities to relieve the growing constraints to external trade and domestic transport caused by inadequate berth capacity and container handling capabil- ity. China's Seventh Five-Year Plan (1986-90) recognizes these needs. Sub- stantial investments are envisioned, including technological improvements such as container handling facilities and intermodal transport centers. To facili- tate these improvements, significant 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 development of the transport sector and is supporting its initiatives with both financial and technical assistance. Four port projects (Loan 2207-CHA, Loan 2689-CHA, Loan 2877-CHA/Credit 1845-C8A and Loan 2907-CHA/Credit 1875-CiA) 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 ports are no exception and their future economic growth could be constrained by the limited throughput capacity of the ports. 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. Targets have been set, within the port operations improve- ment action plan, to be achieved within the project. The proposed project will also contribute to improved investment planning, both at the subsector level and in the individual ports. A regional water transport optimization study will address the issues of the relative economic role of the different ports in the mid-eastern region and how best to exploit the deep-water poten- tial of Ningbo port. Updating of the master plans in the individual ports will ensure the most effective use of their investment resources. The project will also increase the Bank's long-term involvement in the Port of Shanghai, one of the ten biggest in the world, and lay the foundation for Bank partici- pation in the much larger investments needed under the Eighth Five-Year Plan to meet the port requirements for this economically dynamic region of China. An international panel of experts has been set up to review the Shanghai Port  -2- Master Plan within the project. Finally, development of a port costing and management information system will provide a valuable tool to improve effi- ciency of operations and lay the basis for a review of port tariffs to serve both economic and financial objectives. 4. Project Objectives. The proposed project will focus on: (i) improv- ing the operating efficiency and the level of maintenance at the ports of Ningbo and Shanghai; (ii) initiating work on a comprehensive strategy for future port development in the important mid-eastern region of China, with particular attention to the deep-water potential at Ningbo and its role rela- tive to Shanghai as a regional transshipment center; (iii) expansion and modernization of physical facilities at these two ports; (iv) training of operational and managerial personnel; (v) improvement of the environmental impact of port operations and expansion; and (vi) assisting the Ministry of Communications (MOC) in establishing a port costing and management information system for all major ports in China. 5. Project Description. The proposed project consists of the follow- ing: (1) For Ningbo: (a) preparation of a regional port optimization study to define the role of Ningbo's deep-water facilities; (b) updating the port's master plan; (c) training of operational and managerial personnel; (d) con- struction of one container and two multipurpose berths; and (e) provision of cargo handling equipment. (2) For Shanghai: (a) review of the port's master plan by an international panel of experts; (b) carrying out of a number of measures to improve the efficiency and safety of operations and the environ- ment; (c) construction of general cargo, multipurpose and coal berths at Baoshan, Guangang and Zhujiamen terminals; (d) reconstruction of four berths and construction of an 80,000-ton grain silo at Minsheng terminal; and (e) provision of cargo handling equipment. 6. The project also includes a port costing and management information system (PCMIS) study to assist the Government in setting up a port costing and management information system. This last item is the culmination of the Bank's dialogue 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 cargo-handling techniques and facilities, which will promote the growth of both domestic and international trade. NPA and SHB will implement their respective portions of the project, and MOC will be responsible for the PCMIS study. The Government plans initially to introduce the resulting PCMIS in Ningbo, Shanghai and Xiamen (which is the subject of a separate Bank loan), and Dalian (which is currently assisted by the Bank through Loan 2907-CHA and Credit 1875-CHA) before extending it to other ports in China. 7. The total cost of the project is estimated at $340.0 million, with a foreign exchange component of $225.6 million. To expedite project implementation, SUB has made arrangements for purchasing about US$4.2 million worth of equipment and steel structure. Retroactive financing of these items (from October 1, 1987) is included in the loan. The financing plan is shown in Schedule A and the procurement method and disbursements in Schedule B.  -3- 8. Agreed Actions. The Government has agreed to onlend the proceeds of the Bank loan to NPA and SHB on terms and conditions satisfactory to the Bank. In addition to implementing the project as described above, including the study components, each port has agreed to: (a) submit to the Bank its audited financial statements not later than 6 months after the end of each financial year; and (b) 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 obligations. NPA has also agreed to update its Master Plan by June 30, 1990; and SHB will have its Master Plan reviewed by a panel of experts in accordance with terms of reference agreed with the Bank. Both NPA and SHB have agreed to implement action plans to improve their operational performance. Specific measures appropriate to each port have been agreed. WPA and SHB have also undertaken to implement actions to protect and improve the environment and operational safety, both in their present areas of operation and in areas financed under the project. These measures will mark significant improvements in water, air and noise pollution over the present situation in both ports. Approval of the loan agreement by Caina's State Council and execution of subsidiary loan agreements between the Government and NPA and SHB are conditions of effectiveness of the proposed loan. 9. Justification and Risks. In 1986 the average waiting time for ships arriving at Ningbo and Shanghai port was within the limits of normal delays. However, projected increases in traffic would cause substantial congestion in the future. Economic benefits of the proposed project derive from: (i) ship time savings, both waiting for berth and at berth (from the installation of new equipment and introduction of modern technology); (ii) cargo handling cost savings; and (iii) cargo time savings. On this basis, the economic rate of return of the project is 26X at Ningbo and 18X at Shanghai. The main risk foreseen for the project is delay in construction, but, in view of the engineering and other preparations already made, this is not considered likely. 10. Recommendation. I am satisfied that the proposed loan would comply with the Articles of Agreement of the Bank and recommend that the Executive Directors approve the proposed loan. Barber B. Conable President Attachments Washington, D.C. November 16, 1988  Schedule A CHINA NINCNB AND SHANGHAI PORTS PROJECT Estimated Cost and Financing Plan (US$ million) Local Foreign Total Estimated Cost /a Civil Works: Ningbo 15.7 23.4 39.1 Shanghai 81.5 125.7 207.2 Equipment: Ningbo 1.4 20.2 21.6 Shanghai 7.1 38.6 45.7 Technical assistance and training: Ningbo 3.5 2.1 5.6 Shanghai 0.6 2.7 3.3 Base Cost 109.8 212.7 322.5 Physical contingencies 2.7 5.8 8.5 Price contingencies 1.9 7.1 9.0 Total Project Costs 114.4 225.6 340.0 Financing Plan NPA 23.5 22.2 45.7 SHR 90.9 125.4 216.3 Bank - 76.4 76.4 Japan and others /b - 1.6 1.6 Total 114.4 225.6 340.0 /a Exclusive of duties and taxes from which the project is exempt. 7T Inclusive of $0.7 million from Cr.. 1664-CHA.  Schedule B CHINA NINGBO AND SHANGRAI PORTS PROJECT Procurement Method and Disbursements (U$ million) Project Element Procurement Method Total Cost ICB LCB Other ----(-(U8$ million)- Civil works 26.00 232.61 - 258.61 (15.00) (0.00) - (15.00) Equipment 64.34 3.01 4.78 72.13 (51.41) (3.01) (4.78) (59.20) Technical assistance and - - 9.31 9.31 training - - (2.20) (2.20) Total 90.34 235.62 14.09 340.05 - (66.41) (3.01) (6.98) (76.40) Note: Figures in parenthesis are the amounts to be financed by the Bank. Disbursements Categor Amount X (USC milon) Civil works (Shanghai) 2.0 S02 of total expenditure Civil works (Ningbo) 13.0 851 of total expenditure Equipment 59.2 100I of foreign expenditure, 10OZ of local expenditure ev- factory, and 752 of local expenditure Technical assistance and training 2.2 1002 of total expenditure Estimated Disbursements IBRD Fiscal Year 1989 199-0 1991 1992 1993 - - -((US$ million)--- Annual 16.6 19.7 21.0 12.8 6.3 Cumulative 16.6 36.3 57.3 70.1 76.4  Schedule C CHINA NINGBO AND SrANGHAI PORTS PROJECT Timetable of Key Project Procesiing Events Time taken to prepare : One year Prepared by : Government SPA and SUB First Baok mission s March 1987 Appraisal mission departure : March 15, 1988 Negotiations s September 26, 1988 Planned Date of Effectiveness s March 1989 List of relevant PCRs and PPARs s None  Schedule D Page 1 of 3 STATUS OF BANK GROEP OPERATIONS IN THE PEOPLE'S REPUBLIC OF CHINA A. SSATEMEEN OF BANK LOANS AND IDA CREDITS (as of September 30. 1988) Loanl Amount (US$ million) Credit Fiscal (less cancellations) Number Year Borrower Purpose Bank IDA Undisbursed Jt One loan and two credits have been fully disbursed 2021/111C $1 PRC 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 222611313 83 PRC Industrial Credit I (CIS I) 40.60 30.00 4.89 2231 83 PRC Petroleum I-(Daqing) 162.40 - 20.43 2252 83 PRC Petroleum II (Zhongyuan-Venliu) 100.80 - 28.68 2261/1347 83 PRC State Farms 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 PRC Lubuge Hydroelectric 145.40 - 45.28 2394 84 PRC Railway 220.00 - 34.82 1462 84 PRC Rural Credit I - 50.00 0.17 1472 84 PRC Rural Health & Medical Educ. - 85.00 21.80 2426 84 PRC Petroleum III (Karamay) 99.S0 - 27.89 2434/1491 84 PRC Industrial Credit II (CIB I1) 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 8S PRC University Development II - 145.00 63.78 2493 85 PRC Power II 117.00 - 38.07 2501 85 PRC Changcun (Luan) 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 85 PRC Railway II 235.00 - 197.21 2541 85 PRC Fertilizer Rehabilitation & 97.00 - 28.44 Energy Saving 1605 85 PRC Forestry Development - 47.30 34.92 257911606 85 PRC PiShiHang-Chaohu Area Development 17.00 75.00 54.36 2580 8S PRC Weiyuan Gas Field Technical 25.00 - 14.93 Assistance 1642 86 PRC Rural Credit II - 90.00 26.41 2659/1663 86 PRC Industrial Credit III (CIB III) 75.00 25.00 20.79 1664 86 PRC Technical Cooperation Credit II - 20.00 19.34 1671 86 PRC 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 0 Page 2 of 3 Loan/ Amount (USS million) Credit Fiscal (less cancellations) Number Year Borrower Purpose Dank IDA Undisbursed It 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 Med. 15.00 65.00 69.56 1733 87 PRC Red Soils - 40.00 20.92 2775 87 P?C Shuikou Hydroelectric 140.00 - 116.47 2783/1763 87 PRC Industrial Credit IV (CIS IV) 250.00 50.00 235.69 2784 87 PRC Shsnghai Machine Tools 100.00 - 98.99 1764 87 PRC Xinjiang Agricultural Development - 70.00 68.29 2811/1792 87 PRC Beijing-Tianjln-Tanggu Expressway 25.00 125.00 131.48 2812/1793 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 Vujing Thermal Power 190.00 - 190.00 1871 88 PRC Rural Credit III 170.00 119.67 2877/1845 88 PRC Huanspu Port 63.0 25.00 88.55 2907/1875 68 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 PRC Teachers Training - 50.00 47.49 2943 La 88 PRC Pharmaceuticals 127.00 - 127.00 295111917La 88 PRC Sichuan Highway 75.00 50.00 121.58 2952 la 88 PRC Shaanxi Highway 50.00 - 50.00 1918 88 PRC Dazing 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 2967/1932 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 - Total 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 /a Not yet signed. lb 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 pro;ects in execution, which is updated twice yearly and circulated t the Executive Directors on April 30 and October 31.  chetdule D Page 3 of 3 B. STA?EU? OP INC MINWSTfWTs ,(as of September 30, 1988) Invest- Fiscal Type of Loan Equity Total ment no. year Obligor business -- (X8$ million) -. 813 1985 Guangzhou and Peugeot Automobile 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,.term4nations repayment and sales - - - Total Comitmntsnow HelG by INC 23.00 2.04 25.04 Total Disbursed 6.50 0.04 6.54 Total Undisbursed 16.50 2.00 18.50  io J / j< ,; 1 @; re r21' B ~ ,, tilIfRD TAt H ~ ~ ~ ~ 2 ale ' '--- /t ) ' X W X 31* EAST CHINA SEA W~NNB PORT PROJECT a . - <A 4~~~~HANGZHOU / g> >o vX CHINA > o< ,o ' NINGBO PORT PROJECT -. REGIONAL TRANSPORT CONNECTIONS /mm., Roads i 'erG W, R0alroads