China - Ningbo and Shanghai Ports Project : Ningbo Port

Document of The World Bank FOR OFFICIAL USE ONLY &A/ 30026-G,-c~Hf Report No. 7297-CHA STAFF APPRAISAL REPORT CHINA NINGBO AND SHANGHAI PORTS PROJECT NINGBO PORT November 16, 1988 Transport and Energy Operations Division Country Department III Asia Regional Office This document has a restricted distribution and may be used by recipients only in the performance of the. official duties. Its contents may not otherwise be disclosed without World Bank authorization.  CURRENCY EQUIVALENTS (as of December 1988) Currency name = Renminbi (RMB) Currency unit = Yuan (Y) US$1.00 = Y 3.7O US$0.27 = Y 1.00 US$270,270 = Y 1,000,000 FISCAL YEAR January 1 to Decemtor 31 MEASUREMENT EQUIVALENTS Metric System British/Chinese 1 meter (m) 2 3.281 feet 1 square meter (s2) = 10.764 square feet 1 cubic meter (m ) 35.315 cubic feet 1 kilometer (km) = 0.621 mile = 0.5396 nautical mile 1 ton-km = 0.621 ton-mile 1 ton = 2,204 pounds 1 hectare (ha) = 2.469 acres -14.993 mu PRINCIPAL ABBREVIATIONS AND ACRONYMS USED AAPRC - Audit Administration of the People's Republic of China ADT - Average Daily Traffic cif - Cost, insurance'and freight COSCO - China Ocean Shipping Corporation CNTIC - China National Technical Import Corporation dwt - Dead weight tons ERR - Economic Rate of Return FYP - Five Year Plan FY - Fiscal Year GOC - Government of China LRMC - Long Run Marginal Cost MLW - Mean Low Water MOC - Ministry of Communications MOF - Ministry of Finance MR - Ministry of Railways NM - Ningbo Municipality NPA - Ningbo Port Authority NPV - Net Present Value nrt - Net registered ton PBC People's Bank of China SPC - State Planning Commission teu - Twenty-foot equivalent unit  FOR OMCIAL USE ONLY CHINA NINGBO AND SHANGHAI PORTS PROJECT NINCBO PORT Loan and Project Summary Borrower: People's Republic of China. Beneficiaries: Ningbo Port Authority (NPA) and Shanghai Harbor Bureau (SHB) Amount: $76.4 million equivalent: $30.0 million for Ningbo; and $46.4 million for Shanghai. Terms: Twenty years, inciuding five years of grace, at the standard variable izterest rate. Relending Terms: Out of the proceeds of the loan,$30 million would be onlent by the Government to NPA under a subsidiary loan agreement with a 20-year term, including 5 years of grace, at an interest rate of 5X p.a. The foreign exchange risk between the dollar and RMB and commitment fees would be borne by NPA. Project Objectives: The principal objective of the project is to assist the Government in its efforts to improve operations, relieve congestion and increase the handling capacity in the ports subsector. The project would provide for infrastructure development at key ports in China, as well as technical assistance and train- ing to strengthen the ports' managements and improve their operating capabilities and to address long- term aspects of port development. Project Descrietion: The proposed project includes developments at Ningbo (Ningbo Port) port which consist of: (a) construction of one container berth and two general purpose berths capable of being converted to container berths as and when needed, together with the necessary infrastructure including two causeways, yards, railways, roadways, water supply, sewerage and power supply eystems; (b) provision of the required loading/unloading equipment, some harbor operation equipment, boats and computers; and (c) provision of the technical assistance needed to implement an action plan to improve port operations; update the master plan; carry out a port optimization study; and train port personnel. Riski: The project has no significant risks since all components involve proven technology that has been in extended use in China or in other parts of the world. This document has anrstricted distribution and may be used by recipients only in the performance| of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.|  Estimated Project Costs: Local Foreign Total (Ningbo Port) --- - (US$ million) ---------- Civil works 15.7 23.4 39.1 Equipment 1.4 20.2 21.6 Training 0.5 0.4 0.9 Technizal assistance 3.0 1.7 4.7 Subtotal 20.6 45.7 66.3 Contingencies Physical 2.1 4.6 6.7 Price 0.8 1.9 2.7 Total Project Cost 23.5 52.2 75.7 Financing Plan (Ningbo Port): Bank lan - 30.0 30.0 NPA/Government 23.5 22.2 45.7 Total 23.5 52.2 75.7 Estimated Disbursements: Bank PY 1989 1990 1991 1992 1993 -------- (US-millionT ----------- Annual 5 9 8 5 3 Cumulative 5 14 22 27 30 Economic Rate of Return (Ningbo Port): 26X MEs IBRD 20284 IBRD 20932  - iii CHINA NINGBO, XIAMEN AND SHANGHAI PORTS PROJECT NINGBO PORT Table of Contents Page No. I. THE TRANSPORT SECTOR ........................................ 1 | A* Traffic*..*................................... I C. Land Transport Systems........................................ 2 D. Transport Issues and Objectives in the 1980s............ 3 II. THE PORTS SUBSECTOR ............. ...........*.*** 4 A. Port Traffic............................................ 4 B. Organization and Management .......................o ...... 5 C. Operations and Maintenanceo......e.e. . . . . . . . . . . . . . . . . .. . . . . 6 D. Investment Priorities and Technology.................... 7 F. The Role of the Bank.................................... 9 C. Experience in Past Lending.............................. 10 III. NINGBO PORT ........................................ 1O A. Regional Transport Network............................... 11 B. Existing Facilities ..OfoOOO.000000............. ........................ 12 C* Port Traffic .........e..........................o....s....o...o....e 13 D. Port Operations .............e eoooooose.ooo.o.o.. .............. 13 E. Port Organization and Management............... o...... 14 F. Planning, Blidgeting, Accounting and Auditing************ 14 This report was written by Ismail Mobarek, George Tharakan, Hank Yen and Nils Birgander, who appraised the project in March 1988. Keith Thomas assisted with the financial analysis.  - iv - Page No. IV. THE PROJECT ........................... 15 A. Project Obee c t i v e s 15 B. Project Description......................... ............ 15 C. Cost Estimates...t ie... 17 D. Financing Plal.....an... . 19 E. Implementation .. 00 19 F. Procurement*m...t 20 C. Disbursements ...... 21 H. Ecology and Environment. .... ..... . ..... *....*.. . . 21 r. Reporting and Project Completion Report po rt... 21 V. ECONOMIC EVALUATION...U................. ....o.. 22 A. Break-Bulk and Container Traffic.a ff....c..0.0....000 22 B. Impact on Operations... ..... ............6o ................ 23 C. Costs and B eie f i t s 23 D. Overall Evaluation and Sensitivity Analysislysis....... 25 E . Project Risk sk . 26 VI. FINANCIAL ANALYSISN................ 26 A Past Results... .............. . 26 B. Present Financial Positions..... 27 C. Future Financial Performance........................ 28 VII. AGREEMENTS TO BE REACHED AND RECOMMENDATIONS................ 29 ANNEXES 1. Documents in the Project File 2. Training Program 3. Training and Technical Assistance: Schedule and Estimated Cost 4. Terms of Reference: Updating the Master Plan for the Port of Ningbo 5. Terms of Reference: Port Development Optimization Study 6. Environmental Cond'tions in the Port 7. Port Operations, Maint4nance and Environmental Improvement Action Plan 8. Semi-Annual Progress Reports  TABLES 3.1 Economic and Demographic Data for the Hinterland 3.2 Existing and Proposed Berths 3.3 Port Traffic and Forecasts, 1981-2000 3.4 Shipping Statistics, 1986 4.1 Project Cost Summary 4.2 Project Cost Estimates (US$) 4.3 Project Cost Estimates (RMB) 4.4 List of Cargo Handling Equipment 4.5 Cumulative Disbursement Schedule 5.1 Traffic Projections Used in the Economic Analysis 5.2 Operational Parameters Assumed for Economic Evaluation 5.3 Project Economic Cost Estimates 5.4 Ship Time Asialysis Without and With Proposed Berths 5.5 Loading/Unloading Cost Savings 5.6 Container Sea Transport Costs and Savings 5.7 Economic Benefits Summary 5.8 Economic Rates of Return and Sensitivity Analysis 6.1 NPA: Income Statements 6.2 NPA: Funds Flow Statements,, 1983-94 6.3 NPA: Balance Sheets, 1983-94 6.4 Assumptions for the Financial Forecasts CHARTS A. Organization Chart of NPA B. Implementation Schedule C. Procurement Schedule MAPS IBRD 20932 IBRD 20284  CHINA NINCBO, XIAMEN AND SHANGHAI PORTS PROJECT NINGBO PORT 1/ I. THE TRANSPORT SECTOR 1.1 Chinese policy statements repeatedly identify transportation and energy shortages as the two most critical bottlenecks in the economy. The rapid growth of China's economy in recent years has stimulated an increasing demand for the shipment of commodities of all sorts, and for passenger travel as well. Efforts to reduce waste within the transport system (for example, by eliminating cross-hauling of the same commodity, increasing the prccessing of raw materials before shipment, and increasing the intensity of road snd waterway utilization) are certainly desirable, and are being pursued. More fundamentally, however, the Government's strategy for solving transportation shortages will have to rely on an expansion of the system's capacity, by increasing the productivity of existing facilities wherever possible, and by building new facilities where necessary. A. Traffic 1.2 Freight Traffic. Domestic freight transported in 1986 by all modes reached 1,383 billion ton-km, representing an 8Z increase over 1985 and an average annual growth rate since 1952 of almost 9%, consistently higher than the growth of domestic product. By the year 2000, domestic freight traffic could be in the range of 3,000 billion ton-km. The modal split has moved toward a more balanced use of modes, with the railways' dominant share of 822 ia 1952 reduced to 63% by 1986. 1.3 Pa_senge. traffic reached 459 billion passenger-km (p-km) in 1986, up 72 over 1985 and representing an average annual growth ra.ce of 11 since 1978 and almost 92 since 1952. This illustrates the increasing demand for travel as income grows. It is likely that this growth would have been even more rapid if it had not been constrained by the limited capacity of the transport sector, particularly the railways, to offer more pass;nger services. Railways are the major passenger carrier, handling 562 of the traffic in 1986. Despite the rapid growth of passenger traffic in recent years, the mobility of the Chinese people is still much lower than that of people in countries with comparable income levels. By the turn of the century, passenger traffic may well reach about 1,500 billion p-km per year. 1/ The Ningbo Port Project is a component of a proposed project (Ningbo and Shanghai Ports Project), the other component of which is for Shanghai port. The Ningbo component is referred to in the text of this report as the Project.  - 2 - B. Investment 1.4 Over the -period 1953-85, some Y 154 billion, or 14% of all new investments under central government corn:rol, went to transport. In comparison with other countries, annual levels of transport investment appear to have been on the low side, a factor contributing to transport now being a bottleneck to economic development. For example, by 1983, 30 million tons of coal had accumulated in Shanxi Province for lack of transport, and seme of this stockpiled coal was destroyed by spontaneous combustion. Despite a recent policy of curtailing production to match available transport, the volume of coal stockpiled in Shanxi has again begun increasing. Rural areas are short of transport, beth for agriculture and for other rural enterprises. In the ports, lack of proper handling facilities is hampering trade in bulk commodities such as fertilizers, cement and grain. In the coming decades, a much Larger investment effort will be needed in transport if these bottlenecks are to be overcome. C. Land Transport Systems 1.5 The railway system, in 1986, consisted of some 52,000 route-km, of which about 10,600 km are double or multiple-track and t,430 km are electrified. The network is served by 12,270 locomotives, 314,540 freight cars and 22,140 passenger coaches. At present, 61Z of tractive power is still steam, 33% diesel and 61 electric. Freight traffic density averages 16.7 mil- lion net ton-km per route-km which is the second highest freight density in the world after the Soviet Union, and nearly twice that of the United States. Freight traffic reached 877 billion t-km in 1986. Growth averaged 5.6% p.a. since 1978, and reached 7.8% in 1986. Three-quarters of all freight traffic involves ten commodities including coal, timber, iron and steel, grain and construction materials. The passenger traffic density of 4.9 million pas- senger-km per route-km is now the world's highest. In 1986 1.1 billion passengers were carried. The average annual increase since 1978 has been 101. Despite some possible rationalization in the transport of raw materials and heavy industrial outputs, there i: no question but that the transport demand for the major commodities will continue to grow rapidly. Thus, although its share of the total is expected to decrease, rail traffic will continue to grow, requiring massive investments in line capacity, motive power and rolling stock well into the 2_-ure. 1.6 The highway system comprised about 962,800 km in 1986, of which about 204,000 km were asphalt paved, about 758,800 km, gravel and sand paved. Despite impressive expansion of the road network since 1949, when only e)ome 80,000 km of motorable roads existed, the roads in China today are inadequate because: (a) pavement strength and quality are poor; (b) there are many thousand kilometers of extremely rough macadam-surfaced roads carrying in excess of 300 average daily traffic (ADT); (c) congestion is severe near cities, due to the mixing of slow and fast moving traffic; and (d) there are gaps of about 4,000 km in major national roads linking large cities and provincial capitals. The road network and road transport in China today can therefore only be characterized as underdeveloped. Road maintenance, however, is well organized and currently absorbs much of the attention and resources of the provincial and other local road authorities. Except in western China, the  highway network is still very much a system of feeder roads to the railways. Nevertheless, motor traffic has reportedly grown at a very high overall annual average of 152 on the national highways since 1978. D. Transport Issues and Objectives in the 1980s 1.7 The transport system has been severely taxed by the pace of recent economic development and capacity constraints are evident in all modes. Coal transportation is a particularly serious case because of its significance for energy supply and hence for industrial growth. At present, trans')ort represents a greater constraint on the supply of energy than does coal mine development. China also needs to substantially expand its port and waterway facilities to relieve the growing constraint to external trade caused by inadequate berth capacity and container handling capability. There is need for dramatically expanded road transport, to serve a multiplicity of needs, including access to and from porLs. Increasing specialization and the rapid growth of light manufactures have created an urgent demand for better road transport and integrated intermodal (IIM) services. Road transport also will be called upon to meet a growing share of the demand for passenger transportation from an increasingly mobile population. 1.8 China's Seventh Five-Year Plan (7th FYP, 1986-90) acknowledges all these sectoral needs. By the end of the Plan period, freight traffic is projected to be 45X higher than in 1985, and passenger traffic 6CZ higher, with a greater share of the increase falling on road transport. To meet these needs, substantial investments are envisioned, especially in new rail lines, double-tracking and electrification of existing lines, new highways, and more berths at deep-water potts. The Plan also aims to secure efficiency gains in transportation from operational improvements; these include the development of integrated intermodal transportation networks, in particular for coal transportation and for import/export trade, and technological improvements such as container-handling facilities and intermodal transport terminals. To facilitate these developments, the Plan envisions significant institutional changes in the sector, including an extension of the policy of separating the functions of government from those of operating enterprises and delegating greater authority to the latter (recently begun in the ports subsector, paras. 2.4-6). Continuing adjustment of prices for transportation services is expected to assist the funding of investments in the sector from internally generated resources, 1.9 The Bank subscribes to the Government's objectives for development of the transport sector, and is supporting its initiatives with both financial and technical assistance. Three railway projects (Loans 2394-CHA, 2540-CHA, 2678/Cr. 1680-CHA) have assisted the expansion of capacity on key routes and the manufacture of electric locomotives, passenger coaches and signalling eq.,Apment; a fourth Railway Project, approved by the Executive Directors on June ;3, 1988, provides for strategic studies tor technological modernization, as well as expansion of line capacities and manufacturing facilities. Four highway projects (Loan 2539/Credit 1594-CHA, mnd Loan 2811/Credit 1792 and two additional projects approved by the Execut.4e Ulrectors on June 9, 1988) involve the construction or improvement ao b.th national and rural roads. Port-related activities are described in paras 2.21-2.22. Besides these  - 4 - subsector-specific operations, the Bank recently has begun to assist che Government in conducting strategic studies and implementing projects of a wider nature. For example, a review of the utilization of water transport was completed in 1987 a comprehensive transportation study for Guangdong Province is in progress, and a provincial transport sector project is being prepared for Jiangsu Province which includes highway and inland waterrJay improvements. A study of coal transportation is planned for FY89-90 to complement the recent'y completed study of coal pricing and an ongoing study of coal utilization. II. THE PORTS SUBSECTOR 2.1 China has 15 major deep-water ports; six of these (Shanghai, Dalian, Qingdao, Qinhuangdao, Huangpu and Tianjin) handle over 80% of the total traffic. Shanghai, with 102 berths, is one of the ten largest ports in the world. In 1987, it handled 128 million tons of cargo and more than 12 million pessengers. Ningbo Port, which is close to Shanghai, is one of China's few natural deep-water ports and is the only deep-water port on China's mid- eastern seaboard. There are also many minor ports along China's extensive coastline and 110,000 kms of navigable waterways. A. Port Traffic 2.2 Compared to other developing countries, China's port .caffic is low in rs:lation to the size of its economy. However, it has been growing rapidly since the economy was opened to foreign trade: between 1977 and 1986 traffic at the 15 major ports more than doubled, to 344 million tons. Tonnages of domestic and foreign cargoes are increasing about equally but foreign traffic is growing at a faster rate. Foreign trade is expected to cnntirue growing in step with the economy as a whole; the Sev2nth Five-Year Plan envisions total port traffi^ reaching 500 million tons by 1990, which will be more than 50% higher than the volume in 1985. About one third of total traffic is coal which moves mainly from northern coal loading ports for distribution through ports on the south and east coasts. Bottlenecks in coal transport are seen as a major constraint to continued rapid economic growth. Other bulk and neo- bulk cargoes also feature prominently in water-borne traffic. These include iron ore, grain, fertilizer, construction materials, timber and cement. General cargo usually makes up 10-20Z of the traffic at the major ports. 2.3 Cargo un :zation has only just been introduced in China, and the potential for growtn in unitized cargo movements using containers and pallets is very large. In 1986, total port container traffic was 620,000 teu (twenty- foot-equivalent units). In the first eight months of 1987, total containerized cargo amounted to 3.3 million tons; this represented a 21% increase over the same period in 1986. There are now 21 ports that handle containers and 13 specialized container berths with a total throughput capacity of over 1 million teu.  B. Organization and Management 2.4 One of the most important challenges facing the management of China's ports is how to adapt the ports to the changing circumstances brought about by the economic reforms. While the reforms were initiated in China in 1979, the port sub-sector was not affected by them until ;984, when the Ministry of Communications (HOC) started the process of port decentraliza- tion. Three features of the reforms in the port-sector will bet self- financing of port operations; investments funded by internal cash generation; and increasing competition among ports for cargo. Before the reforms, MOC set tariffs, allocated cargo, provided grant financing for major investments, covered any deficits, and received most of the surpluses generated by the ports. Now only a portion of the total cargo is allocated, tariffs for unallocated cargo are allowed to be set competitively within a narLow range, and profits are retained by the ports and are subject to taxes. The tax arrangements, however, tend to be ad hoc (usually fixed, lump-sum payments), and are apparently based on the needs of individual ports to retain surpluses. In the future, the Government plans to reduce progressively controlled allocation of traffic, reform tariffs and taxation policies, and phase o--t grant financing of investments. 2.5 The first port to be decentralized was Tianjin under a "Pilot System Reform" introduced in 1984. Under this trrangement the primary leadership of the port was tranferred from HOC to the local government. This has meant that the port received a great degree of autonomy in management, investment planning and control over its finances. As pa?; of the decentralization arrangement, Tianjin port was also exempted from paying any profits tax up to the year 1990. In 1986, the ports of Shanghai and Dalian were also decentralized with somewhat modified provisions regarding taxes and grant financing of investments. They are required to pay a fixed lump sum tax, require MOC approval of large investments, and will receive some grant financing through 1990. Huangpu port was similarly decentralized, though specific provisions were again slightly different. All of the remaining ports under HOC control are to be decentralized by the end of 1988. 2.6 The main objectives of this program of decentralization are to develop the capability and initiative of the ports' local managements, and to increase co-ordination between port development and the development plans of the region served by a port. Further, it is expected that the need to be financially self-sufficient and to compete for cargo will encourage efficiency in the ports sub-sector. Recent coments by Chinese leaders have expressed satisfaction with the program in general, and while it is still too early to evaluate the different models adopted, it appears that future policy wili tend to be more even handed and uniform in its treatment of various ports. Key elements of that policy will relate to taxation, tariffs and the financing of investments, and in order to develop efficient policies, there is a need to improve the iriormation available on port operations, costs and finances. In support of the government's initiatives in this area, the Bank is assisting HOC in conducting a number of studies including research on alternative organizational forms employed in other countries and development of port costing systems (para. 2.20).  C. Operations and Maintenance 2.7 Most major ports in China operate around the clock with a three- shift system, but operations are increasingly hampered by congestion inside the port areas. One major factor contributing to congestion is over-aged and outmoded equipment; another is an excessive reliance on breakbulk cargo handling methods which have been replaced in most major ports of the world by various forms of cargo unitization (containers, pallets, etc.). Another factor is a lack of adequate hinterland transport capacity at most of China's major ports. In addition, the tariff structure is distorted (paras. 2.15- 2.20) and fails to provide incentives for efficient utilization of existing facilities. In particular, the current port tariff does not encourage effi- cient use of often limited port storage facilities, and the use of more effi- cient unitized cargo handling techniques. 2.8 Port congestion peaked in 1985 when average ship delays for foreign trade vessels were as high as 11 days. This improved somewhat in 1986 as a result of government restrictions on imports, but port congestion is beginning to increase again with average waiting times in excess of 4-5 days in many of the major ports. These expensive ship delays can be traced to a number of deficiencies in addition to the lack of an adequate number of berths. Poor documentation procedures and inadequate intormation systems in the ports often lead to delays caused by documents not being available in time, and/or the port not having the right equipment available when a ship is ready to start loading/discharging cargo. 2.9 There is also a need to rationalize cargo movements. In many of the southern and eastern ports, a large proportion of the traffic involves ship- to-ship or ship-to-barge transfers, some of which could be avoided by direct movements between smaller pov-ts through the use of modern sea-going barges capable of operating on both ;oastal routes and inland waterways. MOC has begun efforts to rationalize traffic flows, and as part of the proposed Ningbo Port Project, a study of cargo and shipping movements in the mid-eastern region will be undertaken. 2.10 Efforts are under way to improve the productivity of port operations. Recently, the ports of Shanghai and Dalian have each retained consultants to review their operations, identify weaknesses and recommend improvements. At the ports of Ningbo, Xiamen and Shanghai, the Bank has similarly mounted major reviews of operations and maintenance, and has agreed with these ports on action plans to achieve specified performance targets within a specified time frame. The problems with productivity in China's ports, however, have less to do with poor operational practices, and are more related to the lack of adequate specialized facilities. As a result bulk cargoes are often being handled inefficiently at break-bulk facilities. Container handling capacity is well below the potential for contLinerized cargo, and little attention has been given to achieving productivity improve- ments through cargo unitization. There is a clear need to improve the availability of specialized bulk handling facilities and to increase the level of cargo unitization for break-bulk cargoes.  -7- 2.11 Excessive reliance on break-bulk handling has resulted in berth productivity levels for general cargo often being as low as 50% of that achievable with unitized cargo handling. Whereas in foreign trade some progress has beer. made through containerization, in the domestic trade little has been achieved to date. Palletization of break-bulk cargo and through movement of pallets are feasible and cost-effective means for increasing unitization of domestic break-bulk cargo, and savings would result both from improved productivity and from reductions in cargo damage and loss. The problems to be overcome however are both technological and institutional, with the latter being perhaps the more critical. MOC has initiated efforts to introduce through pallet concepts with a pilot scheme to be implemented between Cuangdong Province and Hainan Island. Lessons learned there, especia'ly concerning tne organization of through transport movements, will benefit not only the introduction of through pallets in the domestic trades, but also the through movement of containers in foreign trade. It must, how- ever, be emphasized that many of the initiatives needed are beyond the power of the ports: for instance the need for tariff reform (para.2.18), and the coordination of other entities, such as freight forwarders, involved in the through movement of cargo. 2.12 Inadequate rail and road links in a number of the ports hinder the smooth flow of cargo through the ports, cause congestion in port storage facilities, and increase costs to shippers. The proper interfacing of different transportation modes is an aspect of port development which is now receiving the urgent attention of MOC; however, only road connections are within HOC's own jurisdiction, while railways are the responsibility of the Ministry of Railways (MR). MR is itself facing a serious shortage of capacity, and the coordination of its own priority projects with those of MOC is important. 2.13 Each major port has its own maintenance works and port equipment is kept serviceable, although much of the equipment suffers frequent breakdowns because of age. The most serious maintenance problem is siltation at the estuarine ports and this requires considerable routine dredging. Some of the dredging may be excessive and could be reduced through hydrographic work to provide a better understanding of estuarine flows. D. Investment Priorities and Technology 2.14 In the 7th FYP, Government proposes to invest over Y 10 billion in the port subsector. Major investments include 120 deep-water berths and 80 smaller ones, which together with other improvements would increase deep-water harbor capacity to 500 million tons by 1990, more than 50% above that in 1985. One of the Government's priorities for the 7th FYP is to update tech- nology. For ports, this will involve in particular: (a) palletization and containerization of break-bulk cargo; (b) specialized handling equipment for bulk cargo, the majority of which is now mixed with general cargo handling, resulting in low efficiency; and (c) computerization of documentation flow and mAnagement information.  - 8 - E. Tariffs 2.15 The structure and level of port tariffs are determined jointly by the MOC, MOF and the State Price Bureau. The present tariff structure was set up in 1978 (and was revised in 1985 for foreign trade vessels) on the basis of a somewhat arbitrary allocation of costs to the different port services. The structure also reflects all the distortions inherent in the prices cf the dif- ferent factor inputs. As a first step in rationalizing tariffs, the HOC has agreed to undertake a port costing study with the assistance of the Bank (para. 2.20). 2.16 There are two tariffs in China's ports, one for foreign trade and another, lower one, for domestic trade. In foreign trade, it is understood that foreign ships pay the published harbor dues and charges while Chinese ships pay lower rates. About 80% of all Chinese cargo is carried in vessels owned or operated by the China Ocean Shipping Company (COSCO), which is controlled directly by MOC. In national terms, port tariffs paid by COSCO are little more than a transfer payment between two parts of MOC. Tariff rates could be set for efficiency objectives, but instead they seem to reflect the relative financial strengths of COSCO and the ports and their different investment requirements. By contrast, rates for foreign vessels seem to be set on the basis of what the market will bear. A 40% increase was effected in February 1985, but there was no increase in the lower rates charged for domestic vessels. 2.17 There are no shipping conference rates for Chinese ports and the ports only rarely pay demurrage charges for ship waiting. Charter contracts usually include an allowance for ship waiting time, but these charges are paid by the cargo owner, not by the port. Recently, however, ports have been sign- ing despatch agreements with ship operators guaranteeing a certain turn around time, with demurrage charges payable by q' port if the time is exceeded or premiums payable by the ship if it is handled faster. Usually the premiums far exceed the demurrage charges. 2.18 Tariff reform is necessary both to assure the future financial health of the ports and to ensure that port tariffs provide incentives for efficient utilization of port assets. In many instances the present tariff structure is inefficient on both counts, For instance, the relative prices for handling break-bulk cargo, palletized cargo and container cargo do not reflect costs and actually discourage shippers from the introduction of more efficient unitized cargo handling technology. Also, relatively low port storage charges encourage shippers to over-utilize port storage facilities thereby causing congestion in the ports. Therefore, in approaching port tariff reform it is important to focus not only on the level of tariffs but also on the structure. 2.19 Existing tax agreements between the ports and the Ministry of Finance are due to expire in 1990, and future tax and tariff policies are presently under review. In order to establish new tax and tariff policies which will ensure both the financial health of the ports and the efficient utilization of port facilities, there is an immediate need to improve the information available on port operations and finances. In a number of areas,  _9 _ I the information systems now in place are inadequate. Ports have an insufficient awareness of the cost of providing specific services and the adequacy of depreciation funds and other funds needed to cover future liabilities. Further, in view of the elimination of grant financing and the large investments planned for China's ports (to accommodate increased trade flows and recent large increases in domestic transport demand), future financial liabilities of the ports are likely to increase rapidly. For the above reasons, it is now especially important for the government and port managers to pay special attention to costing port operations, managing their finances, and assuring the long term viability of investments. 2.20 To address the need for an accurate and uniform system of costing at the ports, the Bank has undertaken discussions with MOC on developing a managment information system. Terms of reference for developing a Port Costing and Management Information System (PCMIS) were discussed and agreed with MOC, which will be responsible for system development (Annex 5). This effort would be funded by a grant from the Japanese Government. After the system has been developed under MOC's auspices, it will be tried on a pilot basis at selected ports before adoption at all major ports (see para. 4.4). F. The Role of the Bank 2.21 The Bank has supported, and will continue to support, the Government's objective of expanding capacity and improving productivity in the ports. The first lending operation in the subsector (Three Ports Projects, Ln. 2207-CHA) financed additional container handling capacity in Shanghai, Huangpu and Tianjin and a coal terminal at lluangpu. The second (Tianjin Port Project, Ln. 2689-CHA) is financing the construction of eleven additional berths at Tianjin for timber, construction materials and general cargo. The third, (Huangpu Port Project Ln. 2877-CHA/Cr. 1845-CHA), is financing the construction of five additional berths in the Xinsha area of Huangpu port for coal, iron ore, bulk fertilizer and general cargo. The fourth, (Dalian Port Project Ln. 2907-CHA/Cr. 1875-CHA), is financing construction of a new terminal at Dayao Bay for container and break-bulk cargo. 2.22 Earlier Bank projects supported management systems improvements with components addressing computer development, technical studies, training, and containerization of cargo. The work of Bank missions has also been instrumental in developing Chinese expertise in the economic evaluation of investment projects and in updating various aspects of port operations. A study component in the present project (para. 4.6) will help determine the most economic pattern of development for the various ports in mid-eastern China, including, in particular, Shanghai and Ningbo ports. A companion project for Shanghai Port will extend support in assessing alternative institutional models for port organization (para. 2.4) through a review and evaluation of port organization and management in other countries, to be undertaken by the Shanghai Maritime Institute in collaboration with the University of London.  - 10 - C. Experience in Past Lending 2.23 Construction of the Three Ports Project (Loan 2207-CHA) is complete, one year later than envisaged at appraisal. There has been a considerable foreign exchange cost saving under the project as a result of bids being lower than expected, and $55 million of the original loan of $124 million has been cancelled. The project is problem free. The Tianjin Port Project (Loan 2689- CHA $130 million) was approved in Apri; 1986. Implementation is on schedule. Loan Agreements on the Huangpu Port Project and the Dalian Port Project have been signed on June 22, 1988 and July 15, 1988 respectively, and implementa- tion is on schedule. 2.24 A number of studies in the port and shipping sub-sectors have been initiated under previous Bank projects. These include a containerization study which was completed by the Comprehensive Transport Research Institute in 1985. Recent investments in container facilities have benefited from the insights provided by this effort. Studies included under ongoing port projects include an "Intermodal Cargo Distribution Study" as part of the Huangpu Port Project (in the south) and a similar effort to be undertaken in the Dalian Port Project (in north China). III. NINGBO PORT 3.1 The larger hinterland of Ningbo Port comprises six provinces (Anhui, Hubei, Hunan, Jiangsu, Jiangxi, Zhejiang) and the city of Shanghai. The six2 provinces and Shanghai City together comprise a land area of over 900,000 km2, which includes the whole of what are referred to as East China (Anhui, Jiangsu, Zhejiang provinces and Shanghai City) and Central China (Hubei, Hunan and Jiangxi provinces). Whereas the land area of this hinterland constitutes only 10% of China, its population of approximately 300 million people is almost a quarter of that for the whole country. In 1986, the gross value of industrial and agricultural output (GVIAO) of this hinterland was RHB 564.8 billion or 38% of national GVIAO. Industrial output accounted for RMB 430.4 billion, and agricultural output was RMB 134.8 billion. Total value of foreign exports in 1985 was US$7.3 billion, and accounted for 26.7% of national exports. Table 3.1 presents key economic and demographic data for the larger hinterland of the port.. 3.2 Presently, the hinterland of Ningbo Port is considerably smaller than the larger hinterland described above. Due to constraints in the hinterland transport network, most of the cargo handled at the port is for Zhejiang Province south of Hangzhou. The major exception to this is iron ore transshipped through Ningbo for the Baoshan Steel Works in Shanghai and other steel mills located along the Yangtze River. In the future, as Ningbo's deep water facilities begin to play a larger role in the region, it is expected that the port's hinterland will be gradually extended to the larger hinterland. The port optimization study (para. 4.6) included in this project is intended to identify specific opportunities for in expanded role for the port.  - 11 - A. Regional Transport Network 3.3 The transport network serving the port of Ningbo is shown in IBRD Map 20932. The port is served by the Xiaoyung Railway, three Class II highways and inland waterways. Xiaoyung Railway connects all port facilities through Ningbe City to Hangzhou, and presently is single track with design capacity of 4.8 million tons/year. Through Hangzhou the railway connects with the Hangzhou-Shanghai railway (present capacity Shanghai-Hangzhou is 12 million twns) and to the Zhegan Railway which serves the Zhejiang-Jiangxi rail corridor. Of the three Class II highways leading to the port, two connect Ningbo City with the port. The third highway directly accesses the provincial road network. 3.4 The rai' connection from Ningbo to the hinterland (Xiaoyung Railway) is already capacity constrained. During the 7th FYP the capacity is being increased from the existing 4.8 million tons to 13 million tons (by the early 1990s) through investments of the order of Y 130 million. In the 8th FYP this line will be double tracked and capacity will then increase to 30 million tons. The line from Hangzbou to Shanghai is currently a single track with design capacity of 12 million tons, and is also capacity constrained. Under the 7th FYP the Shanghai-Hangzhou line is being double tracked to increase capacity to 26 million tons by 1990. Hence, by the mid-1990s the rail capacity serving Ningbo Port, in particular the link between the port and the greater Shanghai area, will be more than three times presently available capacity. 3.5 The highway network serving the port is being improved under the 7th FYP through three projects, all to be completed by 1989-90. The first project is reconstruction of the Class II Highway from Hangzhou to Ningbo, which will increase the design capacity from less than 3,000 vpd at present to 4,000 vpd by 1990. The second project is a 1,035 m long tunnel under the Yungjiang river, which will shorten the road distance between the Beilun terminal and Ningbo city by about 20 km. The other highway improvement undertaken in the 7th FYP, improves the highway connecting Ningbo to Fuzhou to the south (in Fujian Province). For the 8th FYP, a four lane expressway connecting Ningbo- Hangzhou-Shanghai-Nanjing has been proposed. This will be a major investment of the order of Y 7.5 billion. Feasibility studies for some sections of this expressway have been completed, and Zhejiang Province would like the Bank's assiscance in completing feasibility studies for the remaining sections which are all located in Zhejiang Province. 3.6 Ningbo is situated on the Yungjiang River which is connected by inland waterway to Hangzhou through the Hangyung Canal. This canal is presently restricted to vessels under 40 tons, however, thare are plans to upgrade it to allow vessels of 100-500 tons and to increase annual transport capacity to 6 million tons. From Hangzhou, across the Qiantangjiang river, the Hangyung connects with the Grand Canal which links with the Yangtze River system, and is navigable (upto the border of Jiangsu and Shandong provinces) by 500 to 2,000 ton barges. Further, Ningbo Port is connected via coastal shipping to the Shanghai region, to the Yangtze River, and to Hangzhou across Hangzhou Bay. In general all of these waterways are limited to vessels with draughts of between 2 and 3 m.  - 12 - 3.7 A direct transport link to the greater Shanghai area using a roll- on/roll-off ferry is under preparation and would be funded by Ningbo Municipality. Such a link would reduce the transport distance for road vehicles between Ningbo and Shanghai from around 450 km to 160 km. Future development of Ningbo port as a deep-wacer container terminal serving the greater Shanghai area will be erhanced after implementation of such a direct transport link for vehicles carrying cargo to and from Shanghai. B. Existing Fac-.lities 3.8 Three districts, Ningbo, Zhenhai and Beilun, mrke up the Port of Ningbo. Of these, Ningbo District is the oldest and is located close to Ningbo City on the Yungjiang River. Zhenhai District is located 21.5 km downstream from Ningbo City near the mouth of the Yungjiang River where it enters Hangzhou Bay. Beilun District, the site for the proposed project, is 37 km from Ningbo City and is located on Hangzhou Bay (see Map IBRD 20932). 3.9 Ningbo District consists of 16 berths of which two can berth vessels of 5,000 dwt, five are for vessels of 3,000 dwt, another five are for vessels between 500 to 1,000 dwt, and the remaining four berths are suitable for vessels under 500 dwt. Total design throughput capacity is 1.47 million tons per year. Throughput capacity for vessels over 500 dwt is 1.3 million tons (this excludes capacity of the four small berths). In 1986, Ningbo District handled 1.64 million tons: 0.9 million tons loaded and 0.74 million tons discharged. 3.10 Zhenhai District consists of eight berths for handling cargo, of which four can accommodate vessels up to 10,000 dwt, one berth is for vessels up to 5,000 dwt, and three berths are for vessels up to 3,000 dwt. In addition there are two small berths for harbor service craft. Total design throughput capacity of these eight berths is 4.3 miLlion tons. In 1986, Zhenhai District handled 1.93 million tons of cargo: 0.3 million tons loaded, and 1.63 million tons discharged. 3.11 Beilun District consists of three bulk cargo berths of which one can accommodate 100,000 dwt vessels, and two are for vessels of up to 25,000 dwt. In addition, there is a floating bagging facility for bulk vessels of up to 25,000 dwt. The three berths have a total design capacity of 20 million tons of ore per year. The floating terminal can bag 200,000 tons of bulk cargo per year. In 1986, Beilun District handled 7.21 million tons of bulk cargo: 3.31 million tons loaded and 3.9 million tons discharged. 3.12 The Floating Oil Terminal is a converted 220,000 dwt tanker anchored off Beilun District, to serve as a reception facility for oil imports. Its annual throughput capacity is 4 million tons, aind in 1986 it handled 3.31 million tons of cargo. Details of berth capacities are provided in Table 3.2. 3.13 Cargo Handling Equipment. Ningbo District general cargo berths are served by three 5-ton portal cranes, and seven 4-ton tower cranes. At Beilun District, the iron ore bertns are equipped with two grab-type gantry ship unloaders each with a capacity of 28 tons, and two ship loaders. Iron ore handling capacity at Beilun is for 10 million tons discharged and 10 million  - 13 - tons loaded per year. Zhenhai District is equipped with two ship loaders for coal capable of handling 0.7 million tons, and six 10-ton portal cranes for general cargo and bulk cargo operations. C. Port Traffic 3.14 In 1987 Ningbo Port handled 19.3 million tons of cargo, up from the 1986 figure of 18.0 million tons. Excluding crude oil and petroleum products, the largest single commodity is domestic coal which arrives from northeast China to be transhipped to small coastal vessels for delivery to coastal areas in Zhejiang Province, and for local consumption in the Ningbo City area. The next large cargo flow is imported iron ore which is shipped by coastal vessels up the Changjiang River to steel mills in Wuhan, Nanjing and Maanshan, and to the Baoshan Steel Mill near Shanghai. Cnemical fertilizer and grain arrive in bulk and are bagged and loaded on coastal vessels for local distribution. The remaining commodities are handled as general cargo. Of the 2.88 million tons of gevezal cargo handled in the port in 1987, 2.8 million tons was handled as break-bulk cargo. Container traffic amounted to 5,300 teu, which represented a container penetration rate of 16Z of foreign general cargo traffic. Table 3.3 presents details of existing and projected cargo flows through the port. 3.15 Ningbo Port handled 1,188 ship visits in 1986. Of these, 96 were foreign flag, 134 were national flag foreign-trade ships, ar.d C58 were domestic trade vessels. The average ship size for foreign-flag vessels was 50,380 dwt, reflecting use of foreign-flag tramp vessels for iron ore and other bulk cargo. National flag vessels in foreign traLe had an average ship size of 15,640 dwt which were mostly general cargo liner vessels. Domestic trade vessels had an average size of about 7,900 dvt. Among break-bulk cargoes, larger vessels were employed for timber and iron and steel, with an average size of around 13,500 dwt. Remaining general cargo movements were carried out in smaller vessels ranging from 10,000 dwt to 500 dwt, with an average size of 2,700 dwt. Details are provided in Table 3.4. D. Port Operations 3.16 Productivity in overall port operations for break-bulk cargo ranged from 58.7 tons/ship-hour in port for iron and steel to 11.9 tons/ship-hour in port for "other" geueral cargo (Table 3.4). Equivalent figures for berth operations were 138.6 tons/ship-hour at berth for iron and steel to 16.6 tons/ship-hour at berth for "other" general cargo. The low productivity levels for "other" general cargo reflects lower productivity in handling smaller domestic trade vessels. However, it should be entirely feasible to improve berth productivity to around 50 tons/ship-hour at berth for the "other" general cargo category. An action plan to improve port operations, (para. 4.8) has been agreed with the port, and is to be implemented as an integral part of this project. Details of the action plan, and the agreed productivity targets are presented in Annex 7. 3.17 Ningbo Port suffered no significant congestion in 1986. Waiting time to service time ratios are well below 0.50 for almost all categories of cargo. The exceptions are national flag foreign-trade vessels (waiting time ratio 0.5) and non-metallic ores (waiting time ratio 0.83); these two  - 14 - categories together constitute less than 10% of total cargo volume. In general the waiting time ratios correspond to berth utilization rates below 702, and ship delays simply reflect normal delays to be expected in any random arrival process. However, projected incres !s in traffic througn the year 2000 would cause substantial congestion in 'ie future. Cargo delays were reasonable, and there appears not to be any congestion in the port's storage facilities. The table below provides berth utilization and cargo dwell time data. NINGBO PORT - BERTH UTILIZATION AND CARGO DWELL TIME - 1986 Berth Utilization: Beilun District 68.7Z Zhenhai District 59.8Z Ningbo District 85.8Z Average Dwell Time for General Cargo 15 days E. Port Organization and Management 3.18 The port of Ningbo is presently administered by ihe "Ningbo Port Authority" (NPA), a unit under the dual leadership of Ningbo Municipality (NM) and the Ministry of Communications (MOC). Under the current program of decentralization, the administration of NPA was transferred to the City of Ningbo in December 1987. Only in the area of long-term development planning will MOC and State Planning Commission (SPC) approval continue to be required. UPA is considered an independent economic and legal entity under a charter issued by Ningbo Municipality on May 18, 1988. The charter is acceptable to the Bank. 3.19 Organization of the port is divided into three divisions: administration, technical and operating. These three divisions report to the Deputy Director of the port. The Deputy Director reports to the Director who is also a Vice Mayor of Ningbo City. The organization chart is attached as Chart A. F. Planning, Budgeting, Accounting and Auditing 3.20 The long-term plan for Ningbo Port is developed by the port and submitted to HOC and SPC for approval. A port development master plan has been prepared by NPA, and this is to be updated (as part of this project, see para. 4.5 and Annex 4) in view of the increasingly larger role the port is being called upon to play in the region. NPA prepares an annual budget which will in future be approved by Ningbo City. 3.21 NPA operates an accrual-based accounting system and follows accounting procedures laid down by the Ministry of Finance (MOF). Its chart of accounts and the form of its financial statements (income statement and balance sheet) are as prescribed by MOC for the ports under its control. Consolidated statements are prepared annually for NPA and its subordinate  -15- enterprises, and with the addition of a funds flow statement these will be acceptable to the Bank for the purposes of financial reporting. 3.22 Besides tbe internal audit procedures applied by MOC to the ports and by the ports to their subordinate enterproses, external Ludit of NPA is now carried out by the Audit Administration of China (AAPRC). AAPRC carries out the audit of most Bank projects in China. At negotiations, assurances will be sought from NPA that it will submit its audited financial statements to the Bank not later than six months after the end of each financial year. NPA will keep the accounts of the project, and will provide the Bank with audited accounts of project expenditures not later than six months after the end of the financial year. IV. THE PROJECT A. Project Objectives 4.1 This project will directly contribute to China's overall plan to remove port bottlenecks by constructing additional deep-water berths at key ports (see para. 2.8). It will increase Ningbo port's efficiency in the handling of containers and general cargo by constructing specialized berths and providing them with modern equipment. The project will also contribute to: (a) improvements in the port's efficiency through rehabilitation of existing facilities particularly at Beilun terminal; (b) longer term efficiency improvements by providing training of both operational and managerial staff; and (c) optimizing port development through a study to determine the potential of Ningbo port's deepwater facilities in the distribution of cargo moving through China's east coast ports. The latter study may lead to proposals for future investment projects. Importantly, the project will allow the Bank to contribute to optimizing the utilization of port facilities in eastern China, and this could have a significant impact on the port subsector. B. Project Description 4.2 The p.roject will consist of the following: (a) construction of a jetty about 750.0 m long and 45 m wide for one container berth and two general purpose berths with 13.5 m depth alongside, and two 14.Om wide causeways connecting the jetty to the land yard (see Map No. 20284). These betths will require: (i) pavement of the necessary yards and roadways, and construction of railway connections, sheds, buildings, water supply and sewerage systems; (ii) procurement of equipment to operate the facilities, including container cranes, mobile cranes, forklifts, vessels, tugboats, vehicles and compucers;  - 16 - (b) rehabilitation of existing facilities, particularly at Beilun terminal; (c) training of both operational and managerial staff; (d) updating Ningbo Port's Master Plan, including review of the effects of port expansion on adjacent commercial activities, residential areas and transport infrastructure; (e) preparation of a port optimization study to best exploit the deep- water potential at Ningbo port through transhipment of cargo using large vessels; (f) improvement of the environment monitoring system in the port area; and (g) implementation of an action plan to improve port operations and maintenance. 4.3 Berth Construction. The new facilities will be constructed at Beilun Terminal about 37 kms from Ningbo City. The jetty and causeways will be constructed on prestressed concrete piles with a cast-in-place reinforced concrete deck. This design was chosen for minimum interference with the current and siltation regimes. The land yard will be constructed on reclaimed land behind a revetment to protect the land from wave overtopping. A nearby mountain will be used as the quarry for reclamation material. Water supply, sewerage and power supply will be provided from the mains leading to Beilun terminal; these have enough capacity for present needs and for the new project as well. One container freight station for trucks is planned. 4.4 Training. In addition to the operational training required for the new container handling equipment, which will be provided by the suppliers, NPA will train the other personnel required for the project and also to upgrade the port personnel (Annex 2). On-the-job training in project supervision will be provided by foreign consultants who will also assist in the supervision. Terms of reference (TOR) for construction supervision were discussed and agreed during negotiations. Foreign consultants will also be needed to provide training and implement the Port Costing and Management Information System, guidelines for which are to be prepared by MOC with the assistance of the Bank (para. 2.20). At negotiations, an understanding was reached with NPA that it will implement the above mentioned training program in accordance with the program agreed with the Bank (Annex 2). 4.5 Port Master Plan. In March 1987, NPA completed and issued the port's master plan for the period 1986-2000. NPA will update the port's master plan according to the TOR discussed and agreed during appraisal (Annex 4). In particular, the master plan will be updated to reflect the results of the port optimization study (see below) to be carried out under this project. The master plan will be reviewed and updated by consultants recruited accord- ing to the Bank's guidelines during July 1, 1989 to June 30, 1990. During negotiations assurances were obtained from NPA that it will update the port's master plan as agreed.  - 17 - 4.6 Port Optimization Study. In order to explore the potential of the deep water facilities at Beilun terminal, NPA will carry out a study to assess the economies of transhipping various cargo types to neighboring ports. This study will be carried out c cording to TOR discussed and agreed with the Bank (Annex 5). During negotiations assurances were obtained from NPA that iF will carry out the port optimization study according to the agreed TOR from Ma ch 1, 1989 to August 1, 1989. 4.7 Environment Monitoring. One uf the areas that has high priority is environment protection and, as indicated in Annex 6, comprehensive measures have been taken to ensure that port activities have minimum adverse impact on the environment. An environment monitoring unit was established in the port and is responsible for monitoring and reporting any environmental hazards or breach of regulations. Additional equipment and training are needed for this unit to improve the effectiveness of the monitoring process. Funds for that purpose are included in the proposed project. During negotiations an understanding with NPA was reached that NPA will prepare in consultation with the Bank the list of additional equipment needed, an improved monitoring scheme and the required training. 4.8 Action Plan. An action plan to improve port operations and maintenance was discussed and agreed with NPA. The action plan concentrates on: improving the efficiency of port operations by using more advanced techniques; improving preventive maintenance by periodic inspection and better ; records; and improving the environment by taking certain measures in the port i (Annex 7). During .iegotiations understanding was reached with SPA that it .- 3will implement the action plan and reach the productivity targets agreed for the years 1990 and 1995. C. Cost Estimates 4.9 Cost Estimates. The total projezt cost is estimated at Y 293 mil- lion or US$76 million equivalent, with a direct and indirect foreign exchange component of about Y 202 million or US$52 million equivalent. Details of project cost estimates are presented in Tables 4.1, 4.2, 4.3 and 4.4, and are sum*narized below.  - 18 - SUMMARY OF PROJECT COST ESTIMATES (3.7 RMB = 1.0 US$; July 1, 1988 prices) z Z of Local Foreign Total Local Foreign Total foreign total ----(RMB 'mln) ----- ------(US$ 'mln)