China - Dalian Port Project

Document of The World Bank FOR OFFICIAL USE ONLY Report No. P-4722-CHA MEMORANDUM AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT AND THE INTERNATIONAL DEVELOPMENT ASSOCIATION TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN IN AN AMOUNT EQUIVALENT TO $71.0 MILLION AND A PROPOSED CREDIT OF SDR 18.2 MILLION (S25.0 MILLION EQUIVALENT) TO THE PEOPLE'S REPUBLIC OF CHINA FOR A DALIAN PORT PROJECT January 5, 1988 This document has a restricted distribution and mav be used bv recipients oniv in ihe perfornance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  CURRENCY EQUIVALENTS Currency Unit = Yuan (Y) Yuan = 100 Fen Calendar 1986 December 1987 $1.00 5 Y 3.45 $1.00 = Y 3.70 Y1.00 = $0.29 Y1.00 = $0.27 FISCAL YEAR January 1 - December 31 WEIGHTS AND MEASURES 1 meter (m) = 3.28 feet (ft) 1 kilometer (km) = 0.62 miles 1 hectare (ha) = 2.47 acres 1 kilogram (kg) = 2.2 pounds (lb) 1 ton (t) = 1,000 kg = 2,205 pounds 1 kg = 2.2 pounds PRINCIPAL ABBREVIATIONS AND ACRONYMS USED GOC - Government of China PDA - Port of Dalian Authority SDR - Special Drawing Right  FOR OFFICIAL USE ONLY CHI NA DALIAN PORT PROJECT Loan/Credit and Project Summary Borrower: People's Republic of China Beneficiary: Port of Dalian Authority Amount: Loan: $71.0 million equivalent Credit: SDR 18.2 million ($25.0 million equivalent) Terms: Loan: 20 years, including 5 years of grace, at the standard variable interest rate Credit: Standard, with 35 years maturity Onlending Terms: 20 years, including 5 years of grace, at 5% p.a. interest Financing Plan: Government $134.6 million IBRD $71.0 million IDA $25.0 million Total $230.6 million Economic Rate cf Return: 20% Staff Appraisal Report: Report No. 6588-CHA Map: IBRD No. 19866 This document has a restricted distribution and may be used by recipients only in the perfoi'. of their official duties. Its contents may not otherwise be disclosed without World Bank auth.  MEMORANDUM AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT AND THF INTERNATIONAL DEvELOPMENT ASSOCIATION TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN AND CREDIT TO THE PEOPLES REPUBLIC OF CHINA FOR A DALIAN PORT PROJECT 1. The following memorandum and recommendation on a proposed loan and credit to the People's Republic of China for $96 million eqiivalent, comprising a bank loan of $71.0 million equivalent and an IDA credit of SDR 18.2 million ($25.0 milliion equivalent), is submitted for approval. The proposed loan would be for 20 years, including 5 years of grace, at the standard variable interest rate; the credit would be on standard IDA terms with 35 years maturity. 2. Background. The transport system in China has been severely taxed by the pace of recent economic development and capacity constraints are evident in all modes. China needs to sutstantially expand its port and waterway facilities to relieve the growing hindrance to external trade caused by inadequate berth capacity and container handl.ng capability. China's Seventh five-Year Plan (1986-90) recognizes these needs. Substantial investments are envisioned: these includte technological improvements such as container handling facilities and intermodal transport centers. ro facilitate these improvements, significant institutional changes are being carried out in the sector, including an extension of the policy of separating the functions of Government from those of operating enterprises, and delegating greater authority to local managements. The Bank fully subscribes to Governmenz's objectives for development of the transport sector and is supporting its initiatives with both financial and technical assistance. Three ports prcjects (Loans 2207-CHA, 2689-CHA, and Huangpu port project, approved by the Board on October 6, 1987) will effect improvements at the ports of Tianjin, Shanghai and Huangpu. 3. Rationale for Bank Involvement. Expanding the capacity of coastal ports is an urgent objective for the Government, and this is being tackled in two ways. First, new facilities are to be constructed (120 new deep water berths are envi ioned in the Seventh Five-Year Plan), and second, the equip- ment of existing facilities is to be updated to obtain greater productivity. The Bank has supported and will conrinue to support these objectives. With Bank assistance the Government has added port facilities, enhanced container handling capability and other specialized facilities appropriate to modern traffic, initiated new organizational arrangements designed to improve the productivity and efficiency of port operations, and trained a large number of perscns in long term planning. The Dalian project is a logical next step in this program of financial, technical and institutional cooperation. 4. Project objectives. The proposed project is designed to improve Dalian port s administration and enlarge its capacity to handle cargo flow. The project wo.ld: (a) assist the urgent expansion of port capacity; (b) facilitate technology transfer in long term planning (master planning),  - 2 - nlnciai planning and control, and berth management; (c) facilitate the study or the present and potential use of containers in the hinterland of Dalian to secure adequate coordination of transportation and storage facilities; and (d) support the training needs of port operators, maintenance personnel and managers at Dalian. 5. Project Description. The proposed project consists of: (a) con- struction of 2 container berths for 30,000 DWT ships and 2 general-purpose berths for 25,000 DWT ships capable of conversion to container berths as and when needed. These berths will require: (i) construction of 1 1,840 m-long breakwater and revetment; (ii) dredging of about 2.5 million m of soil, backfill and stabilization of the fill material; (iii) construction of the necessary railway and road connections. container freight stations, ware- houses, and storage yards; (iv) installation of water supply, sewerage and power supply systems; (v) provision of the required loading/unloading equipment, navigational aids, harbor operations equipment and boats; and (vi) construction of required maintenance buildings, auxiliary buildings and others; (b) training of port operators and other specialists in the Port of Dalian Authority (PDA) through technical assistance in the areas of: (i) oort operations, design, planning ana construction supervision; and (ii) financial control, including in particular capital e:tpenditure planning and control and operating cost monitoring; (c) preparation of a study of intermodal transport of containers in the port hinterland to reduce port congestion; (d) review and updating of the port master plan which is under preparation by the eaff of PDA. Construction of the railway and highway connections outside the port area started early in 1986 and is the responsibility of the Minist:;' of Railways (MR) and Dalian Municipality, respectively. The implementation of ;he remaining components of the proposed project falls under the responsibil- ity of PDA under the overall supervision of MOC Capital Construction Depart- ment. Assistance will be prcvided by the Waterway Design Institute, foreign consultants and China National Technical Import Corporation as appropriate. The project, to be carried out over 5 years, provides funds for civil works; cargo handling equipment; training; and technical assistance. The total cost of the project is estimated at US$230.6 million equivalent, with & foreign exchange component of US$96.0 million. A breakdown of costs and the financing plan are shcwn in Schedule A. Amounts and methods of procurement and of disbursements, and the disbursement schedule are shown in Schedule B. A timetable of key project processing events and the status of Bank Group operatiors in China are given in Schedules C and D, respectively. Civil works and equipment installation are expected to be completed by the end of 1992. A map is attached. The Staff Appraisal Report, dated January 5, 1988, is attached. 6. Agreed Actions. The Government has agreed to: (a) onlend the proceeds of the Bank loan and IDA credit to PDA on terms and conditions satis- factory to the Bank Group; and (b) ensure that the road and railway connection from the new port facilities to the main Dalian-Shenyang highway and railway will be open to traffic on completion of the project. PDA has agreed to: (a) submit to the Bank Group its audited financial statements not later than six months after the end of each financial year; (b) carry out: (i) the training in accordance with a program to be agreed with the Bank Group; (ii) the updating of the port master plan on the basis of Lerms of reference  agreed with the Bank Group, and complete it by June 30, 1989; and (iii) the containerization study on the basis of terms of reference agreed with the Bank, complete it by December 31, 1989 (the Gcvernment has also agreed to take the necessary steps to impler,,ent the recommendations of this study); and (c) conduct its tinancial affairs so as to cover all its costs of operation (including depreciation) from operating revenue, and to meet from internally generated funds all its financial obligations including debt service, remittances to the state and allocations to special funds and to prepare annually, beginning in 1989, a rolling financial plan covering the following five years. 7. Justification and Risks. In 1985 the average waiting time of ships arriving at Chire~se coastal ports was over 11 days, costing about Y 187,000 per ship. Economic benefits of the proposed project derive from: ti) ship time savings; (ii) cargo handling cost savings (iii) cargo time savings. On this basis, the economic rate of return of the project is 20x. The only risks foreseen for the project are of delays in construction attributable to domestic procedures fur civil works international competitive bidding. 8. Recommendation. I am satisfied that the proposed loan and credit would comply with the Articles of Agreement of the Bank and the Association and recommend that the Executive Directors approve the proposed loan and credit. Barber B. Conable President Attachments Washington, D.C. January 5, 1988  Schedule A CHINA DALIAN PORT PROJECT Estimated Costs and Financing Plan Local Foreign Total