Turkey - Third Ports Project

Docwncrntof The World Bank FOR OFFICIAL USE ONLY Report No. 13647 PROJECT COMPLETION REPORT REPUBLIC OF TURKEY THIRD PORTS PROJECT (LOAN 2535-TU) OCTOBER 28, 1994 Infrastructure Operations Division Country Department I Europe and Central Asia Region 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 witbout World Bank authorization.  CURRENCY EQUIVALENTS Currency Unit - Lira (TL) At Appraisal (March 1980) - US$1 - TL 70 TL 1000 - US$14.29 June 1990: - US$1 - TL 2610 TL 1000 - US$0.3831 GLOSSARY OF ABBREVIATIONS DSI - Devlet Su Isleri (State Hydraulics Agency) EIB - European Investment Bank GOT - Government of Turkey RFW - Kreditanstalt fur Wiederaufbau MENR - Ministry of Energy and Natural Resources PCR - Project Completion Report SEE - State Economic Enterprise SPO - State Planning Organization TER Turkiye Elektrik Kurumu (Turkish Electricty Authority) TKI - Turkuye Komur Isletmeleri Kurumu (Turkish Coal Authority) Fiscal Year January 1 - December 31  FOR OFFICIAL USE ONLY THE WO)LD aNK WmbNon, D.C. 20433 U.S.A. Office of Director-General Operations Evaluation October 29, 1994 MEMORANDUM TO THE EXECUTIE DIRECTORS AND THE PRESIDENT SUBJECT: Project Completion Report on Turkey Third Ports Proiect (Loan 2535-TU' Attached is the Project Completion Report on Turkey - Third Ports Project (Loan 2535-TU) prepared by the Europe and Central Asia Regional Office, with Part HI contributed by the Borrower which gives a detailed account of project peration, implementation and results. The US$134.5 million equivalent loan was signed in May 1985. After three extensions, the Loan was closed on December 31, 1992. US$77.8 million equivalent was cancelled. The project was to introduce institutional reforms and container handling technology in four ports. The involvement of four different agencies (Turkish State Railways; The Turkish Maritime Organization; the General Directorate of Railways, Ports and Airport Construction; and the Customs Department) required close coordination, which was not always forthcoming. According to the PCR, the performance of all four agencies was below expectations. The project did contribute to increasing containerization in Turkish ports, more in Hyadarpasa and Izmir than in Mersin and Trabzon. But it largely failed on institutional reform. According to the PCR, the Bank's performance was affected by the pressure to lend and was therefore unsatisfactory during project preparation. Project implementation was hampered by delays in procurement and installation of equipment and defects in some of the equipment supplied; lack of adequate local financing; inability of implementing agencies to make quick decisions; Borrower reluctance to abide with Bank guidelines on procurement; failure to carry out the proposed dredging of the Izmir access channel due to both environmental and political problems; delays in contracting out studies and in hiring training experts. The cancellation of several important components, and the partial completion of others, makes it impossible to compare estimated and actual costs and benefits. Even to sustain the limited benefits of the project would involve further costs. The outcome of the project is rated as unsatisfactory, its sustainability as unlikely and its institutional impact as negligible. The Borrower questions some of the above conclusions, believes that loan closing ought to have been extended for an additional year, and faults the Bank for not having granted this extension. The project may be audited. Attachment 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 diaclosed without World Bank authorization.   FOR OFFICIAL USE ONLY PROJECr COMPLETION REPORT REPUBLIC OF TURKEY THIRD PORE PROJECT (Loan 2535-TU) Table of Contents PREFACE .................................................................. i EVALUATION SUMMARY ........................................... ii PART I. PROJECT REVIEW FROM THE BANK'S PERSPECTIVE A. Project Identity ........................................... 1 B. Background ............................................. 1 C. Project Objectives . ........................................ 2 D. Project Description ......................................... 3 E. Project Design and Organization ................................ 5 F. Implementation Schedule and Procurement ......................... 6 G. Project Results . .......................................... 11 H. Project Sustainability . ...................................... 12 I. Bank Performance . ........................................ 13 J. Borrower's Performance . .................................... 15 K. Consultants' Performance ........... ......................... 15 PART II. BORROWER'S REVIEW OF THE PROJECT L. Turkish State Railways (TCDD) ................................ 17 M. Turklish Maritime Organization (TDI) ............................ 22 N. General Directorate of Railways, Ports and Airports Construction (DLH) . Ministry of Transport .25 0. General Directorate of Customs, Ministry of Finance and Customs .26 PART III. STATISTICAL INFORMATION Table 1 Previous Bank Loans in the Turkish Port Sector .29 Table 2 Container Traffic in TEU: Appraisal Estimates and Actuals .30 Table 3 Cargo Handling Performance (Container): 1983 vs 1992 .31 Table 4 Timetable for Project Implementation .32 Table 5 Project Implementation .33 Table 6 Civil Works - Terminal Preparations .35 Table 7 Estimated Project Cost and Financing .37 Table 8 Project Cost Estimates and Amounts Disbursed .38 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.  Table of Contents (Cont'd) Page No. Table 9 Cumulative Estimated and Actual Disbursements ..................... 39 Chart I Planned and Actual Disbursement Schedules as Compared with. EMENA Ports Profile ...................................... 40 Table lOalb TCDD/TDI: Financial Performance Relative to Appraisal Estimates ... ..... 41 Table 11 Status of Legal Covenants .................................... 42 Table 12 Mission Data ............................................. 43 Map IBRDR1 8675 ............................................ 44  i PROJECT COMPLETION REPORT REPUBLIC OF TURKEY THIRD PORTS PROJECT (Loan 2535-TU) PREFACE This is an Project Completion Report (PCR) for the Third Ports Project in Turkey, for which Loan 2535-TU in the amount of US$134.50 million equivalent was signed on May 29, 1985. It was closed on December 31, 1992 after three extensions (original closing date: December 31, 1990). Out of the above loan, US$56.66 million equivalent was disbursed and the balance of US$77.84 million equivalent was cancelled. The Preface, Evaluation Summary and Parts I and III of the PCR were prepared by the Infrastructure Division of Country Department I, Europe and Central Asia Region. Part II was prepared by the four implementing agencies (DLH, TCDD, TDI and Customs Department). Preparation of this PCR started during the final supervision mission in August 1993, and is based, inter-alia, on the Staff Appraisal Report dated April 24, 1985, the Loan and Project Agreements dated May 29, 1985, supervision reports, correspondence between the Bank and the Borrower, internal Bank memoranda, discussion with Bank staff responsible for the project, and data provided by the Turkish authorities.   ii PROJECT COMPLETION REPORT REPUBLIC OF TURKEY THIRD PORTS PROJECT (Loan 2535-TU) EVALUATION SUMMARY A. Project Objectives 1. The main objective of the project was to introduce modern container handling technology to four ports in each of the major hinterland areas of Turkey so as to accommodate the forecasted rapid growth in container traffic and support the export-oriented development strategy of the country. The specific goals of the project included: * the introduction of improved cargo handling methods, specifically through the provision of specialized equipment for handling containers at four selected ports (Izmir, Haydarpa4a, Mersin and Trabzon); e agreement with the Government and the port agencies on a realistic investment program for the Fifth Development Plan covering the period 1985-89; i mplementation of a comprehensive action plan for the introduction of container handling technology, including operational procedures, equipment maintenance, and modified customs regulations; and * the introduction of institutional reforms which would include, as a first phase, the strengthening of planning capabilities and the separation of port accounts from those of other activities managed by TCDD and TDI, and the introduction of a cost-related tariff structure at commercially feasible levels for container traffic. B. Implementation Experience 2. The Third Ports project followed two other Bank-financed projects in the ports sector in Turkey. The first one (Loan 28-TU) was approved in 1950, followed by a Ports Rehabilitation Project (Loan 1741-TU) in 1978. The Ports Rehabilitation Project was still on-going when the Third Ports Project (Loan 2535-TU) was appraised and approved by the Board in 1985 (see Part III: Statistical Data,Tablel). 3. The Third Ports project involved four different implementing agencies. These were the Turkish State Railways (TCDD), Turkish Maritime Organization (TDI), the General Directorate of Railways, Ports and Airports Construction (DLH) and the Customs Department. A Project Coordination Committee (PCC), created specially for the project, coordinated the activities among the four implementing agencies. It comprised of representatives from each agency and was chaired by a Deputy Undersecretary of the Ministry of Transport.  iii 4. The project was planned to be completed in 4'h years, including six months to allow for start-up delays, and 12 months to allow for unforeseen delays. The implementation period was shorter than the Region's standard profile of 7 years for port projects. When appraising the project the fact that this was the third project in the sector and a large share of the loan (75%) was for equipment procurement, may have been the rationale for the shorter implementation period. However, the bankruptcy of one of the main equipment suppliers, and the environmental issues surrounding the dredging of the entrance channel of the Izmir Bay, delayed implementation. In addition, the institutional shortcomings of the implementing agencies were not factored in adequately during appraisal'. 5. The Bank extended the closing date for this loan three times for a total of two years. And finally, after 6