Somalia - Fourth Port Project

Document of The World Bank FOR OMCIAL USE ONLY Report No. 6223 PROJECT COIMPLETION REPORT SOMALIA FOURTH PORT PROJECT CREDIT 838-So May 30, 1986 Eastern and Southern Africa Region Transportation Division This document has a restricted distribution and may be used by tecipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  FOX OMCIAL USE ONLY THE WORtLD BANKa Washington, D.C. 20433 U.S.A. OW.ce A o0ectcv.Geeal ,.4 May 30, 1986 MEMORANDUM TO THE EXECUTIVE DIRECTORS AND THE PRESIDENT SUBJECT: Project Completion Report on Somalia Fourth Port Project (Credit 838-SO) Attached, for information, is a copy of a report entitled "Project- Completion Report on Somalia Fourth Port Project (Credit 838-SO)" prepared by the Eastern and Southern Africa Regional Office. Under the modified system for project 'erformance auditing, fur.ther evaluation of this project by the Operations Evaluation Department has not been made. Attachment This document has a restricted distribution and may be used by tcipints only in the performance of their official duties. Its contents may not otherwis be disclosed without World Bank autborization.  FOR OFFICIAL USE ONLY SOMHALIA PROJET CNPLUTIC REPORT FOURTH PORT PROJCT CREDIT 838-SO TABLE OF CONTENTS PAGE PREFACE.... ............. ..................................... i KEY PROJECT DATA . ................. ii HIGRLIGHTS* ....t......... ***o..... iV L. INTRODUCTION.-** 1ooo o II. PROJECT PREPARATION AND APPRAISAL ...........2.....a 2 [II. PROJECT IMPLEMENTATION AND COST ................. 3 IV. OPERATING PERFORMANCE ..A.. ...... E... .. ....... *.... 8 V. FINANCIAL PERORKANCEN........ 8 VI. INSTITUTIONAL DEVELOPMENT ...................*9 VII. ECONOMIC RE-EVALUATION ...............**... 9 VIII.CONCLUSIONS 6"".0 .......... I . 10 TABLES 1. PROJECT COSTS......... ........................... 12 2. CUMULATIVE DISBURSEMENT SCHEDULE............ 13 3. MOGADISHU PORT THROUGHPUT..................... ..... 14 4. SPA THROUGHPUT - ALL PORTS............................. 15 5. OPERATING STATEMENTS ....................... . . 16 6. COMPARATIVE BALANCE SHEETS ........................ 17 7. CASH FLOW*...# ........ . ..... 18 8. CALCULATION OF PROJECT BENEFITS ............. . ... 19 APPENDIX 1 - General Plan of Mogadishu Harbour .20 ANNEX - Borrower Comment .21 MAP IBRD-13535 This document has a rstricted distribution and may be used by recipients only in the performance of their ofcial duties. Its contents may not otherwise be disclosed without World Bank authotiution.  -i- SCKMAJA PROJECT COMPLETION REPORT FOURTH PORT PROJECT - CREDIT 838-SO Preface %redit 838-SO for the Fourth Port Project for US$ 5.5 million was signed on August 23, 1978 and became effective June 27, 1979. The Closing Date was June 30, 1981. Due to the high bids received for the construction works the project was completely redesigned and resubmitted to the Board on March 26, 1981, signed March 27, 1981 and became effective the same day. The revised Closing Date was December 31, 1983. The Credit was disbursed by July 1984 except for a cancellation of US$ 90,000. This report consists of a Project Completion Report (PCR) prepared by the Eastern and Southern Africa Projects Department. The PCR was prepared on the basis of information contained in the Staff Appraisal Report, a review of Bank files including supervision and progress reports, and interviews with Government officials during a mission to Somalia in September/October 1985. In accordance with the revised procedures for project performance audit reporting, this Projecc Completion Report was read by the Operations Evaluation Department (OED) but the project was not audited by OLD staff. The draft report was sent to the Borrower for comments; their reply is shown as an Annex. 1  - ii - SOMALIA PROJECT COMPLETION REPORT FOURTH PORT PROJECT (CREDIT 838-SO) BASIC DATA SHEET KEY PROJECT DATA Appraisal Revised 1) Estimate Estimate Actual Total Project Cost (US$ million) 6.6 13.0 9.3 Credit Amount 5.5 5.5 5.50 Disbursed - - 5.41 Cancelled - - 0.09 Repaid - - - Borrowers Obligation - - 5.41 Date Physical Components Completed 10/31/80 6/30/83 7/83 Proportion Completed by Above Date (%) - - 100 Proportion of Time Overrun (%) - - - Economic Rate of Return (%) 15 21 34 OTHER PROJECT DATA Original Revised 1/ Plan Actual Actual First MIentioned in Files - Negotiations 04/17/78 - - Board Approval Date 07/06/78 07/06/78 03/26/81 Credit Agreement Date 08/23/78 08/23/78 03/27/81 Effectiveness Date 11/21/78 06/27/79 03/27/81 Closing Date 06/30/81 06/30/81 12/31/83 Borrower Somali Democratic Republic Executing Agency Somali Port Authority Fiscal Year of Borrower January 1 to December 31 Follow-On Project Name Proposed Fifth Port Project CUMULATIVE ESTIMATED AND ACTUAL DISBURSEMENTS (USS,' MILLIONS) FY79 FY80 FY81 FY82 FY83 FY84 FY85 Appraisal 1.5 5.1 5.5 Actual 0.8 2.5 3.8 5.0 5.3 5.4 Actual As % of Estimate - 16 45 - - - - Date of Final Disbursement July 1984 1/ The project as originally appraised was not implemented due to the high bids for construction. The project was redesigned and resubmitted to the Board at a later date.  -iii- SOALIA PROJECT COMPLETION REPORT OUmR POn PROJECT CREDIT 838-SO MISSION DAT& Dates No. of Man-days Mo/Yr Persons in field Report Date Identification 12/76 2 28 2/9/77 Appraisal 12/77 3 42 6/30/78 70 Supervision 1 2/79 3 24 3/29/79 2 8/79 2 16 9/27/79 3 3/80 1 5 3/28/80 4 6/80 1 7 8/26/80 5 6/81 2 16 6/26/81 6 12/81 2 16 1/07/82 7 5/82 2 16 6/25/82 8 2/83 2 14 4/01/83 9 10/83 2 16 11/30/83 130 CURRENCY EXCHANGE RATES Name of Currency: Somali Shillings (So.Sh.) Year Exchange Rate Appraisal (1977) US$ - So.Sh. 6.295 1977-1981 US$ - So.Sh. 6.295 1982 US$ - So.Sh. 15.206 Completion,(1983) US$ - So.Sh. 17.556 ABBiRVIATIONS DANIDA Danish International Development Agency EDF European Development Fund Ro-Ro Roll-On Roll-Off SPA Somalia Ports Authority  - iv - SOMALIA PROJE.CT COMPLETION REPORT FOURTH PORT PROJECT - CREDIT 838-SO Highlights 1. At the time of appraisal Somalia and Iraq had entered into an agreement to construct a joint venture refinery 15 km south of Mogadishu. It wa& expected that the refinery would operate at full capacity of 500,000 tonnes per year commencing in mid-1978. Consumption of refined products within Somalia amounted to some 200,000 tonnes per year and the balance was to be exported. The existing facility for unloading petroleum products from small tankers was located in the open sea close to the rocky shore and was dangerous and inefficient. The Fourth Port Project was to finance the foreign exchange component of facilities to address these problems. In particular the project was to provide a tanker pier for small products tankers, the required causeway and/or trestles which would carry a crude oil pipeline and a petroleum products pipeline, and hydraulic model tests, site investigations, detailed engineering, preparation of tender documents, assistance during tendering and supervisioa of construction. The project was also to prov:Je consulting services for engineering, site investigation, etc. for a proposed 210 m extension of the existing banana quay. 2. During the five years prior to appraisal, total traffic at Mogadishu Port had been growing at an annual rate of about 12% per annum. The project was appraised during December 1977 and the preliminary design completed in February 1979. Bids were invited in November 1979 and the lowest bid was approximately 3 times the appraisal estimate mainly because shortly before bid opening bidders were informed by Government of unexploded World War II ammunition in the dredge area. Subsequently the original project was discarded and-it was decided to proceed with the extension to the banana berth for which bids had already been invited. The revised project was approved by the Board on March 26, 1981, signed and became effective March 27, 1981. The project as originally appraised was to be completed October 31, 1980 and Closing Date was June 30, 1981. The revised project was to be completed June 30, 1983. The provisional certificate for completion of works was actually issued July 10, 1983. 3. The project as revised was estimated to have a total cost of US$13.0 million with a foreign component of US$9.6 million. Actual cost amounted to US$9.3 million with a foreign component of US$8.3 million. Some of the reductions in costs were the result of foreign exchange fluctuations. 4. Traffic at Mogadiqhu for the seven years 1978 to 1984, excluding petroleum products, grew at about the estimated appraisal rate. Petroleum traffic did not materialize due to the conflict between Iraq and Iran. However as the remaining traffi- did register a growth rate the decision to construct a general cargo berth was, in hindsight, a fortunate decision. In addition, the project called for the construction of sheds for cargo at  - v - the rear of the banana berth (berth 5) and the extension (berth 6). During implementation container traffic showed a substantial increase. It was decided to delete the sheds and leave the areas to be used as a cuntainer park and to construct a Ro-Ro ramp at the outer end of berth 6. The location of the ramp is not ideal but the additional cost was minimal. 5. Additional. points of particular interest are: (i) profitability of the Somalia Ports Authority was much better than projected as revenues increased at a greater rate than working expenses due to the increase in traffic throughput and a tariff increase in 1983 (para. 5.01); (ii) dividends to the Government equal to 80% of profits were paid or provided for in each year, and the return on net fixed assets ranged from 16.9% (1979) to 48.2% (1984) (para. 5.02); (iii) minimal progress was made in the areas of cost accounting and institutional development (paras. 6.02 and 6.04); and (iv) the co-financing arrangement with DANIDA was excellent and extremely flexible (paras. 3.17 and 3.18).  SONALIA PROJECT COMPLETION REPORT . ~~~~~~~I FOURTE PORT PROJECT - CREDIT 838-SO I. INTRODUCTION 1.01 Somalia's transport infrastructure comprise three principal ports, 10 airports, about 17,700 km of roads, but no railways or pipelines. The three major ports, Berbera in the north on the Gulf of Aden, and Mogadishu and Kismayo in the south, handle practically all of Somalia's ocean transport. Berbera exports mostly livestock; Mogadishu imports most of the country's general cargo; and Kismayo exports bananas and meat. Until recent years Mecca, a lighterage port, exported bananas but these are now trucked to Mogadishu for export. The Second and Third Highway Projects (Credits 295-SO and Credit 699-SO) were designed, inter alia, to -mprove the transport of livestock to Berbera. The Fourth Port Project was designed primarily to supply a tanker pier in the port of Mogadishu for the import of crude oil to be refined in Somalia and to facilitate the export of refined petroleum products not consum6d within the country. It also included pipelines within the port, hydraulic model tests, site investigation, detailed engineering and engineering supervision. Provision was also made for engineering for an extension to the existing banana quay to be constructed in a follow-up project. 1.02 The First Port Project (S5-SO, US$550,000) in 1969 was for engineering and accounting consultancy services. These preparations resulted in the Second Port Project (359-SO, US$12.95 million) in 1973 together with an EDF grant of US$12.5 million to finance a breakwater, three berths, a dolphin berth and associated facilities. During execution of this project a Third Port Project (Cr.586-SO, US$5.2 million) was approved. This project was for an additional 180 meter berth and a corresponding extension of the breakwater. For the purpose of the Project Completion Report the Second and Third Port Projects were treated as one. The total costs of the two projects was only 6% above the funds originally allocated. However, the time overrun was 40% on the Second Project and 60% on the Third Project. The economic return on the combined projects was slightly higher than the appraisal estimates. 1.03 The Fourth Port Project was identified during a mission to Somalia in November/December 1976 and was appraised one year later in December 1977. The original design at time of appraisal is set out in para. 1.01 but was substantially revised at a later date as the lowest of six bids received was So.SH 89.6 million as compared with the appraisal estimate of So SH 27.7 million. The Credit, which had been approved by the Board on July 6, 1978, had to be resubmitted and was approved on March 26, 1981. The revised legal documents were signed on March 27, 1981 and the revised project became effecti,'e as of that date. 1.04 The IDA Credit of US$5.5 million and a Loan of about US$4.1 million equivalent from the Government of Denmark were to finance all foreign costs and the Government was to finance the local cost component.  -2- 1.05 This completion report is based on: (i) a review of the project files; and (ii) information collected on a mission to Somalia luting September/October 1985. II. PROJECT PREPARATION AND APPRAISAL Origin of the Project 2.01 Somalia and Iraq entered into an agreement to construct a refinery 15 km south of Mogadishu in 1976 on a fifty-fifty basis. It was anticipated that the refinery would operate at full capacity of 500,000 tonnes per year from mid 1978. Local consumption amounted to approximately 200,000 tonnes per year and the remainder would be exported. Imports of crude and exports of refined petroleum products would temporarily be handled at a tanker facility at the third general cargo berth which would restrict the use of this berth for general cargo to half of its capacity. 2.02 At the request of the Somalia Government a Bank mission visited Somalia from November 29 to December 12, 1976 to undertake a Ports Survey. The survey indicated, inter alia, that a tanker terminal for Mogadishu would be needed when the refinery was completed. It was estimated by the mission that comoletion would probably be late 1978 or early 1979. A tanker terminal study by consultants, financed under the Third Port Project (Credit 586-SO), was commissioned and the preliminary report submitted June 16, 1977. hwpraisal 2.03 The Fourth Port Project was appraised in December 1977 and was primarily based on the need for such a terminal. Design of the terminal and facilities was financed by the Project Preparation Facility with the preliminary phase completed in February 1979. The Credit became effective on June 27, 1979. 2.04 Although the Credit did not become effective until June 1979 it was approved by the Board in July 1978, six months after appraisal, and signed on August 23, 1978. The first supervision mission visited Somalia, before effectiveness, during February 1979. At that time the schedule called for completion of tender documents by July 1, 1979 and award of contract by December 1979. During the February mission certain changes in design recommended by the consultant were agreed with the Government and the Association. The estimated cost of these changes amounted to approximately So.SH 4.0 million (US$660,000 equivalent). To offset this increase, certain cost saving measures were suggested including the use of an SPA dredge to reduce dredging costs. 2.05 In regard to institutional and managerial improvements the SPA was to employ a qualified and competent port management expert for a period of it least two years. While included in the Project, financing was  -3- obtained from EDF. Also SPA was to prepare a training program for its staff. Project Description 2.06 The description of the project is as follows: (a) a tanker pier for crude oil tankers of maximum 50,000 dwt and for small products tankers. It was to consist of a loading/unloading platform, berthing platforms and mooring platforms connected to shore by a causeway and/or trestles which would carry a crude oil pipeline and petroleun products pipelines and a roadway for small trucks; (b) pipelines within the port limits; (c) hydraulic model tests, site investigations, detailed engineer4.ng, preparation of tender documents, assistance during tendering and supervision of construction of the tanker terminal by consulting engineers; and (d) site investigation, detailed engineering, preparation of tender documents and assistance during tendering by consulting engineers for a 210 meter extension of the existing banana quay in Mogadishu harbor for general cargo traffic, the construction of which would be optional under the tanker terminal contract, and would depend on the rate of traffic growth. The option would be considered when completion of construction of Ihe tanker terminal was approaching. III. PROJECT IALENBUTArEION ND COST Start up 3.01 In August 1979 a meeting was held in Copenhagen for a final review of tender documents for the civil works component of the project. Attending the meeting were representatives of tine Government of Somalia, the consulting engineers, and the Association. The prime purpose was to clarify the documents and for all parties tc agree as to precisely what was to be included, and to ensure that procedures followed Bank Guidelines. The Association representative stated, inter alia, in his report of the meeting " there were likely to be cost problems on this contract, as a consequence of which early uttention should be given to possibilities for cost adjustment". He then set out four possible alternatives for cost savings (Memo to files dated August 10, 1S79). 3.02 Before calling for bids it was decided to use the dredged material in reclaiming an area 200 m by 120 m behind the proposed tanker terminal. The reclaimed area was to be protected against wave action by using rubble mound type dykes. At Government request the consultants updated their cost estimates on August 7, 1979 and the revised estimate  - 4 - without contingencies was So.Sh.39.4 million compared with appraisal estimated costs of SoSH 27.7 million. 3.03 Bids were invited from some twenty international contractors which had prequalified. Four con.ractors submitted bids based on the consultants design and three of these also submitted bids based on an alternative design of their own. A fifth contractor submitted a bid based only on his own design. 3.04 Shortly before the date set for submitting bids, one contractor learned of the presence of unexploded ammunition within the dredge area and informed the other contractors. During World War II the Italians dumped large quantities of anti-tank shells in the area and the Government employed an underwater exploration company in August 1975 to carry out an "Unexploded Ordance Survey " in the port. The report was submitted to Government on January 7, 1476. The main findings of the survey were: (a) unexploded ammunition was p1resent within the dredge area; (b) the main area of concentrati&n was defined; (c) the exact quantity of ammunition was still undetermined but in all probability existed in substantial amounts; and (d) from the tests carried out on the recovered shells it seemed likely that most o. the ammunition was probably "inert" whilst wet, but the possible presence of other types of ordinance in a volatile state could not be ruled out. 3.05 There is no doubt that this information was known to Government as the issue was raised in the meeting of August 6, 1979 between the consultants and Government representative in Copenhagen and is included in the minutes of the meeting. Shortly before the date set for opening the bids the Government agreed to the consultant :fficially informing all prospective bidders. This was done by Addendum No. 5 to the tender documents. However, the addendum was dated November 12, 1979, nine days before the date set for bid openings; it reached the bidders only two or three days before they submitted their bids; and it stated that "It shall be stressed that the removal of possible explosives within the working area, including clearance, will not be part of the contract." It did not comment on who would be responsible for the removal, when it would be done, or how the contractor would be compensated for possible damage to personnel or equipment. 3.06 The five bids received are set out below: