Somalia - Port Modernization Project

Dowumnt of The World Bank FOR OFFICIAL USE ONLY C i. P-2-3 _5l9 Report No. P-4269-SO REPORT AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL DEVELOPMENT ASSOCIATION TO THE EXECUTIVE DIRECTORS ON A PROPOSED SDR 19.9 MILLION (US$22.6 MILLION) CREDIT TO THE SOMALI DEMOCRATIC REPUBLIC FOR A PORT MODERNIZATION PROJECT June 2, 1986 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.  CURRENCY AND EQUIVALENTS Currency Unit - Somali Shilling (So.Sh) US$1.00 = So.Sh 66.50 'Official rate, May 1, 19b6) US$1.00 = So.Sh 83.60 (Market rate September 1985, used for appraisal) Note: There are also two other recognized exchange rates: a commercial rate determined by the CSBS which is used for levying import duties, for tourists and other smaller transactions; and a free market rate determined by the average of foreign exchange transactions between external account holders in the CSBS. At May 1, 1986, these rates were about So.Sh 85 and 150, respectively, to US$1.00. WEIGHTS AND MEASURES 1 Meter (m) = 3.28 feet (ft) 1 Kilometer (km) 0.62 mile (mi) 1 Sq. kilometer (km2) = 0.386 square miles (sq mi) 1 Hectare (ha) = 2.47 acres (ac) 1 Metric ton (m ton) = 2,204 pounds (lbs) ABBREVIATIONS CSBS = Commercial and Savings Bank of Somalia DANIDA = Danish International Development Agency EDF = European Development Fund GRT = Gross Registered Tonnage GTZ = Duetsche Gesellschaft fur Technische Zusammenarbeit KfW Kreditanstalt fur Wiederaufbau MPW = Ministry of Public Works MPMT = Ministry of Ports and Marine Transport MLAT = Ministry of Land and Air Transport NTA = National Transport Agency MOA = Magistrate of Accounts PIP = Public Investment Program Ro-Ro = Roll on, Roll off SFA Special Facility for Sub-Saharan Africa SIDA = Swedish International Development Agency SIDAM = Somali Institute of Development Administration and Management SJF = Special Joint Financing SPA = Somali Ports Authority SSAL = Somali Shipping Agency and Line TEU = Twenty feet equivalent unit (of container) UAS = Uniform Accounting System USAID = United States Agency for International Development FISCAL YEAR January 1 - December 31  FOR OMCLu1 USE ONLY SOMALIA PORT MODERNIZATION PROJECT CREDIT AND PROJECT SUMMARY Borrower: Somali Democratic Republic Amount: SDR 19.9 million (US$22.6 million equivalent) Beneficiary: Somali Ports Authority (SPA) Terms: Standard. Relending Terms: The Government will relend the proceeds of the Credit to SPA with an annual interest rate of 12 percent per annum over a 15 year repayment period, including five years' grace. SPA will bear the foreign exchange risk. Project Description: The Project's main objective is to assist SPA to meet the changes in cargo handling brought about by new shipping technology and to maximize the utilization of existing facilities. To this end the Project would: (i) upgrade existing facilities to handle containers and roll-on, roll-off traffic; (ii) rectify the subsidence of the breakwater in Mogadishu; (iii) construct container freight stations; (iv) procure cargo handling and other equipment and pallets; (v) construct and equip workshops for the proper maintenance of equipment; (vi) construct a Port Training School; and (vii) provide technical assistance, training, and training equipment. Project Benefits and Risks: The maia benefits will be a reduction in ship waiting time and improved port performance. The improvement in productivity will allow SPA to defer heavy investments in additional berths until the year 2010. The main risks are that the modest growth in traffic as forecast or the increase in productivity targetted for the Project will not materialize. These risks have been taken into account in the sensitivity analysis. Thu 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.  - ii - Estimated Costs Local Foreign Total (USs Millions) Equipment 0.01 5.54 5.55 Civil Works 0.91 4.07 4.98 Rectification of Breakwater 0.27 2.67 2.94 Training and Technical Assistance 0.02 1.55 1.57 Consulting Services _ 1.44 1.44 Total Base Cost 1.21 15.27 16.48 Contingencies (a) Physical 0.14 1.80 1.94 (b) Price 0.50 5.48 5.98 Total Costs 1.85 22.55 24.40 Financing Plan IDA Credit - 22.6 22.6 Somali Ports Authority 1.8 - 1.8 Total 1.8 22.6 24.4 Estimated IDA Disbursements (US$ Million) IDA FY 1987 1988 1989 1990 1991 1992 1993 1994 Annual 0.74 2.96 4.23 4.48 3.83 2.88 2.19 1.24 Cumulative 0.74 3.70 7.93 12.41 16.24 19.12 21.37 22.55 Economic Rate of Return: 32 percent Maps: IBRD 19505 rBRD 19481 IBRD 19482 IBRD 19483  INTERNATIONAL DEVELOPMENT ASSOCIATION PORT AND RECO(kNDTION OF! THE P1usiDisNT TO THE EXECUTIVE DIRECTORS ON A PROPOSED DEVELOPMENT CREDIT TO THE SOMALI DEMOCRATIC REPUBLIC FOR A PORT MODERNIZATION PROJECT 1. I submit the following report and recommendation on a proposed development credit to the Somali Democratic Republic for SDR 19.9 million (US$22.6 million equivalent) on standard IDA terms to help finance a Port Moderanzation Project. PART 1 - THE ECONOMY 2. A report on the economy entitled: "SomAlia - Towards Economic Recovery and Growth- (Report No. 5584-SO) was distributed to the Executive Directors in August 1985. The Resource Base 3. Somalia is large and sparsely populated. It occupies most of the northeast "horn" of Africa, a location of some strategic significance. Its varied topography includes a hot and arid coastal plain, rugged mountains and plateaus, and lowlands of varying fertility and uncertain rainfall. Its population of about 5.3 million is unevenly distributed over a land area of nearly 638,000 sq km of semi-desert. There is as yet no census, but there is evidence of heavy migration to the capital, Mogadishu. Population growth in recent years has been about 3 percent (excluding refugee inflows) which win result in long-term pressure on the fragile resource base. Only about 13 percent of the land is suitable for cultivation, but with water the main constraint, only a small fraction (8.5 percent) of this potentially arable land is cultivated. The country has only two rivers of any consequence. The waters of the Shebelli reach the sea only in exceptional years, being used for irrigation, albeit inefficiently. The Government proposes to control the Juba through construction of a large multi-purpose dam at Bardhere, a project currently under study by the Bank. 4. The mainstay of the economy has long been nomadic pastoralism. About 50 percent of the population are nomads and semi-nomads who depend on livestock for their livelihood. Livestock production accounts for about 35 percent of GDP and provided, until recently, over 80 percent of export earnings. Virtually all livestock exports pass through the country's three main ports: Mogadishu, Berbera, and Kismayo. Crop production generates about 8 percent of GDP. 5. Apart from the traditional export of livestock, commercial agriculture is centered mainly on the production and export of bananas and the production of sugar, sorghum, and maize for the domestic market. Expansion of the manufacturing and service sectors is limited by the small size of the domestic market, poor infrastructure, and shortages of capital and entrepreneurial experience. The existence of several minerals has been confirmed, but their exploration is still at an early stage.  - 2 - 6. A number of foreign companies have been engaged in onshore and offshore exploration of hydrocarbons but so far no commercially viable oil prospects have emerged. Investigations for natural gas, under an IDA credit, have proved disappointing. In the absence of other known resources, Somalia's prospects depend upon agricultural and livestock development, whose progress will depend upon careful management of the scarce land and water resources, and improvements in animal health. 7. Somalia is among the poorest countries in the world and is classified by the United Nations as a least-developed country. Per capita income was estimated at $260 in 1984. Other indicators of the country's low level of social and economic development include: a crude death rate estimated at 20 per thousand population (compared to a crude birth rate of 50 per thousand); an average life expectancy of only 45 years; an infant mortality rate as high as 142 per thousand population; primary and secondary enrolment ratios of 30 percent and 11 percent, respectively; and a ratio of nearly 16,000 persons per physician. Past Development Strategy and Performance 8. Following its assumption of power in 1969, the Government adhered to a program of 'scientific socialism" whose stated objectives were egalitarianism and social justice, development through the public sector, nationalization of certain foreign enterprises, and the formation of cooperatives. Public ownership and management expanded both through nationalizations and through the creation of new public enterprises. The parastatal sector established in the 1970s included about 45 autonomous agencies which eliminated private enterprise in wholesale trade and banking and which dominated manufacturing. 9. In the early 1970s Somalia made considerable progress in meeting certain basic needs. A program of literacy and primary education had notable results, and an effective system of food distribution was also established. In other respects, however, the record in the social sectors has been less impressive, particularly in water supply, sanitation and health, where services have frequently been biased in favor of the urban population. Moreover, there are indications that there has been a trend towards increasing income differentiation within the rural sector. 10. During the 1970s the Somali economy experienced stagnation in production and a decline in per capita income. Only the services sector grew during the period, by 3.5 percent per year and the growth in government services, at an annual rate of about 7 percent, was particularly striking. Beginning in 1981, the economy witnessed a reversal of the past trend, with real GDP in 1981-82 growing on average by 6.4 percent per year notwithstanding some decline in the services sector. 11. Over 100,000 Somalis have migrated to work in the Gulf area, which has led to severe depletion of Somalia's already small stock of qualified and skilled manpower. The savings of these emigrants are  potentially an important resource for the economy, but despite major adjustments to the exchange rate, only a small proportion of emigrants' savings is remitted, largely through unofficial channels. 12. Following a border conflict with Ethiopia in 1977/78, there was a great surge in Government expenditures which resulted in widened deficits in both the budget and the balance of payments. During 1978-80, the Government's financial situation deteriorated rapidly, mainly because of the sizeable expansion in expenditures consequent upon the border conflict, the cost of maintaining large numbers of refugees, and the wage bill associated with the Governme t's policy of guaranteeing employment for secondary school leavers. At the same time, official foreign aid declined. This resulted in Government recourse to deficit financing. With further deterioration in the budgetary situation in 1979 the Government's recourse to the Central Bank rose to record levels (about 13 percent of GDP). This, in turn, led to rapid inflation, from 10 percent in 1978 to 60 percent in 1980. 13. Official data on Somalia's balance of payments are incomplete, but it seems that the country had a reasonably comfortable overall balance of payments position up to the beginning of 1979. The stagnation in exports and surge in imports since 1979 resulted in a widening of both the current and overall balance of payments deficits. The current account deficit during 1980-83 averaged $290 million, as compared to $110 million in the years 1977-78. Total international reserves, which rose steadily in the 1970s to $158 million in March 1979, dropped to $15 million at the end of December 1980, and have since dwindled to nearly zero. 14. The stagnation of export earnings and the near zero level of domestic savings have rendered Somalia entirely dependent upon external asaistance for the financing of development. After joining the Arab League in 1974, Somalia mounted a successful effort to attract funds from the Arab petroleum exporting countries. After 1977, the sources of foreign assistance shifted from the centrally planned economies (except for the People's Republic of China, which maintains a large program) towards Arab bilateral and multilateral institutions and OECD countries, several of which have had substantial assistance programs for a number of years. According to OECD data, Somalia's receipts of ODA during the period 1980-1982 averaged nearly $400 million per year, equivalent to some $75 per capita per year. 15. Somalia's external debt burden has grown rapidly in recent years and amounted to about $1.4 billion at end 1984. The structure and terms of borrowing have also hardened. The debt service ratio in terms of obligations rose from 7 percent in 1979 to nearly 50 percent in 1983 and is projected at about 100 percent in 1986. The country also has accumulated debt service arrears. The problem of arrears has not been fully resolved by the debt rescheduling at the Paris Club in March 1985. IMF and World Bank staff have encouraged the Government to seek further debt relief where possible on concessional terms.  -4- Policy Changes 16. As the financial crisis deepened through 1978-1980, the Government became convinced of the need to take remedial action and embarked on a course of moving towards a more market-oriented economy. Beginning in early 1981, the Government successfully implemented two successive stabilization programs supported by IMF standby arrangements. The measures taken under these programs included adjustment of the exchange rate, fiscal and monetary restraint, and significant liberalization of agricultural marketing. Under the first standby program, a dual exchange rate ws introduced, producer prices for agricultural crops were increased, and banana growers received the full benefit of devaluation. This program also involved a substantial reduction in Government recourse to the banking system and increased interest rates. 17. Following the completion of the 1981/82 program, a new stabilization program was adopted in mid-1982, supported by the IMF with an SDR 60 million 18-month standby arrangement for the period July 1982-December 1983. The dual exchange rate wes unified on July 1, 1982, the Somali shilling was again devalued, interest rates were raised, and fiscal and monetary expansion was restricted. In January 1983, a bonus scheme was introduced providing for a premium of 25 percent in foreign exchange terms of inward remittances and capital inflows by Somali nationals. In mid-1983, a more flexible exchange rate system was Introduced whereby the Somali shilling was pegged to the SDR adjusted by the relative rates of inflation between Somalia and the five countries in the SDR basket. 18. The Government derided in 1983 to abandon its policy of guaranteed employment to high school leavers. The Government is in the process of determining which public enterprises should be phased out of operation, which privatized, and which retained in the public sector. Another step to liberalize the economy was the de facto elimination of the Government monopoly on grain purchases. 19. The policy reforms introduced by the Government from 1981-83 had a positive impact on the economy. Reductions were effected in the rate of growth of the money supply, in Government recourse to the banking system, and in the rate of inflation. There was also some increase in commodity production and exports. These measures represented the first stage in the formulation and implementation of a policy agenda directed at restoring financial equilibrium, rehabilitating and making fuller use of existing agricultural and industrial productive capacity, and establishing the foundations for long-term growth. 20. In March 1983 the Government requested the Bank to organize a first Consultative Group meeting for Somalia. It prepared a Medium Term Recovery Program (MTRP) for the Consultative Group meeting, consisting of (i) a program of phased policy measures aimed at restoring the balance of payments and public finances and at rationalizing the pricing and incentive structure; and (ii) a resource-constrained Public Investment Program (PIP) for the period 1984-86. The formulation of this recovery program represented a major accomplishment.  21. The inaugural meeting of the Consultative Group for Somalia was held in October 1983. Participants were encouraged by the remedial policy measures taken by the Government. They welcomed in particular the substantial adjustments made by the Government in the size and composition of the investment program. These adjustments included postponing some new projects pending results of new studies, rephasing the implementation of ongoing projects and introducing new high-priority schemes such as the rehabilitation of irrigation in the Shebelli region. It was recognized at the meeting that further financial aid to Somalia should be on highly concessional terms and that Somalia should attempt to secure debt relief also on concessional terms. 22. Following the Consultative Group Meeting, intensive discussions between the Government and donors were held concerning follow-up action on the development of the Juba Valley, including the proposed Bardhere Dam, and agreement was reached with the Bank on terms of reference and timetable for a study of interim water solutions, financed under the first IDA Technical Assistance Credit. A USAID financed Civil Service Study has been reviewed by the Government and arrangements for follow-up are being made. 23. The progress in financial stabilization and economic recovery during 1981-83 suffered a major setback in 1984 due to the ban on Somali cattle imports in the traditional market, the drought of 1983 as well as the Government's failure to make further policy reforms. Exports plummeted, inflation reached a record high and debt service arrears increased further in 1984. Recent Economic Developments 24. Faced with mounting external and internal imbalances in 1984, the Government embarked in early 1985 on a comprehensive economic and financial program supported by a new IMF Stand-by Arrangement for SDR 22.1 million and compensating financing facility of SDR 32.6 million in a total amount equivalent to SDR 54.7 million. The program was a bold and ambitious undertaking aimed at stabilizing the economy and raising the rate of economic growth by fostering a more market-oriented economy. 25. During the first three quarters of 1985, the Government adhered closely to the agreed terms of the program by dismantling all price controls, adopting more liberal marketing policies, removing all restrictions with respect to foreign trade, undertaking a major devaluation of the official exchange rate, introducing a freely floating exchange rate for most private transactions, providing export incentives through increased acceptance of the free exchange market, and pursuing a tight monetary and fiscal policy. These measures combined with favorable weather conditions led to increased agricultural production, a reduced inflation rate, and the expansion of livestock and banana exports. 26. This performance, however was overshadowed by a substantial and growing deficit in the official foreign exchange budget which stemmed from some slippages in the implementation of program measures, delays in the  - 6 - release of some previously agreed external assistance to finance the balance of payments gap for 1985, and shortfalls in the level of foreign exchange receipts, particularly from workers' remittances which shrank because of the more difficult employment conditions in the Gulf States. The acute shortage of foreign exchange resulted in substantial shortfalls from the target level of imports and the emergence of new external payment arrears, including to the IMF. These arrears, in turn, led to the inability of Somalia to draw on all resources negotiated under the stand-by arrangement and to reduced drawings on loans from various international organizations and governments, thereby compounding the balance of payments financing problems and causing a halt to many development projects. The Consultative Group Meeting of November, 1985 27. At the second Consultative Group (CG) meeting, held in Paris on November 5 and 6, 1985, the Government presented to the donor community its "National Development Strategy and Programme" containing the three-year (1986-88) public investment program (PIP). Bank Staff reviewed the proposed PIP and, in view of limitations of implementation capacity, the urgency of need to confine investments to high priority projects and Somalia's balance of payments and overall growth prospects, recommended a core PIP of around $600 million over the three-year period (compared with the Government's proposed PIP of $685 million). This was also endorsed by donors who commended the Government for the adjustment measures it had taken and strongly supported the Government's development strategy that emphasized public investment focussed on rehabilitation of existing capacity, and economic policy reform to improve efficiency and promote the private sector. 28. It was further stressed at the CG meeting that the success of the Government to sustain and strengthen the implementation of the adjustment and reform program and therefore to enhance the prospect for attaining a viable balance of payments position in the medium-term, would continue to depend closely on the type, level, and timeliness of donor support. 29. In this regard, and in order to raise resources needed to finance the projected balance of payments gap for 1986, the Bank requested donor assistance in amount of $426 million to be disbursed in that year, divided between projects ($160 million), food support ($45 million), petroleum assistance ($20 million), other commodity aid ($50 million), cash aid ($30 million) and debt relief ($121 million). With the exception of shortfalls in aid pledged in the form of petroleum and cash, donors responded favorably in providing assistance in all other respects -- indeed, the targets for project and food assistance were exceeded. January 1986 Agreements with IMF 30. At the time of the CG meeting, the 1985 stand-by arrangement with the Fund was still suspended, but understandings were reached between the Fund staff and the Somali authorities on policy measures needed to be instituted by authorities to improve Somalia's precarious balance of  - 7 - payments situation. This was followed by a Fund mission (with Bank staff participation) to Somalia during January 5-12, 1986 to discuss with the authorities comprehensive adjustment measures that could permit completion of the review of the stand-by arrangements. The mission found that despite some slippages in the implementation of the agreed stand-by program that had occurred because of the acute shortage of foreign exchange, developments under the program had shown an important degree of success in various areas. The new price and marketing policies have had a positive impact on agricultural production. The increase in production is estimated to have resulted in at least four percent increase in real GDP, while the better supply conditions together with the more cautious fiscal and monetary policy pursued by the Government has led the rate of inflation to decline to about 30 percent, compared to 82 percent in 1984. The pricing policies have had a particularly favorable impact on exports, which are estimated to have increased by about 78 percent over the depressed 1984 level. Especially notable is the almost doubling of livestock exports, despite the continued ban of Somali cattle exports to the traditional market. On the fiscal policy side, although revenue collections have fallen considerably below the target established in the program for 1985, in part because imports fell 24 percent below the initial estimate, the Government has made every effort to restrain expenditure, so that the overall deficit for 1985 is presently estimated at 3.4 percent of GDP, compared to a target under the stand-by arrangement of 2.2 percent. Given the difficulties encountered, this outcome reflects considerable effort on the part of Government to meet the established objectives. The suspension of the Fund program was lifted on April 23, 1986, after the arrears to the Fund had been paid. 31. The Government of Somalia intends to strengthen the program further in order to improve the success of the adjustment effort. It has agreed inter alia (i) to implement the gradual exchange rate unification policy in order to ensure complete unification by the end of 1986, (ii) to unify the commercial rate with the free market rate and to levy import duties on the basis of this unified rate rather than the commercial rate presently used, providing increased restraint on imports and additional revenue for the budget, (iii) to raise the interest rates to bring deposit rates to the expected inflation rate for 1986, as an attempt to mobilize domestic resources, and (iv) to increase petroleum prices monthly in order to reach full import parity in April 1986 for gasoline and June 1986 for diesel, and, in line with the objective to liberalize the economy, authorize the private sector to import and distribute petroleum products. Gasoline prices achieved full import parity in April 1986, and in May diesel prices had achieved about 80 percent of full import parity.These and other new measures are being considered in the context of proposed IDA and and SFA/SJF credits for agricultural sector adjustment. 32. The current exchange system is already providing considerable incentives for exports, which are projected to increase by about 20 percent in 1986. Remittances from Somali workers abroad are also significant when consideration is given to the difficult labor conditions in the Gulf States. However, in the short-term, it is not feasible to foresee  - 8 - increases in export earnings of the magnitude necessary to close the projected balance of payments gap for 1986, and for the next few years. At the same time, the reduction in imports which has occurred since 1981 has meant that further significant reductions in import volumes are likely to have a very negative impact on economic activity and growth prospects. Consequently, for the next few years Somalia must rely on special donor assistance for achieving the objectives of its economic adjustment and reform program and a sustainable balance of payments situation. PART II - BANK GROUP OPERATIONS IN SOMALIA 33. Bank Group commitments to Somalia to date total US$251 million, consisting of 29 IDA credits and two IFC investments. Fourteen projects are under implementation. Over thirty percent of total IDA lending has been for agriculture, twenty five percent for transport and the rest about equally divided over education, water supply, ports, energy, industry and technical assistance. An agricultural inputs program and a livestock health service project were approved in FY85. An IDA credit, supplemented by the SFA and the SJF to total $70 million for agricultural sector adjustment is to be considered for approval in June 1986. The IFC investments in Scmalia are a US$375,000 loan for a molasses terminal for the Juba Sugar Project and Sw. Fr. 1,550,000 for a polypropylene bag project. 34. Physical progress in implementing development projects in Somalia has been mixed. Some projects have suffered from over-ambitious design, and co-financing arrangements have caused some difficulties. Progress of the North West Region Agricultural Development Project - Phase I has been good and the main production targets estimated at appraisal have been met or exceeded. Projects for roads, ports, water and education have been more successful than in the agricultural sector. Some IDA-financed projects have experienced delays in execution. Staffing and management problems have impeded effective preparation and implementation of projects. 35. Somalia's disbursements performance on projects assisted by the Bank Group has been satisfactory. The FY85 disbursement rate was 33.5 percent, as compared to 21.9 percent for Eastern and Southern Africa and 22.0 percent Bank/IDA-wide. IDA Strategy 36. We propose to continue to assist the Government to devise and implement policies and programs to improve the efficiency of both the public and private sectors, to improve the macroeconomic framework for domestic and external resource mobilization and allocation, Improve pricing administration and marketing systems, and to increase production and exports. We aim to support further use of existing capacity end to help lay the foundations for longer term growth. Issues in public enterprise reform are expected to become an increasingly important component of our policy dialogue, and we intend to support Government in its stated policy of disposing of unviable public enterprises, and its stimulating the private sector.  - 9 - 37. We are giving particular attention to aid coordination and management issues, and have undertaken an assessment of technical assistance to Somalia jointly with the UNDP. An energy assessment has been completed, as has a review of population, health and nutrition issues. A collaborative review with the Government and donors of major issues in the agricultural sector has been made with support from an SPPF. We are cooperating with the Government in the preparation and review of periodically updated public investment and expenditure programs, at both the global and, increasingly, at the sector level. The Advisory Committee for Juba Valley Development established by the Consultative Group at its October 1983 meeting provides an important forum for review and collaboration on issues affecting the development of Somalia's major water resource. The most recent meeting of its Technical Committee, in which the Bank played an active part, was in January 1986. 38. In IDA's lending work, it Is planned to emphasize productive investments and rehabilitation programs. An irrigation rehabilitation project is being prepared to help increase productivity and farmer incomes in the Shebelli Valley. Most projects have been cofinanced with a number of other donors, and this is expected to continue in the future. For example, an IDA commodity import program is being cofinanced by a grant from Federal Republic of Germany, and IDA administers additional commodity assistance on behalf of Italy. The economic and sector work program strives to support the macroeconomic reform process, and to provide analytical inputs for the work of the Consultative Group for Somalia. Relationship to Other Aid Flows 39. IDA disbursements represent about eight percent of total aid flows to Somalia. We expect that this relationship will continue at about the same level during the next several years. IDA obligations represent about 12 percent of Somalia's total outstanding and disbursed debt up to December 31, 1983. Debt service payments to IDA represent a very small proportion of Somalia's total debt service obligations. In 1984, payments to IDA were estimated at only about one percent of total debt service payments for that year. This trend is expected to continue in the future. Part III - The Transport System General 40. Somalia's transport infrastructure is limited, consisting of some 21,600 km of roads, three principal ports and four airports with paved runways. There are no railways, pipelines or internal waterways, and coastal shipping, once important, is now negligible. Roads are by far the most important means of modern transport.  - 10 - Transport Policy 41. The Government of Somalia recognizes the vital role that adequate transport facilities and services play In the development of the nation's economy. Its objectives in transport are to ensure a regular supply of fuel, spare parts and vehicles, to provide reliable transport services and to Improve road moaintenance to reduce transport costs and protect its assets. The role of the transport sector will be to maximize the provision of transport services within the Government's financial, and in particular foreign exchange constraints, by: (i) reducing costly reconstruction of the paved road network through improved maintenance; (ii) achieving more efficient use of road vehicles through improved maintenance and load factors (probably through greater private sector involvement); (iii) maintaining the foreign exchange earning capacity of the major ports; (iv) improving the efficiency of port operations; and (v) reducing transport costs in the distribution of goods through promoting and expanding coastal shipping. Organization 42. The four ministries concerned with the transport sector are: (i) the Ministry of Public Works (MPW) which, through its Civil Engineering Department, is responsible for highway maintenance and for planning and construction of highways, ports and airports: (ii) the Ministry of Land and Air Transport which is responsible for road transport regulations including vehicle registration and control, and for civil aviation through its Civil Aviation Department; (iii) the Ministry of Ports and Marine Transport which, through the Somali Ports Authority (SPA), is responsible for uarine transport; and (iv) the Ministry of Interior which is responsible for highway traffic control. Coordination is provided by the State Planning Commission. Highways 43. Of the total road network 3,000 km are paved, 600 km are gravelled and the rest are earth roads and tracks. The amount of gravel and paved roads has increased significantly since 1976 from 1,800 km to 3,600 km in 1985. The coverage of the network, despite its density being below the Eastern African average, is broadly adequate for the country's present needs, though access to many areas remains very difficult. The main problem, however, is the unsatisfactory standard and condition of the roads. Despite considerable road upgrading in recent years, 85 percent of the network is substandard, resulting in high vehicle operating costs. Road construction and maintenance is relatively costly, due to longer distances to carry water and crushed stone material for construction, and in the case of gravel roads, the surface deterioration is faster than normal in certain parts of the country, due to the harsh winds and extremely dry conditions. 44. All public roads in the country are suffering from lack of proper maintenance. This is due to inadequate organization, shortages of skilled and semi-skilled maintenance staff to carry out routine or periodic  - 11 - maintenance, and the lack of adequate road maintenance equipment combined with the fact that available resources are often diverted to other activities. Funding of road maintenance operations falls far below what is required and the capacity of the Civil Engineering Department (CED) is such that even the small amounts belng allocated to road maintenance are seldom fully utilized. Technical assistance and training programs for the Civil Engineering Department of the Ministry of Public Works (MPW) have been financed through the Bank's Third and Fourth Highway Projects. The impact of this assistance on improving the organization and execution of road maintenance has been less than could have been expected. Under the Fourth Highway Project, the Bank financed a road maintenance study whlch recommended certain changes that should enable government to improve the quality of road maintenance in general. The Bank also recently initiated donor meetings in the country to seek better coordination of external assistance in the road maintenance sector in Somalia. Road Transport Industry 45. Available data on fleet composition, age and condition indicate that there were about 15,600 privately owned vehicles along with about 3,000 Government owned civilian vehicles in 1980 when the first systematic data collection was made. Of the total vehicular fleet of 18,600, about 25 percent were medium to heavy trucks including buses, 40 percent pick-ups and vans and the balance (35 percent) passenger cars including taxis. With no rail service in the country, road vehicles carry most freight, with animal portage in remote areas, and movement of livestock to market on the hoof. 46. The road transport industry is dominated by the private sector which owns about 4,000 trucks (light and heavy) and handles over 75 percent of the demand for the internal movement of goods. The rest of the regular demand is met by the National Transport Agency (NTA) with its fleet of about 290 trucks. NTA has incurred losses since its inception in 1978 and is dependent on Government subsidies for fleet expansion and replacement. Since an alternative transport system does not exist, it is imperative that the growth of the road transport industry be fostered. However, the poor road conditions, shortages of spare parts and of fuel, and seasonality of demand for freight transport have rendeted the profitability of the industry low. Furthermore, due to the lack of foreign exchange, replacement of the trucking fleet has been slow. Most recently imported trucks have either been for food aid transport or for aid financed development projects. The average age of the vehicle fleet is estimated to be 8 to 10 years. Civil Aviation 47. The air transport system in Somalia serves ten scattered regional centers with Mogadishu as the focal point. Only the airports at Mogadishu, Berbera, Kismayo and Hargeisa have paved runways and a scheduled passenger service. Civil aviation has had an insignificant part of the Public Sector Investment Programs (PIP) planned through 1988, though there has been a  - 12 - recent bilateral proposal for improvements at Mogadishu airport. Somali Airlines, established in 1964, operates one Fokker F27 aircraft and two Cessnas on its domestic routes and two Boeing 707 aircraft on its international routes which connect Mogadishu with Rome, Frankfurt, Cairo, Nairobi, Djibouti, and various points on the Arabian Peninsula. Somali Airlines is an autonomous parastatal under the department of Civil Aviation of the Ministry of Land and Air Transport. Technical and management assistance is provided by Lufthansa. A few foreign airlines link Somalia with other African countries and Europe. Ports 48. Three major ports (with sheltered deep-water facilities) handle practically all of Somalia's ocean transport. They are: (i) Mogadishu which Imports much of the country's general cargo, and exports bananas; (ii) Berbera which exports mostly livestock; and (iii) Kismayo which exports bananas, livestock and seafood. Merca, a lighterage port which has exported bananas in past years, has been virtually inactive since 1978 as a result of the diversion of the banana traffic to Mogadishu. Most of Somalia's international trade is handled by foreign vessels, supplemented by vessels from the state-owned Somali Shipping Agency and Line which was established in 1974. Transport by coastal shipping within Somalia is limited despite the long coastline. Soon, however, a cement plant, now under construction in Berbera, will send about 75,000 tons of its annual output by ship to Mogadishu. Similarly, petroleum products from the refinery near Mogadishu wilU be transported by a small tanker to Berbera and Kismayo. Current development of commercial fishing is also expected to stimulate some growth of coastal shipping because fish are to be transported from a number of small ports to a few processing and distributing centers, particularly Mogadishu and Berbera. 49. The Somali Ports Authority (SPA) which is responsible for the administration, operation and maintenance of the country's ports was created in 1962. Planning for the expansion and development of the ports as well as the execution of the ports' infrastructural developments is the responsibility of the Ministry of Public Works while provision for the financing of these projects is incorporated in the Government's Ceutralised Capital Investment Budgets. Completed projects are handed over to SPA ownership for the conduct of port operations. SPA falls under the jurisdiction of the Ministry of Ports and Marine Transport. Although there are certain restrictions imposed by the Government (primarily pertaining to employment and transfers of staff, salaries and terms and conditions of service, financial management and the distribution of operating surpluses) SPA has sufficient powers to discharge its responsibilities except in the financial area including its ability to obtain foreign exchange. 50. SPA is facing a shortage of skilled and semi-skilled manpower because of the exodus in large numbers of educated Somalis to the neighbouring oil producing countries. Although the manpower drain has halted because of the drop in oil earnings in the neighbouring countries, it is unlikely that the public sector will be able to attract back into  - 13 - service those who lef t for higher salaries. This exodus hbs resulted in numerous positions in the organization being either unfilled or fliled with inexperienced personnel. Out of a total regular employment of 802, only 24 form the managerial and professional group. The result is that effective supervision is lacking and this is reflected in the day to day operations at the ports. Cargo is handled and stored haphazardly and there are frequent disputes over quantities, and condition of the cargo. SPA management is weak in such areas as planning, information systems and accounting and financial management. The project will inject new techniques and practices in controlling and directing SPA's activities, through training for all levels of SPA, as well as placement of operational experts in key functions. 51. In overcoming manpower and institutional constraints attention should not be focussed only at the ports. Operations of peripheral port organizations such as customs, shipping agents and forwarding agents and trade practices and documentation which inhibit the development of trade and the distribution of cargo out of the port will have to be improved, up-dated and made compatible with current international shipping, trading and transport practices and requirements. The shipping agency is a case in point. Shipping agency work is being carried out in the country solely by the Somali Shipping Agency and Line (SSAL). This monopolistic position breeds certain inefficiencies which could be overcome if shipping agency is open to competition. Various recommendations to improve the efficiency of shipping agency work are being studied by the Government through a high level committee. As a condition of credit effectiveness, the Government will submit to IDA for review and approval a plan of action including a timetable for implementation for opening up shipping agency work to private interests which may include, but not be limited to, joint ventures of foreign and local interests. 52. All cargo operations, except for the delivery and receipt of cargo at storage areas, are undertaken by SPA at all three ports using daily labour from labour co-operatives. Cargo handling is labour intensive. Labour productivity is low as a result of the lack of mechanical handling equipment and the shortage of skilled cargo handlers. The standard of maintenance or port facilities and equipment is poor and workshop facilities are inadequate. 53. Total import and export traffic through SPA ports fluctuated considerably during the period 1978 to 1984, but, with an upward average growth of 3.5 percent per annum. Total traffic was 1.1 million tons in 1984. Dry cargo throughput (i.e. excluding petroleum) increased at an average annual growth rate of 3.2 percent with imports growing at 7 percent per annum and exports declining at 8 percent per annum. The rapid import growth reflects the significant volume of food aid imports and the aid-assisted infrastructure development program. The precipitous decline of dry cargo exports, (which constitute only 20 percent of dry cargo traffic), was led by a major decline in the export of bananas (largely due to the impact of Government price controls and drought) and livestock (due to the impact of the drought and a ban on Somali livestock). As for  - 14 - petroleum products, the total throughput has fluctuated around 200,000 tons depending on the foreign exchange availability and commodity aid from oil exporting countries. Of the total throughput of SPA ports, on average, 72 percent of the port traffic passes through the port of Mogadishu with 22 percent and 6 percent passing through the ports of Berbera and Kismaya respectively. This composition reflects the relative importance of the capital city as the main economic and population center of the country. Past Bank Group Involvement in the Transport Sector 54. The World Bank group has been extensively involved in the development of the transport sector in Somalia through the provision of IDA credits for four highway and four port projects. The first involvement, consisting of an initial credit (74-SO) approved in 1964 and a supplementary credit (123-SO) in 1968 which totalled US$8.5 million, was used along with co-financing funds primarily to construct the 216 km Afgoi-Baidoa Road and to organize and improve the Civil Engineering Department in NPW. The road construction was completed successfully in 1971 although a dispute developed between the Government and the contractor which went to arbitration and was only recently settled. Notwithstanding this problem, the project has had beneficial effects on the area served by the road and on the nation generally. An economic re-evaluation in 1978 by Bank staff in connection with a project completion audit confirmed the soundness of the project. 55. The Second Highway Project, financed by a US$9.6 million IDA credit (295-SO) in 1972 and by funds from the African Development Bank, was concerned largely with construction of the 158 km Hargeisa-Berbera Road. Completed in 1975, the road has greatly facilitated the movement of livestock from Hargeisa to the port of Berbera. A Bank staff economic re-evaluation of the project in 1978 estimated a 36 percent economic return. A Third Highway project provided a US$7.0 million IDA credit (699-SO) in 1977 primarily to assist in extending the above road 132 km westward from Hargeisa to Borama and Tug Wajale. Construction began in January 1978. Due to hostilities in the area, the original contract was terminated; a new reduced contract was awarded and 70 km. from Hargeisa to Nabadid were completed in January 1985, 4-1/2 years later than the original estimate. The project was cofinanced by the Arab Fund for Social and Economic Development, the Islamic Development Bank and the African Development Bank. A Bank staff economic re-evaluation of the project (December 1985) showed 11% as compared to 24% estimated at appraisal. The main reasons for the reduced ERR were (i) an 82% increase in per km construction cost; and (ii) lower than expected traffic due to the drought (lower livestock traffic) and lower economic activity in the area. The training and technical assistance program was unsuccessful in achieving its targets due mainly to: (a) no financial incentive for the local counterpart staff; (b) transfer of staff; and (c) certain cases of unsatisfactory performance by the consulting firms. A Fourth Highway Project, financed by IDA (US$23 million), the Arab Fund (US$16.3 million) and Government (US$4.2 million), was signed in 1983. The major civil works component involving rehabilitation of the Afgoi-Baidoa road was completed  - 15 - in October 1985, although reduced in scope due to the suspension of the loan from the Arab Furd following the Government's inability to meet debt service obligations on other outstanding loans. The technical assistance component and the urgent maintenance component are continuing, and the project closing date is September 1987. 56. Port project financing began in 1964 with a technical assistance grant of US$311,000 followed in 1969 by a credit (55-SO) of US$550,000 for engineering and accounting consultancy services. Although a major Mogadishu Port Project was first identified in 1964 it took nine years to put the project together because of lack of donor funds and political changes in the country. In 1973, these preparations resulted in a US$12.9 million IDA credit (359-SO) which, together with an EDF grant of US$12.5 million, financed the construction of the sheltered deep-water harbor of Mogadishu, consisting of a breakwater, two general cargo berths, a livestock berth and a banana berth, sheds and other facilities. In 1975, during execution of this project, a third IDA credit (586-SO) for US$5.2 million was approved for an additional general cargo berth and corresponding extension of the breakwater. The original Mogadishu Port Project and its extension (Cr. 586-SO) were completed in 1977, about six months behind schedule. The physical execution of the project was plagued with disputes arising from numerous claims advanced by the contractor. These claims were eventually settled without resort to arbitration. The breakwater, however, experienced subsidence problems. A Bank staff economic re-evaluation in 1979 indicated an economic return of 17 percent which is slightly higher than that estimated during reappraisal in connection with the project extension. During execution of the project it became evident that there were fundamental weaknesses in SPA such as the scarcity of skilled staff and the poor use made of them, and that, to overcome these deficiencies, substantial additional efforts were required in future projects. The Fourth Port Project, approved by IDA in July 1978 for a USS5.5 million credit, consisted of construction of a tanker pier and related facilities for handling crude oil tankers and small products tankers. Bids were received on November 21, 1979. However, the lowest bid was substantially higher than the appraisal estimate, and a decision was made to extend the banana berth and construct a ro-ro ramp instead. The project was completed in July 1983. A project Completion Report prepared in December 1985 showed that: (i) ERR was re-evaluated at 34 percent compared to 21 percent estimated at appraisal; and (ii) financially, SPA showed much better results than were projected, enabling SPA to pay large dividends to the Government. Bank Group Strategy in the Ports Subsector 57. Assistance provided to the Somali Ports Authority (SPA) thus far, including the four port projects financed by the Bank, has concentrated predominantly on infrastructural development at the three major ports of Mogadishu, Berbera and Kismayo. Limited assistance in cargo handling equipment was provided from time to time by various sources, and technical assistance, including training, was provided on an ad hoc basis.  - 16 - Part IV - The Project 58. The Project was identified in May 1984 and appraised in September 1985. A report entitled "Somalia: Staff Appraisal Report - Port Modernization Project," No.6097 dated April 30, 1986 is being distributed separately. Negotiations were held in Washington on April 15-20, 1986. The Somali delegation was led by Mr. Ahmed Hagi Ali Adani,General Manager of SPA. Project Objectives and Description 59. The Project is a continuation of IDA's long involvement in the development of Somalia's ports, particularly of Mogadishu. Its main objective is to enable SPA to introduce modern port management and operations through a phased mechanization program as well as comprehensive training for all levels of port staff. It is based on the Somali Ports Master Plan Study initiated under the Fourth Port Project with financing from the Danish International Development Agency (DANIDA). The study, finished in 1985, reviewed the infrastructure requirements of the three major ports for the next 20 years and recommended a phased mechanization program along with a comprehensive training and technical assistance program. It is the first of its kind to provide a coordinated and comprenhensive modernization program for SPA. It will help improve cargo handling capacity and performance at the three major ports of Mogadishu, Berbera and Kismayo by introducing appropriate systems and procedures in cargo handling and port management to meet the current needs of cargo handling operations. The phased mechanization program will enable SPA to handle increasing volume and types (e.g. containers) of cargo without undue congestion or large investments for additional berths; the technical assistance and training will enable SPA to maximize the use of the new equipment to improve its operational efficiency. The Project also provides operational experts for SPA. This is a new endeavor in Somalia and is aimed at the transfer of modern port management and operations expertise to SPA in a short span of time. 60. The Project consists of: (a) Procurement of cargo handling, office, training, and workshop equipment, pallets, refurbishing of old equipment and equipment for the dry-docking of tugs; (b) Port improvement (civil) works: (i) Paving of the container yard at Mogadishu; (ii) Provision of fenders for wharves at Mogadishu;  - 17 - (iii) Construction of container freight stations at Mogadishu and Berbera; (iv) Construction of a ro-ro ramp at Mogadishu; (v) Construction of workshops and stores at Mogadishu and Kismayo; and (vi) Construction of the port training school at Mogadishu. (c) Rectification of breakwater subsidence at Mogadishu; (d) Training and technical assistance for SPA; (e) Consultant services for: (i) supervision, including assistance in equipment procurement, of (a), (b) and (c); and (ii) a study of transport development including the role of coastal shipping and minor ports. Cargo Handling, Office Training, and Workshop Equipment 61. Containers are increasingly being handled by roll-on/roll-off C"ro-ro") facilities, whereby they can be moved straight from the hold to the quay through special doors without having to be lowered over the side by cranes or ship's gear. The provision of the equipment recommended for the Project will allow SPA to cope with the form in which cargo is increasingly being handled (containers, ro-ro, pre-palletised unit loads) but will also result in the reduction in the general cargo gang size by 33 percent (from 30 men to 21 men). This will enable SPA to reduce the engagement of temporary workers from the labor cooperatives. SPA will reduce the gang composition by January 1987. The project will provide SPA with cargo handling equipment to cater for only part of the traffic. The rest of the traffic will be handled by private sector interests which will provide their own equipment, personnel and supervisors. As a condition for credit effectiveness, SPA will enter into arrangements satisfactory to IDA whereby selected major international shipping lines may undertake container/ro-ro operations within a defined area set aside for this purpose in the port of Mogadishu. Government has confirmed that specific areas nave been assigned to two private sector interests to undertake container/ro-ro operations at the port of Mogadishu and that negotiations between SPA and such interests were in progress. In order to realize the benefits of the project, SPA has set performance targets which will improve its cargo handling efficiency by: (i) 65 percent for general cargo; (ii) 45 percent for bagged cargo, and (iii) 50 percent for containers. In addition, targets for cargo handling equipment availability have been set at 75 percent, and shipwaiting time at one day within three years of the delivery of the new equipment. These targets are realistic.  - 18 - Port Improvement and Civil Works 62. Ports throughout the world have no choice but to become equipped to handle containers and pre-palletised loads which are rapidly becoming the dominant means of handling dry cargo. In view of the complete lack of basic facilities for container handling in all three ports, the Project provides for the paving of a container yard (31,400 m2) at Mogadishu; construction of container freight stations at Mogadishu (6750 m2) and Berbera (1260 m2); construction of a ro-ro ramp at Berth 4, Mogadishu; construction of workshops and stores at Mogadishu (1060 m2) and Kismayo (310 m2) and provision of fenders for the wharves at Mogadishu. In addition, a port training school will be constructed at Mogadishu. Rectification of Breakwater Subsidence at Mogadishu 63. The breakwater at Mogadishu Port was constructed during 1975 and 1976 under the Second Port Project with financing from EDF, and since then some 68 separate instances of subsidence have occurred over the 770. length of the breakwater adjacent to the storage area behind the quay. Subsidence was first observed during the construction period in 1975 and despite repairs and changes in the design, the subsidence persisted. Consultants who undertook a study on the causes of the subsidence between September 1981 and January 1983 pointed out that a collapse of the filter layers is unpredictable and recommended two alternative solutions for early implementation: (i) drive an interlocking steel sheet-pile through the core at an appropriate distance from the concrete superstructure and with improved ventilation to reduce the build-up of entrapped air pressure; or (ii) install an adequate protective filter of synthetic filter cloth for the length of the breakwater. Due to shortage of funds, the Governmant of Somalia/SPA have not yet been able to execute the remedial works. The steel sheet-pile alternative is considered to be the most practical and economical solution and will be adopted for the Project. Training and Technical Assistance 64. The transformation of port operations from lighterage to alongside berth has not been followed by appropriate and systematic changes in cargo handling systems and procedures. The provision of 126 man months of operational experts in key positions will enable SPA to introduce proper systems and procedures in port operation, maintenance of equipment and improved financial management. The Project will also provide for 36 man months of training experts whose main task will be to train and develop local instructors. A new port training school will be built under the Project. Arrangements will also be made for training of Somali port personnel at: (i) Bandari College in Mombasa; (ii) the Vocational Training Institute at Mogadishu which was developed with the assistance of GTZ; and (iii) the Somali Institute for Development, Administration and Management (SIDAM). To ensure that the training effort started by the Project will be sustained, SPA will establish and thereafter maintain a Training Fund by setting aside a proportion of its revenue each year (by April 1 of each  - 19 - year) to finance the annual training budget equivalent to 0.5 percent of its previous years gross revenue in 1987, 1.0 percent for 1988, and 1.5 percent for 1989 and thereafter. Establishment of such a fund will be a condition of credit effectiveness. Consultant Services 65. Consultants will be engaged for the purpose of supervising port improvement (civil) works and rectification of breakwater subsidence, as well as equipment procurement. Consultants will also be engaged to undertake a study on future transport development which will examine the transport network and distribution pattern of the country, the role of coastal shipping and the minor ports and the institutional and legal framework relating to international trade, shipping and transportation with a view to instituting appropriate changes and reforms. The terms of reference for the study were discussed and agreed with Government during negotiations. Project Costs and Financing Plan 66. The total cost of the Project, including contingency allowances, is estimated at US$24.4 million net of taxes and duties. Physical contingencies to cover unforeseen quantity increases are calculated at 10 percent of base costs for all items except the rectification of the breakwater subsidence where a 20 percent provision has been made. Price contingencies to provide for anticipated cost increases over the implementation period are based on price increases of 7.2 percent in 1986, 6.8 percent each in 1987 and 1988, 7 percent in 1989, 7.1 percent in 1990 and 4 percent in 1991 through 1994. The international rates have also been used for local costs on the assumption that the difference between domestic and international price inflation will be offset by adjustments in the foreign exchange rate. The foreign exchange component is estimated at US$22.6 million. 67. The proposed IDA credit will finance the entire foreign exchange component of the Project. The Government will on-lend the proceeds of the IDA credit to SPA, with an annual interest rate of 12 percent, 15 years repayment including five years grace.. SPA will bear the foreign exchange risk. The signing of a subsidiary loan agreement between the Government and SPA, satisfactory to IDA, will be a condition of credit effectiveness. Local costs of the project, estimated at US$1.8 million, will be met by SPA. Implementation and Procurement 68. Implementation of the civil works component of the Project will be the responsibility of the Ministry of Public Works assisted by SPA which has set up a Project Planning Unit for the purpose. Procurement of goods and services, other than civil works, will be the responsibility of SPA aided by consultants. The implementation period for the project is estimated at 8 years based on past experience with Bank/IDA financed projects in the port subsector.  - 20 - 69. The new cargo handling and workshop equipment will be procured on the basis of international competitive bidding in accordance with Bank Guidelines with separate contracts for each type or group of similar types of equipment. Refurbishing of old equipment and dry-docking of tugs will be procured following limited international bidding procedures. Port improvement (civil) works and the rectification of breakwater subsidence will be procured under unit price contracts with separate contracts for each following international competitive bidding in accordance with Bank Guidelines with eligible domestic bidders being awarded a price preference of 7.5 percent. Consultants will be employed in accordance with the Bank Guidelines. Additionally, SPA has agreed that during the project implementation period, no other capital expenditure beyond the equivalent of US$500,000 per year will be undertaken without the concurrence of IDA. SPA will submit quarterly progress reports to IDA and, not later than six months after the project closing date, a project completion report, in a form satisfactory to IDA. Disbursement 70. All requests for disbursement will be fully documented. Proceeds of the IDA funds are to be disbursed against the various categories as follows: (i) Cargo handling, office, training and workshop equipment: 100 percent of foreign expenditures; (ii) Refurbishing of old equipment and dry-docking of tugs: 100 percent of foreign expenditures; (iii) Port improvement (civil) works: 82 percent of total expenditures; (iv) Rectification of breakwater subsidence: 90 percent of total expenditures; and (v) Consultancy services: 100 percent of foreign expenditures. Financial Structure and Performance 71. The financial performance of SPA for the period 1979 to 1984 appears satisfactory, although achieved largely at the cost of significant inefficiencies in port operations. The working ratio was broadly maintained at a satisfactory level between 1979 and 1983 and improved substantially in 1984 as a result of the combined effect of a tariff increase implemented in 1983 and the recovery of cargo throughput from the depressed levels of 1983. SPA's liquidity remained good throughout the period with the current ratio improving from 1.5 in 1979 to 1.9 in 1984 despite cumulative remittances of So.Sh 455 millions in corporate taxes and dividends to the Government out of cumulative cash generation of So.Sh 619 million between 1979 and 1984. This apparently satisfactory performance, however, masks the serious deterioration in SPA's financial performance in real terms over the period. The apparently good financial performance together witb inadequate accounting capabilities within SPA inhibited the  - 21 - revision of tariffs in line with domestic inflation over the period. Tariffs have been revised only three times between 1977 and early 1985 1/ and have only partially offset underlying increases in operating and capital costs. By 1985, shipside tariffs 2/, payable wholly in US dollars, had declined by 46 percent in dollar terms on the 1977 levels (an Increase of only 158 percent in So.Sh terms compared to cumulative domestic inflation of about 900 percent over the period). Shore handling charges payable in domestic currency increased by only 60 percent over the period. Only stevedoring charges, payable partly in domestic currency, have been largely maintained in US dollar terms and even this represents a significant erosion in real terms. Against this background, the real return on net fixed assets declined from around 16 percent in 1979 to zero in 1984 3/ as compared to the nominal return in 1984 of 48 percent. Respectable working ratios were achieved largely at the cost of severe compression in real wages and salaries with attendant adverse consequences for labour productivity and morale. 72. Moreover, despite the significant erosion in shore handling charges, SPA has had to devote a significant and increasing proportion of its free cash flow to financing the indebtedness of other state agencies and civil service departments to it on account of shore handling services. As a result, debtors as a proportion of turnover increased from 41 percent in 1979 to 62 percent in each of the years 1980, 1981 and 1982 and declined thereafter to 53 percent in 1983 and further to 42 percent in 1984, largely because the December 1982 tariff increases heavily favoured prompt payment by vessel owners and their agents. Finally, despite its status as one of the country's major foreign exchange earners, SPA has experienced increasing difficulties in acquiring foreign currency to meet its routine capital expenditure and spares requirements because of the country's severe foreign exchange shortage and the Government's strict rationing of available foreign exchange. This has severely affected the serviceability of equipment and led to concommitant declines in overall port productivity. However, since timely and assured access to foreign exchange will be particularly important under increased capital intensity of port operations, Government has confirmed that SPA will open and maintain until the completion of the project an external foreign currency account in which it will deposit a sufficient proportion of its foreign currency revenues to meet its requirements for spare parts and other foreign currency expenses. Establishment by SPA of an external account will be a condition of credit effectiveness. 73. The projections for the period 1985 to 1995 indicate a material improvement in SPA's working performance. The working ratio improves from 1/ In 1977 when the tariff structure was established; in December 1982; and in January 1985. 2/ Comparisons are based on Mogadishu port tariffs; however, tariff increases have been based on proportionate increases which are uniform for the 3 major ports. 3/ Based on the revaluation of fixed assets undertaken in December 1984 as part of the Master Plan Study.  - 22 - an estimated 38 percent in 1985 to an average of about 17 percent p.a. between 1990 and 1995. As a result, cash generation is strong with cumulative cash generated amounting to So.Sh 14,785 million over the projection period 1985 to 1995. The projections are also based on assumption that from 1986, debtors at year-end will represent 17 percent of turnover. Currently, outstanding indebtedness of Government departments and parastatals to SPA has been running at 42 percent of cash turnovers. A plan for the phased reduction of such overdue debt was reviewed during negotiations and confirmation of such plan will be a condition of credit effectiveness. Debt service coverage is also satisfactory over the projection period which Includes the first year after full Project implementation. To safeguard this position, agreement has been reached with SPA that no additional debt will be contracted if this will lead to a debt service cover of less than four. SPA has agreed to set its tariffs to achieve a rate of return of 5 percent per annum on its net fixed assets in use from 1989, and draw up a three year plan to implement a phased structural tariff increase program by March 31, 1987. Port tariffs will be reviewed by SPA and the Government semi-annually from 1989 and adjusted as necessary to meet the financial objectives. Accounts and Audit 74. SPA will submit annual audited accounts to IDA within 9 months of the close of its financial year for the financial years 1987 and 1988 and within seven months after the end of its financial year thereafter. To enable SPA to meet these deadlines, agreement has been reached with the Ministry of Finance that SPA will be permitted to fully implement the more detailed Uniform Accounting System required to be adopted by all Government-owned enterprises on a phased basis. The annual accounts are audited by the Magistrate of Accounts. This is acceptable to IDA. Justification 75. The need for some degree of mechanization is a response to the changing form in which cargo is being shipped and handled (containerization and ro-ro vessels) and also to the need to improve the cargo handling rate for conventional cargo. Containerization and ro-ro unit loads have increased in Somalia in recent years. Apart from the physical benefits derived from improved alongside operations, the larger longer-term benefit to SPA is the institutional development to equip SPA to cope with the more sophisticated port operations and management systems which come with progressive mechanization. A phased mechanization program with a parallel training program for all levels of port staff, as presented in this Project, will allow SPA to mechanize more port operations and will provide it with the capacity to handle greater voluces of traffic as well as cope with new forms of cargo handling brought about by advances in shipping technology. In analyzing the net economic benefits of the operational improvements, investments relating to container/ro-ro operation have been distinguished from those relating to general/bagged cargo operations. The costs of training and technical assistance were proportionately allocated to each of the investment packages. Economic analysis of the breakwater rectification works on the other hand was not carried out because the benefits (i.e., the replacement cost of the breakwater - estimated at US$38.63 million) far outweigh the investment  - 23 - required to rectify the problem (US$3.52 million including physical contingency). 7he overall economic rate of return for the project (excluding breakwater rectification works) is 32 percent with various individual investments ranging from about 21 percent to 46 percent. When the sensitivity of the various investment packages was tested, it was found that a 50 percent Increase in cost and zero traffic growth reduced the economic rate of return to a range of 10 percent to 21 percent. Project Risks 76. One risk is that the even modest growth in traffic forecast will not materialize. This, however, has been taken into consideration through the no traffic growth scenario in the sensitivity analysis. The second risk is a cost increase. Although the possibility of a cost increase exists, the probability of costs substantially exceeding the estimates is not likely in this project. All three ports have had major construction works in recent periods and have good cost data, and these form the basis upon which the costs of civil works under the project are estimated. The third risk is that the increase in productivity targetted for the project as a result of the investments in cargo handling equipment and institutional development will not materialize even at the modest rate projected. This possibility is being minimized by formulating the project to provide a comprehensive training program with heavy reliance on courses and materials developed by institutions with proven track records in training (e.g. UNCTAD, SIDAM and the GTZ sponsored Industrial Vocational Training Center in Mogadishu). Part V - Recommendation 77. I am satisfied that the proposed credit would comply with the Articles of Agreement of the Association, and recommend that the Executive Directors approve the proposed credit. Attachments June 2, 1986 Washington, D.C. A. W. Clausen, President  l; i3  - 25 - Annex I nLL.LLL fir x o'f 7 2336? tlO T cmn IIT IMlATU ) 1lt .T a W 135 AlKCOA ow am am cu 14m. u) TUTAL S3.?7 C37.7 627.1 AfGRCULTURAL m2. 234,7 199.7 W - win (on) .. .. 250.0 alum auuz. now cm-- l Wm u Ia wST (KLUMO U Of oLL MbUSVALaNT) 11.0 43.0 63.0 eLI 561.5 NEWSan m urn iunas PUInAlOM,-NfAISA (maci.e) 2050.0 >LO 3062.0o. 01316 NohfIAIW CS - TOTAL) 17.3 23.1 32.3 20.1 32.u macane uarcru POPWATIU iX RA& 2000 C*eLL) 6.5 STATIDE*T POIUATIU CULL) 21.0 PUoLATOU KNOW= 1.9 . P0PULTIOU 033525 Pit Iq. a. 3.L I. 3.0 33.2 65.a PwR fa. M. AGtR. MU 3.2 I 1.1 16.5 112.3 126. POPULATION Au BTECIUZ (3) 0-14 1U 44.7 '7.5 A.e 4C.0 A5.e 15-64 13 52.0 30.5 52.5 50.6 51.3 CS no *A313 2.? 1.3 LU 2.9 2.7 rOUeTtOIw cROWN 3A*1 CS) TOTAL 3.5 3.0 2.6 2.9 ISiS A.9 6.3 .6 C. J.1 COOK 13D 3AT& (PER THOM) 50.2 50.1 W.O 07.2 '7.0 co DRAT3 RATZ (M THOU) 20. 26.8 20.3 17.6 15.0 =00 3W108 tn *T12 3.2 3.2 3.2 3.3 s.2 P4301. PLANNINGu ACCPSORY. ANNA (TNOU) . nIn (I 30 ARRID VO1) .. .. 2.0 3.3 a.. INDI OF F00D PR. MR CAPITA t1969-71-100) 97.0 100.0 60.0 83.3 U2.9 P CSOA UPPLY OP CALCUlI (2 Cs or 3 0iQUST) 7L.0 71.0 94.0 $7.7 95.5 vinnua (Sm ra DAY) 07.0 61.0 68.0 ii., 55.4 or 50 AMIAL Ago POLS 47.0 40.0 38.0 /t 10.7 2I.5 C31t8 CAmS 1-4) WAIN AU 30.9 25.1 30.0 23.1 10.6 -3T Lln SUIT. AT SRS1 MASS) 35.0 37.2 AA.5 47.6 52.0 In,Ar INW. RATM (PU TROS) 175.0 156.5 142.0 119.5 106.6 ACIM TO SAM AATt (RIOP) TOTAL .. 15.0 33.0 /d 27.1 42.L UA .. 17.0 50 7;r 63.5 67.5 RomUL .. 10.0 21.3 19.3 35.6 ACCS TO KICRITA DISOAL (t OW CPOPULATKON) TOTAL .. .. .. 26.5 28.9 UAW .. .. .. 65.4 57.7 RUL. .. .. .. 20.1 20.7 FOHOIATIW PM PTICIUI 36570.0 26230.0 15630.0 ft 27901.7 11791.7 PM. PRE OMI5NG PERIOD 0610.0 4570.0 2550.0 3303.4 2459.0 prOW. I NsPrxTAL a TOTA 690.0 710.0 000.0 kt 1273.6 l61.1 133A 140.0 300.0 .. 426.2 30.6 RURAL 5040.0 7900.0 .. 329.5 4371.9 AmuiaSz PS HOSPTAL SO .. .. .. .. 27.2 0=00 AWlS! 523Z 0F IIOUSAIOL TOTAL .. .. mU .. .. . .. KR AL .. .. 5.5/. AV2UCC No. or MIUoUs/lm TOTAL .. .. .. .. . m ~.. .. . .. RUR .. ... nucuc or mase unit tier:. ToTAL .. .. RURAL .. .. RAL .. .. . ..  - 26 - Annex I T A h L s 3f Page 2 of 7 SOMALIA - SOCIAL INDICATORS DATA SHKET SOIIALIA REFERENCE GROUPS (WIGHTED AvWRAGeS) /a DnsT (MOST RCFA1T StAIA) A RECENT LUW ENCOHC AFRICA RIDDLE IN1OME 196dt wt7U ESTIRIATA SOUtH OF bANANA AnIUCA S. UF SAHARA EDUIATION ADJUSTED ENNOLUIENT RATIOS PRtlrARY: TOTAL 9.0 11.0 JU.U Id 67.d 95.7 MALE 13.u 17.0 38.0 7 77.6 10W.O FIIIAL . 5.0 5.U z1.o 7d- 54.9 o3.2 SICONDARY: TOTAL I.U 5.0 11.0 Id 13.5 17.3 MALE 2.0 o.U 1.0 71r 17.9 Z5.0 FEMALE .. 2.0 6.0 Id 9.1 14.6 VOCATIONAL (2 UP SECONDARf) .6.4 3.1 17.h Id 13.2 5.S PUPIL-TEACHER RATIO PRIHARY 29.0 33.0 33.0 Id 44.9 41.1 SECONDARY 20.0 24.0 2l.0 __ 27.4 25.5 COllSUlPTIO PASSENGER CARSITHOUSAND POP 1.1 2.0 .. 3.8 Z0.8 RADIO RF.CSIVERS/THOUSASD PoP Q.q 14.4 Z5.9 55.8 107.. TV RECFIVERSlTHOUSAND P0P .. .. .. 2.6 20.8 NEWSPAPER ("DAILY GENERAL INTEREST") Cl RCULATION PER THOUSAND POPULATION 0.8 1.4 .. 5.0 18.4 CINEMA ANNUAL ATTENDANECAPITA 0.6 1.4 .. 0.5 0.4 LABOR FoRCE TOTAL LABOR FORCE (THOUS) 1007.0 1331.0 1815.0 FEKALe (PERCENT) 29.4 29.o 28.0 34.2 36.2 AGRtCULTURE (PERCENT) 88.0 H5.0 82.0 Id 77.5 54.5 iNDuSTRY (PERCENT) 4.0 6.0 6.0 7d 9.7 16.3 PARTICIPATION RATE (PERCETr) TOTAL 41.1 38.5 35.7 39.3 36.8 hALE 58.7 55.2 52.3 50.9 47.1 FEMLE 23.9 22.0 2u.6 28.1 27.2 ECONOMIC DSPENDENCY RATIO 1.2 1.3 1.3 1.3 1.3 InwqE DISYRmUTDO PEk.-T OF PRIVATE INCOME RECEVED BY HIGHEST 5 OF HOUSEHOLDS .. HIGNEST ZO OF HOUSEHOLDS .. LIUEST 202 OF HOUSEHOLDS .. LOWEST 402 OF HOuSEHOLDS .. POUNRX TACT GROUPS ESTIMATED ABSOLUTE POVERTY INCOMe LEVEL (USS PER CAPITA) URBAN .. .. 150.0 Ie 165.5 5YO.7 RURAL .. .. 110.0 7' 95.0 275.3 ESTIMATED RELATIVE POVERTY INCXAE LEVEL (USS PER CAPITA) URBAN .. .. 65.0 /a 113.1 545.6 RURAL .. .. 50.0 7 67.6 201.1 ESTIMATED POP. b-LIN ABSOLUTE POVERTY INCOME LEVEL (2) URBAN .. .. 40.0 /a 36.6 RURAL .. .. 70.0 7 61.8 NOT AVAILABLE tNOT APPLICABLE /a The group average* for each ndic-ator are population-eighted arithmetic mans. Ceverqe of camatrie aong the indicator, depends an availability of data and ie not uniform. /b Unless otherwise noted. "Data for 1960" refer to any year between 1959 and 1961; "Data for 1970" beten 1969 and 1971; and data for Moast Recent Estiete" betwasn 1981 and 1983. Ic 1977: /d 1980; /e 1978. JUNE. 1915  - 27 - Annex I aSi 3 of 7 DUINmONS OF SOCIAL INDICATORS Now Alkul she data am drwn (n nwmt pulny judhd h mass sulsorntau've an rUmble. it ould Mo be naoad that they lmey i l inmunIly ompeabl. hen at die lack at o aIdmd ddaiian an concgpseR aN by dent gountnu in callnag th dais Tle dat au nesls. ssd is d oide,.o A plude. i*ige treads d b_raeren c tatm mqaor difatm bmn meOuntn The u*nu,tsttti (I IbC gamecoumny, pup at ti sujel comsry an ill counsuy pm uhaneashgha erezP am sha ite countbsry rnefc u dle _ceus fr Nih Inrm Oi1 Espomwa' sup wht -dMd Income dnk Abus and Midl Es I1 rshe_ bsaueotsraenr _Iassltural edlsi.l to sh et.c group dau the asmps an populeaon waghod anthmac mam far mau indator *md dsho ally when injonty a sfhe counies ins croMup au dau (or thkt mnrasor. Slince she cowms oreausitn among gik uredian depends on se avallahiNy odea and Is nue uniomLs ensun mwiuas he ismrcnd in rNutng avemaoneo e iscator aothrt s esga arce nly useful in canpng she *uetfean dicaniac5fit a Inn amiw she country rucem groups. AREA (thound sq.km. I Crude girh lae t pe etknseudD-Numiber of live births in th yer hed-Totua surface arma compnung land ara and inland waten; per thousnd of mid-year population 1960. 1970. and 1913 data. 1960. 1970 and 1983 data. CMe Death Rae (per thwasdi-Number of death in the yer AgEil imkno-Estinam at agricultural arA usd temporarily or per thousnd of mid-year populsaon; 1960. 1970. and 1981 data pa ty rrops Lpaatureu. market and kitch rdens or to G e ssR e- rgumb otda a woa le fallow. 1960.1970 nd 1912 dta. will bear in her normal reproducive period if e epeiencs prement agepecific ertility rtes: usually five-year averg ending GNP PER CAPffA (USS).-NP per capita estimus at current in 1960. 1970. and 1983. market prni caculated by same converion method - World Family Platsala-AeNpmv, Amel r_hamduj-Annual num- lusA Atlas (191143 basis): 983 dea. ber of acceptors of birth-control devic under auspic of national LNEGY CONSlUMYTON PER CAPA-Annual apparent family planning program. consumption of commercial prmary energy (coal and lignite. Fam*PlAwmi-Vssrs (par*n sifmrA inven)-The pencen- peaoum ural gas and hydro-, nuclear and geothermal alec- tag of married womn of chilkd-bering agw who ar practicing or ticigy) in kilogrm of oil equivalent per capita 1960. 1970. nd whose husbands are practicing any form ofcontraception. Women 1912 dau of child-bearing ag are gnally women agd 15-9. although for some countries contractive usag is meamured for other age POPULATON AND VITAL sTATISncs groups. Ta,u ftpanle . Mid- Yaw (thisawaaea-As of July 1;1960. 1970. FOOD AND NUTUMON and 1913 data. 1moitf Fo *e WarPr Capit 1 -1- I -OlInde of per psIa. dyukad t efurcid of rrbat Rareo of urana to total capita u production of all food commoditai Production pbui;of damiamng definition 16 u 970a and 1983 daue mxduda animl fead and d for agriculture. Food commodiias abiityof ataamog cunties196. 170.and191 daa.include primary commodities (e.g. sugarcnane instd of sugani -_ubdm pn adm which are edible and contan nutrients leg. collee and tea we - puksil in yew 2000-The projection of popuhltion for 2000. excluded) they compie cereal root cropL pul oi seeds. made for each economy spartely. Starting with information on vegetables fruits nutL sugarane and sugar bets. lietock, and total populaion by age and sex. feratlity rates mortality rates and livestock products. Aggregate production of each country is based in oa mirion in the bae year 1910. thes pazmms on nutnal avep producer pnce weights: 1961-65. 1970. and ware projected at five-year intervals on the basis of eneralized 9192 data aumpom until the population becam sttioaory P CaM Sap$y of CalM. ,ereaC of raqilmis.ni-C omput- S'ltvpei puiari-ls one in which age- and sx-specific mor- ed from calorie equivalent oAnet food supplie available in country tality rae have not chaned over a long perio while age-specic per capit per day. Available supplie comprise domestic produc- fetility rams have smultanously remamed at replment level lion, imports less exports and change in stock. Net supplies (net reproduction rate-1). In uch a population. the birth rate is exdude animul feed, seeds for use in ariculture. quantitin used in constat and equal to the deab rae the age structure is also food procesinsg and losses in distribuion Requiremnts wre consnL and the growth rate is mo. The stauonay population estimated by FAO baed on physiological needs for normal acti'ity size was estimated on the basis of the projected charerisi of and health considering environmnental temperature. body weights. the populato in the vear 2000. and the rate of decline of fertility age and sex distnbution of population. and allowing 10 percent for rate to replcement level. wasteat housebold level: 1961.1970 and 1982 data. Pbparon Momsrwum-ls the tendency for population growth to Ar Capm Sppy of Porei. (sras per Aeyi-Proiein content of continue beyond the tane that replacment-level fertility has been per capit re supply of food per day. Net supply of food is defined achieved; that iL even after the net reproduction rate ha rached as above. Requiments for all countus establisbed bv USDA unity. The momentum of a population in the year t is measured as provide for minimum allowancest of 60 grms of toul protein per a rato of the ulimate uaonry population to the populaton in day and 20 pAis of animal ad pulse protein. of which 10 grams the yer r. gv the asumption fertility remains at replace. should be anmal protein. Thae standards.are lower than those of mnt level from year t onward 1985 data. 75 grams of toul protein and 23 grms of animal protn as an A,e.. DEniMy average for the world, proposed bv FAO in the Third World Food Per sqkm.-Mid-year population per square kilometer t100 hec- Supply: 1961. 1970 and 1982 data. tare) of total area: 1960. 1970. and 1913 data. PAr Capit h eNM Surpply bam Ahimd and hPLfee-Protein suppl) Per .qknt. agnaahral id-Computed as above for agricultural of rood derived from aninmsh and pulses in grams perday; 196145. land only. 1960. 1970. and 1982 data. 1970 and 1977 data Papelttl Age Swtra (Parerverij-Cbildren (0-14 yeas). work- Ckid (ae 1-4) DOeat Rate (per rhoaaadm-Number of deaths of inae(15-64yea) and recred t65 yearsand over) as perentage children aged 1-4 yea per thousand chldren in the sane age of mid-year population: 1960. 1970. and 1983 d gproup in a given year. For most developing countrines data deived * Papufrio. C-owkh Rate fpa nrw-rral---Annuai growth rates of fronm ife tabes 1960. 1970 and 1983 data. total mid-year population for 1950-60. 1960-10. and 1970-83. HEALTH _bpaioi GCrt Rare (percemrj-ha--Annual growth rats Life Ercrtary of ih (yeari-Number of years a neborn of urban population for 1950-60. 1960-70, and 1970-83 data. infant would live if prevailing patterns of mortality for all people  - 28 - Anrnex I Page 4 of 7 as the me of of it binh we to stay the sn- throughout iu lilf R$Al,tnr Ratio *priwy. and aeedasry-Toal students en- 1964 1970 and 1913 data. ro id in pnary and sconday vels divided by number of .'lw Mmndty Rat (per thm.adi-Number or infanu who de teche rn the coeponding laveL befo rocino g on y.r or ae per thouusnd ive births in a given yer, 190.1970 d 1983 dat. CONSU.PTION Am t o* SI (pev fw qf ml I i-eA Wk. aid Ae Cms (per shamd pepalladew-Passrng can com- nreJ-Numxbr of people tot!a tenta rur l) with resnable prim motor can ating les than eight pesns: excludes ambul- acces t rsf water supply (;clude tretd surface waten or ances. hears and militry vehicles. unotated but uncontaminated wster such as thu from protected RegSo Rftwm (er ptheusmudpapaisele-All typs at receiven boeolebs sprin sd saniary weds) es pecnta of their rpec- for radio broadcast to genad public per thousand of population: tive popultion. In an urban are a public fountain or stadpoK exclude un-lk eud receivers in countno and in yen when lod not more than 200 mc.ers from a houn may be conddetd ristration of radio st wu In effec dau for recent years may as bgny within rsonablk ar of tht hour In rural area not be comparable sice most countries abolished lieing. rmsonable acce would imply that ts housewif or members of te houselhold do not have to spend a disproportonae pet of the day rVhedvw f er tkwaudpephultim -TV reevers for broadcast in felctin th faily's water rns to gaI pubic per thousand populauin excludes unlice TV acem . Earm D_pmd fpovmt of rnvers o in cuntries and in r when epstrmaon of TV ses was _ mrue-Number of pople (totaL urban, and rural) serve by in cen disposal as pecentage of their respaive pouNeper Ch'eluum (per .hossondpepubslows--Sbows the aver- Ecta diposl may include the colbecion and disposaL with or 4ae rcuiation of "daily general intmet newspapesn defined as a without treatmtet. of human excret and waste-water by water- PIOdiOi publicaion devoted prinarily to tcordlg generl news. borne systes or dte use of pit privies and simr instalaions. It is consierod to be daily ifit apper at las four times a weeL ft ea Ier P*Spsao-Spulation divided by number of prc- Clu_ Ann_a A trvedwe pe Ca4t jer Yam-Basd on the tising physcian qualified from a medical school at univenity kvel. number of ickets sold during tha year. induding admisson to _hdu Pr NwLr 'uu-_Population divided by number of drive-in cimm and mobile unitL practing male and female graduae nures asstuant nunes practal nunses and nurng auiies. L ABOR FORCE _i I . Pr _~* ._a,iW wing _, ,__Fbuato , w ,eb ,1w (tho -Economnicallyiv ctv pens.n in- Ppia wbpe and Hsu divided by their rspwatve number of duding armed forces and unemployed but excluding housewives. (tosptal, uban, andrurl) divubidedaby pvtheir respectandve studnts, etc.. covering population of all ages Definitions in hosptal eds availble i pemsd Hpivat ga u e various countie are no comparable 1960. ,970 an 1983 data. p_ymanentky staffed by at least one physicia. Establishments prov- Fe (ei JFae labor fame as percentage of total labor ding principaly cusodial cse are not included. Rual hospital foae hooe inue heat and mdical cente not permanentl stffed Agvesawe (perew)-Labor force in farming. fosry. hunting by a physician (but by a medical asistat nur midwife. era.) and fishing as percentage of total labor form 1960. 1970 and 1980 wh offer ipatient accomm odatio nd provide a limitd range dataL of medical facbifes. hsbsrv (peraw-Labor force in minn consuction. manu- _Adds,a P- HoW"ia Bad-Total number of admisons to or factoing and electicity, water nd ps as percentage of total lIbor discuhrges from hospitals divided by the number of beds. force 1960. 1970 and 1980 datL Plidpas- ate (,p--Wei.eJ-a -wk. a dfamk-Participation HOUSISNG or activity rats are computed as totaL mnae. and femal labor force Apo,e Siu qf Uym if (pens per Aoow_ld)-sata, uewe, as percentag of total male and femak populion of all ag bduwd-A housholdconst aofuSpofindiualshoshare rspevey; 1960. 1970. and 1983 dat. These are baed on lLOas ving quarn and tbeir main meals A boarder or lodger may or participation rates recting age-sex structure ofthe population, and may noc be included in the bousehold for statistical purpose long tiam trend. A few emtes are Grom naio o Ararge- Naib_ of Pm= pa R0 nwel, mhew, ad r_ to Etmmd Dqpendmecy Rlen-ltatio of population under IS. and Avage member of persons per roam in all urban and rual 65 and over to the working age populaion (those aed 15-64). occupied convenional dwelngs respectively. Dwellin exdude non-permnent structres and unoccupied par. INCOME DISTUIDLTION tParaPe of D-efq wih Elecriry-ral. whbvu d rral- Powwow of rotal Diosabk Icom (both i c and kiadi- Conventional dwelings with electricity in living quartr as percen- Aanuwng to percentile groups of households ranked by total house. tage of total. urban, and rural dwellings mpectively, hold income. EDUCATION POVERTY TARGET GROUPS A4ssed Ewfi-n Radar The folowig estimates are very approxim measurs of poverty Avww sdoo - toeaL. mk aWd fe rak-Gross tmL le and klvs and should be interpreed with conidrmble caution. fmale enrolnment of al age at the prmnary levd as percentages of EsaWed AhsIr Poer ty Inom Lev f USS pr c&pwja-w4= resPive pnmary schoolge populadons Whilc many countries -d 'waS-Absolute povery income lvd is that income level consider pemary shool age to be 6-11 yea othes do not. The below which a minimal nutritionaly adequate diet plus essntial differe in country pracices in the ags and dumion of school non-food requirements is not affordable. are rflcted in hc ratios given. For sante counties with univenrs EsdxAed RdvariPery Awa.. Leved f 05 per capfai-heu educationL gross enroUllment may excea 100 peret since some _d w-Rumal relative povery income level is on-third of pupis are below or above the countrym s standard primary-school averape per capita personal income of the country. Urban level is age derived from the runal kveld with adjustment for higher cost of Secondar school - roraa mal and feaile-Computed as above: living in urban arms. secondary edution requir at last four years of approved p- Esed Popastion &Belw Abwlt Poeewry lCDmr LWv per- mary inosucto provides gneral vocationaL or te training cewrJ--rm mud rusE- Percent of population (urbn and rual insuction for pupils usually of 12 to 17 years of age correspond- who are -absolute poor.- ence courses we enerally xcluded. Vocadona Enoimii (pecer of ecadory-Vocational insutu- Compartive Analysis and Data Division nons include technical mdusnaL or odher programs which operate Economic Analysis and Projection Department independently or as departments of secondary insttutions. June 1985  Annex I - 29 - Page 5-of 7 SOMALIA COUNTRY DATA Economic Indicators GMP Per Capita - US$266 (1982) 1/ Annual Rate of Growth of GDP Gross National. Product in 1982 1/ at Constant Factor Cost (%) (Fiscal Years) USS Nin. X 1977-80 1981 1982 GDP at Market Prices 1339.1 100.0 -3.0 4.4 8.5 Icvestment 267.5 20.0 Reaource Balance -292.6 21.9 Export of Goods and NFS 152.4 11.4 Import of Goods and NFS 484.2 36.2 Output in FY1982 Value Added US$ lln. % Agriculture 595.4 49.9 Industry 133.4 11.2 Services 462.8 38.9 1249.6 100.0 CENTRAL GOVERNMENT FINANCE 1979 1980 1981 1982 1983 1984 (M i lIi o n So. Sh.) (Rev. Est.) Total Revenue 1526 1421 2263 2760 4075 3971 Current Expenditure 1573 1670 2295 2750 4470 7965 Current Surplus or Deficit (-) -47 -249 -32 10 -395 -3994 Other Expenditures 1684 1462 1425 2616 2097 3299 Overall Deficit 1731 1771 1457 2626 2492 7293 1/ Based on preliminary estimates of National Accounts recently prepared by EA2NE.  Annex I Page 6 of 7 - 30 - BATACZ OF PAYMS 1979 1980 i 1981 1982 1983 19R4 (MLl10on US MblMars) (PrelLm. Actual) erchmndiae Exports (f.o.b.) 106 133 114 137 100 58 MLrchandise Imports (c.i.f.)1/ -394 -461 -422 -484 -450 -408 Trade Balance -288 -328 -308 -347 -350 -350 Non-factor services -12 -8 -1 9 4 -43 and factor inoome, net Private transfers, net 36 57 64 11 19 62 Current AccoDmt Balance -264 -279 -245 -327 -327 -331 Direct Inuestment - - - - - - Official Grant AMd 58 143 150 157 148 177 Private, net 4 - - - - - Offical, net 84 87 79 123 100 46 be of Phnd Credit - 4 30 34 44 -4 Errors andi OissioCts 19 21 3 3 -14 10 Overall Balance -99 -24 17 -10 -49 -102 RAE OF E2i: Fruu 1973 to June 30, 1981 - US$1.00 - So.Sh. 6.295 July 1, 1981-Jbue 30, 1982 - A dual exhwiane rate with: -US$1.00 - 6.295 (for essential hiorts) US$1.00 = 12.59 (all other foreign transaCtiCgB) July 1, 1982-Oct. 22, 1983 - US$1.00 - So.Sh. 15.227 Oct. 23, 1983-Sept. 14, 1984 - US$1.00 - So.Sh. 17.55 Sept. 15, 1984-c. 31, 1984 - US$1.00 - SD.Sh. 26.00 Ji. 1, 19852/ - US$1.00 - So.Sh. 36.00 1/ The inqrt data for 1979-1981 include Frano Vahta lnpqorts. 2/ Rate for abwset all private transactions is determined in a free foreign exchane market.  - 31 - Annex I MM,________AND__PRI__ Page 7 of 7 Dec. Dec. DBc. Dec. Dac. Dec. 1979 1980 1981 1982 1983 1984 (M i I I i o n Sb. h.) BDok Cinals on Gbverrurent (net) 1,231 1,902 2,250 2,100 1,805 4,378 BaRk Ca on Private Sector ard PVibIic Enterpriees 1,726 1,977 2,296 2,924 3,456 5,238 txwty SApply 2,335 2,783 3,674 4,108 4,309 6,933 (P1raaitage of Irdxc Anbmers) General Price Indiex (1977-100) 136.2 217.1 313.4 384.2 524.0 1,007.0 hAuwal reatge Chiange In General Price Index 23.8 59.4 44.4 22.6 36.4 92.0 Bark Chal an Private Sector and tabUic Enterpriss 22.9 14.6 16.1 27.3 18.2 21.5 Mbney 94pply (m1) 35.1 19.2 32.0 11.8 4.9 60.9 .:3NADISE EISM Averawe 1977-79 1980 1981 1982 US$W n % US$ Mln Z US$ mln % USsNon 2 IAvestock 71.2 74.5 101.6 76.2 98.0 85.8 106.0 80.9 Banna 9.8 10.3 8.1 6.1 6.0 5.3 14.0 13.7 Meat and Meat Products 2.1 2.2 1.0 0.7 0.3 0.3 0.2 0.1 Hides and Skins 5.8 6.0 6.6 5.0 2.0 1.7 4.0 3.1 Fish and Fish Products 1.5 1.6 0.3 0.2 1.0 0.8 2.5 1.9 Others 5.2 5.4 15.6 11.7 6.9 6.1 4.3 3.3 Total 95.6 100.0 133.3 100.0 114.0 100.0 131.0 100.0 EU3ERL DEET US$ Nmn. Public Debt (Dec. 31, 1983)1/ 1,503.9 (of ubich disbursed) 1,149.1 nEE SERVICE RAT% 2 nibUc Debt, 1983 (estiur) (after debt relief) 17.2 IMA IEWlDIN (Mhrch 31, 1985) OCtstandirg and Disbuwsed 164.5 tUklsbursed 71.1 Cntstaxrg inc. mdUsbuirsed 235.6 1/ Ew9bdes mdisbursed c -nuats from East Ehropean coumtries, totaLlirg US$154 mLlJIon, whidh are not expected to be disbursed any further.  - 32 - Annex II STATUS OF BANK GROUP OPERATIONS IN SOMALIA A. Statement of IDA Credits (as of March 31, 1986) No. Year Borrower Project Ir Undisbursed (US Million) less cancellations Sixteen Credits have been fully disbursed 100.32 635-S0 1976 Somalia North-West Agriculture 10.0 0.05 905-SO 1979 Somalia Agriculture Extension 10.5 1.40 906-so 1979 Somalia Central Rangelands 8.0 0.93 972-S0 1979 Somalia Bay Agrictlture 12.0 5.84 1043-SO 1980 Somalia Petroleum Exploration Promotion 6.0 0.01 1105-S0 1981 Somalia Fourth Education 10.2 3.39 1236-SO 1982 Sonalia Second Hog. Water Supply 15.0 1.79 1324-SO 1983 Somalia Fourth Highway 23.0 3.88 1464-So 1984 Somalia Afgoy Gas Delineation 18.0 7.51 1465-S0 1984 Somalia Fisheries Explo. Prom. 13.5 9.04 1538-So 1985 Somalia NW Region Agric. Dev. 10.61/ 11.26 1612-SO 1985 Somalia Agricultural Input Program 10.0 3.06 1647-SO 1986 Somalia Livestock Health Services 4.3 4.30 Total 251.42 52.46 of which has been repaid 2.64 TOTAL now held by IDA 248.78 TOTAL Undisbursed 52.46 B. Statement of IFC Investments (As of March 31, 1986) Fiscal Obligor Year Outstanding Loan Equity Total 1981 Somali Molasses Co. Ltd. 0.159 _ 0.159 1985 Polypropylene Bag Co. 0.605 - 0.605 Total now held by IFC 0.764 - 0.764 1/ Original US amount.  - 33 - Annex III Page 1 of 2 SOIKALIA PORT MODERNIZATION PROJECT Supplementary Data Sheet Section I - Timetable of Key Events (a) Time taken to prepare project: 18 months (b) Project Prepared by : IDA staff and consultants (c) Identification mission : May 1984 (d) Appraisal mission : September 1985 (e) Negotiations : April 1986 (f) Planned date of effectiveness: August 1, 1986. Section II - Special IDA Implementation Action: None Section III - Special Conditions Conditions of Effectiveness (a) SPA will establish a Training Fund to be financed by annual appropriations on a graduated scale of percentages of SPA's annual revenues (para. 64); (b) SPA will open an external foreign currency account in which it will deposit a sufficient proportion of its foreign currency revenues to meet its requirement for spare parts and other foreign currency expenses (para. 72); (c) SPA will enter into arrangements satisfactory to IDA whereby selected major international shipping lines say undertake contadiner/ro-ro operations within a defined area set aside for this purpose in the port of Mogadishu (para. 61); (d) The Government will submit to IDA for review and approval a plan of action for Improving the efficiency of SSAL including allowing private individuals and companies including joint ventures of foreign and local interests to engage in shipping agency work (para. 51); and (e) Government will provide detailed plans for the settlement of overdue debts to SPA by other Government agencies (para. 73).  - 34 - Annex III rage Z oT 2 Other Conditions (f) SPA will set its tariffs to achieve a rate of return of 5 percent per annum from 1989 on its net fixed assets in use as annually revalued (para 73); (g) SPA will provide plans for the phased implementation of structural tariff increases between July 1986 and December 1988 by March 31, 1987 (para 73); (h) Port tariffs will be reviewed semi-annually from 1989 and adjusted as necessary to meet financial objectives (para 73); (i) During the project implementation period, no other capital expenditure beyond the equivalent of US$500,000 is to be undertaken by SPA without the concurrence of IDA (para 69); (j) DurSng the project implementation period, no additional debt is to be contracted by SPA if such debt will lead to the overall debt service ratio falling below four times (para. 73); (k) Not later than July 1, 1987 SPA will submit to IDA for review and coments its proposals for standardizing the gang composition for the handling of conventional cargo and thereafter implement such proposals taking into account IDA's coments and the availability of equipment to be procured under the project (para 61); (1) By April 1 of each fiscal year, SPA will deposit into the Training Fund a proportion of its gross revenue of the previous fiscal year on the agreed scale (para. 64); (i) SPA will mintain until the completion of the project, a special account in a commercial bank outside Somalia and shall deposit therein an amount in US dollars sufficient to meet its annual needs for spare parts and equipment (para. 72); (n) Government will implement the plan of action approved by IDA to improve shipping agency work (para. 51); (o) SPA will undertake to achieve the performance targets agreed upon (para 61); and (p) SPA will forward audited financial accounts to IDA no later than nine months from the end of each financial year in 1987 and 1988 and no later than seven months from such year end in subsequent years (para 74),  - 35 - Annex IV Procurement Methods and Costs (US$ million) Total Project Element ICB LCB Other Cost 1. Cargo handling, office, training, 6.78 - - 6.78 and workshop equipment (6.78) (6.78) 2. Refurbishing of old equipment 0.10 - 0.10 (0.10) (0.10) 3. Dry-docking of tugs 0.72 - 0.72 (0.72) (0.72) 4. Port improvement (civil) works 7.32 7.32 (5.99) (5.99) 5. Rectification of breakwater 5.26 5.26 subsidence (4.78) (4.78) 6. Consultant services 4.20 4.20 _____ _ -(4.18) (4.18) Total 19.36 0.82 4.20 24.38 (17.55) (0.82) (4.18) (22.55) Figures in parentheses are the amounts financed by IDA.  IBRD 19505 - PEOPtES D CRATC f? * 'JIBOUTK) REPUBLIC OF YEMEN -l2- X~~DJ I BOUTI ; ,4J;GJi B d J.1r SOMALIA~~~~~~~~~~~~~~Add BIS 4:,_ ) /, PROJECT ,OTm Lot Sr GRAV,,.UE,- NYN'_ SUEU SOufcS TW Wuo; X g BerX <bwo 4. MA.~~~~~~~~~~~~~~~~~~~A ORTS~~~~Grb BileOl S o M A L I AES PORT MODERNIZATIONR-SELDS PROJECT B g A. - PROJECT KJORTS V BITUMNOUS SIOFACED ROADhIS A GRAVELIEANTH SUR FACED OADS. *I 4r AJOR oorTS DOMESTIC AIRFIELDS v INtERllATKYWAL AIRFIELDS QVt L DISTRICr BOUNDARIES , __REGIDh. IliilDARlf S jrJ .,. -* NTERNATiONAL BOUNDARIES 9 , ln _._-., . !i./ElBur ( or)i Bur Akobao ..W t - -, O Dinsar * Bl ! 2\ ^ > t x o --- fl~~~~~~~~~ SAUDI ARABIAI 4-- KILOMETERSmw o l ~ \ OMAN - ^Sa .. % ^ ' /Blle SUOAN_J - / _IB \A% g" Ot.F 6 j , _ o s,, E T H ~~~~~~~~~~~~~~~~~~~~~~~~~~~~DIBOUPTI A. r bKOlbio ^. D-. . d = \ / / . \s Y~~~ _.___'r___S___5__._____a .U Ubm B' eE ,.e' ,f'1',ANUAR 1986 tiGANMANAR 198  SO M A L I A PORT MODERNIZATION PROJECT PORT OF MOGADISHU 4-~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~04 %%% ~~~~~~~~~~~~~~EXISTING FACILITIES ,- - - PROPOSED DEVE.OPML -, --- PIPELINES FOR OIL PRS /r~~~~~~~~~~ PRPOE DVLOM PIPELINES FOR OIL PRC~~~~~~~~  I GUARD MOUSE IA NASHING AREA 2 I T WEIGC. BRIDGE '5 OFFICE 3 0 T WEIGH sBRIDGE 16 SUBSTATION sE<_ 4j' \ I *f . FIRE STATICN '7 'OILETS -I..G _ S=; < ff 5. POLICE BUILDINC- *. SHCwERS 6 CFFI:ES '9 ELECTRIICAL ASIN :JSTC'MS :r, OCAM 2.CPCPTlC-4E B ;ADMINISTRAT:CNi :1 riRE P'J-05 OFFILC .%MI 2 -P.wERE RECEIVER ' . CANTEEN 23 i.ENTCC SPAN 1t SERvICE STATICN :4 R: RC 'AP ': IE"ICLE ;Epkq I-cp :5 AiPC;;' :.:.STCs NAREP.OUSE / 7J3 INSPECCN :e ANNEX Z=''CES KAN ---'S~~~~~~~~~~~~~~~~~~~~~~~OE WORI/S X 4EXlTlC MARSHALLING YARD/ OLE, i A N".LS - - ~~~~~~~~~~~~7 iW-//0 100 200 FEEr 0 25 50 METERS - --. _ _ .-__ - ; - -t _-J 1 JAN UA RY 19836  MLNWH.D -IoLAM.W . / CONTMNER YARD EXTEN F A ~~~~~~~~~~~~~~~~PE1014 STATIO I IrI '/ ~ I ; ,/"~/ //\ , riEPERAL~~~~~~~~~~~~~SC ETR /Z 4w^,<\ 0 50 100 150 FEET X _ \ / > ' O ~ ~~ ~ ~~~~~~~~~~~~ 25 SDbMETERS /_F | >'s / _ '~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~I  IBRD 1946- S O M A L I A PORT MODERNIZATION PROJECT PORT OF BERBERA : / A-, RA N. ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~~~~~~~~~~. -~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~JNAZ 19EEE=-6 t -'""'-'I3LJW / \~~~ j ,. o<S\/ - t - - - - - S s eW l - --/ IPr---h-<w\ / I*_ _ *~xs I PRPOE DEVELOPMENT< /~~~~~~~~~~~~~~~~~~~~~~~~~~JNAY18  MOLASSES TANK / CONTAINER YARD cc ~~~~~~~~~~~NEW f OF Rh TRAN ~~~~~~~RCO-RO RAMP MAINTENANCE - .t j\ - -i - t TRANSIT ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ TANI SHEO WATER \-S ~ ~ ~ ~ ~ ~ ~~~~~I I Ii \ fO II I ir _NEAC 4t_o W09KSHOP~ .~f -OG'MN S -@ - -- ,~ |e- - _o  S O M A L I A PORT MODERNIZATION PROJECT PORT OF KISMAYO .I EXISTING FACILITIES 3J PROPOSED DEVELOPMENT O S 10 FEET a 1 2 1 . 5 ME TE RS FRO1NT TAT EDP PIE R ~M -9.5 '. _' _ BLDG I I Id -1I IF BLDG SCALE HOUSE ~~~~~~~~~~ACCESS CAUSEWAY I IIi I f Ii -I II lil JANUARY 1996