Madagascar - Ports Rehabilitation Project

Document of The World Banlk FOR OFMlCIAL USE ONLY Report No. 14600 IMPLEMENTATION COMPLETION REPORT MADAGASCAR PORTS REHABILITATION PROJECT (CREDIT 1752-MAG) JUNE 12, 1995 Infrastructure Division Central Africa and Indian Ocean Department Africa 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 without World Bank authorization.  CURRENCY EQUIVALENTS Currency unit = FMG (Malagasy franc) Year Malagasy Franc US $ 1.00 equivalenti 1986 676.3 1987 1,069.2 1988 1,407.1 1989 1,603.4 1990 1,494.1 1991 1,835.4 1992 1,866.4 1993 1,913.8 1994 (Average for first six months) 2,841.4 WEIGHTS AND MEASURES Metric System FISCAL YEAR OF THE BORROWER January I - December 31 ABBREVIATIONS AND ACRONYMS CFD - Caisse Francaise de Developpement (Caisse Centrale de Cooperation Economique in the Staff Appraisal Report) CMN - Compagnie Malgache de Navigation DTM - Direction des Transports Maritimes (Directorate of Maritime Transport) ENEM - Ecole Nationale d'Enseignement Maritime ERR - Economic Rate of Return FAC - Fonds d'Aide et de Cooperation KfW - ICreditanstalt fur Wiedranfbau MTM - Ministere des Transports et de la Meteorologie (Ministry of Transport and Meteorology) MTP - Ministere des Travaux Publics (Ministry of public works) PPF - Project Preparation Facility SAR - Staff Appraisal Report SEPT - Societe d'Exploitation du Port de Toamasina (Toamasina Port Authority) SNMTM - The Societe Nationale Malgache des Transports Maritimes SVM - Service des Voies Maritimes (Seaway Department) 'Annual average  FOR OFFICIAL USE ONLY Table of Contents Preface. ................................................ i Evaluation Summary ................................................. ii Part I: Performance Assessment ..........................................1...... Project Identity ............................................... I Background ............................................... . 1 A. Statement/Evaluation of Objectives ............................................... 2 B. Achievement of objectives ................................................3 1. Rehabilitation/Provision of Infrastructure and Equipment ............................ .................3 2. Institutional Development ............................................ 3 3. Shipping Services .............................................3 4. Economic Re-evaluation ............................................ 4 5. Financial Re-evaluation ............................................ 6 C. Implementation and Major Factors Affecting the Project ............................................8 1. Major Factors Affecting the Project .................................................. 2. Project Implementation ............................................8 a. Rehabilitation/Provision of Infrastructure and Equipment .........................................8 b. Shipping Services ......................................... 9 c. Additional Components ......................................... 9 d. Disbursement and Project costs ......................................... 9 D. Project Sustainability ............................................... ................ ..... 10 E. Bank Performance ............................................... 10 F. Borrower Performance ............................................... 11 G. Assessment of Outcome ............................................... 11 H. Future Operation ...............................................1............................ ..... 12 1. Key Lessons Learned ................................................ 13 Part IH: Borrower's Contribution .................................. 14 Part III: Statistical Information. ................................. 22 Table 1: Summary of Assessments .................................. 22 Table 2: Related Bank Loans/Credits .................................. 23 Table 3: Project Timetable .................................. 23 Table 4: Credit Disbursement: Cumulative and Actual................. ................. 24 Chart 1: Cumulative Estimate and Actual Disbursement .................................. 25 Table 5: Project Implementation .................................. 25 Table 6 and Chart 2: Key Indicators for Project Operations .... ........................... 26 This docunent 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 7: Studies Included in the Project ............................ 31 Table 8A: Project Costs ............................ 32 Table 8B: Project Financing ............................ 32 Table 9: Economic Costs and Benefits ............................ 33 Table 10: Status of Legal Covenants ............................ 35 Table 12: Bank Resources: Staff Inputs ............................ 35 Table 13: Bank Resources: Missions ............................ 36 Appendices A. Mission's Aide Memoire B. Annexes C. IBRDMapNo. 19595R1  i IMPLEMENTATION COMPLETION REPORT MADAGASCAR PORTS REHABILITATION PROJECT CREDIT 1752-MAG PREFACE This is the Implementation Completion Report (ICR) for the Ports Rehabilitation Project in Madagascar, for which Credit 1752-MAG in the amount of SDR 13.2 million (US$ 16 million equivalent) was approved on February 19, 1987 and made effective on September 17, 1987. The credit was closed on December 31, 1994 compared with the original closing date of September 30, 1992. Final disbursement took place on March 31, 1995, at which time a balance of SDR 2.390 million (US$ 3.766 equivalent) was canceled. Cofinancing for the project was provided by CFD, KfW, FAC and local sources. The ICR was prepared by Kais Ben Hamida, TWUTD and Ahmed Lamrini, Consultant; and reviewed by Maryvonne Plessis- Fraissard, Chief, AF3IN and P. Hari Prassad, Operations Adviser, AF3DR The Borrower provided comments that are included in Part II of the ICR. Preparation of this ICR was begun during the Bank's completion mission in January 1995. It is based on material in the project file.   ii IMPLEMENTATION COMPLETION REPORT MADAGASCAR PORTS REHABILITATION PROJECT CREDIT 1752-MAG EVALUATION SUMMARY Introduction 1. The Bank's association with the transport sector in Madagascar has been quite extensive with 11 transportation projects to date, of which seven have been in roads and three in railways. Despite the importance of maritime transport in Madagascar, this project was only the first to address the needs of most of the country's ports (the major port of Toamasina was the only one to be covered by an earlier project). 2. In 1982, the French "Fonds d'Aide et de Coop6ration" (FAC) financed a study on ports and shipping, which made a proposal for a reorganization in the port subsector and led to the Ports Rehabilitation Project. Project Objectives 3. The project objectives were: (a) rehabilitation of ports' physical infrastructure, and rehabilitation or provision of new equipment, to reduce transport costs to users of shipping services; (b) development of institutional capacity to manage, operate and maintain, at a reasonable level of efficiency, the ports subsector and its restored assets; and (c) elimination of delays and safety hazards to navigation. 4. Financial covenants were agreed at appraisal to help achieve the institutional development objective, especially with respect to financial management (see Table 10 of Part m). The covenants aimed to ensure the recovery of operating costs, the submission of audited reports and the annual review of tariffs. 5. Although the project objectives were both clearly spelt out and important for the transport sector, they were ambitious, particularly in relation to the relatively modest investment provided for their achievement. Implementation Experience and Results 6. The project achieved many of its objectives. It prevented degradation of the Malagasy ports subsector. Rehabilitation works and equipment endowed DTM ports (run by Directorate of Maritime Transport, i.e., all ports except Toamnasina) with the necessary means to perform their activities, while enabling SEPT (the port authority for Toamasina) to support strong levels  iii of activity. The objective of reducing costs was partially met in DTM ports and in Toamasina. Institutional reforms and technical assistance enhanced the efficiency of management in Toamasina and have created a good base for future operations in DTM ports. The objective of eliminating delays and safety hazards was generally met. 7. The project's recalculated ERR (reflecting actual data through 1994 and revised projections) is 27% (29% in the SAR). Overall performance to date has been satisfactory, but the recalculated ERR for some ports is below expectations, due essentially to overestimation of traffic volumes (see para. 16). 8. The steady and important devaluation of the Malagasy Franc enabled SEPT to achieve highly satisfactory financial performance and meet all its financial objectives; this was due mainly to its tariffs being indexed to the ECU since 1992 (see para. 27). The devaluation had an opposite effect on DTM ports because their tariffs were indexed to the local currency. Overall financial objectives for DTM ports --including recovery of operating costs-- were not achieved. The ports' financial management improved substantially, however, as reflected in the set up of a new commercial accounting system, the inclusion of depreciation in financial statements and the annual submission of audited reports (see para. 33). 9. Actual project costs amounted to US$ 27.4 million compared to US$ 34.8 million at appraisal. The difference between actual and foreseen costs is explained largely by the high arnounts allocated to contingencies in the SAR (see para. 45). The project was financed by IDA, CFD, KfW, FAC and local sources; about 18% of the credit and 13% of other donor financing was canceled in early 1995, reflecting persistent delays that extended project implementation beyond ten years of its identification (see para. 44). Although infrastructure works and cargo handling equipment were implemented in time, many delays were recorded, mainly in the project's dredging and navigation aids components. 10. The key factors that affected the achievement of project objectives were: (a) the project's complex design involving a large number of ports (see para. 7); (b) overestimation of traffic volume (see para. 16); (c) the steady devaluation of the Malagasy Franc (see para. 27, 44 and 54); (d) political events creating gaps in decision making (see para. 44); (e) damnage caused by cyclones to port infrastructure (see para. 43); (f) cumbersome administrative procedures for contract signing (see para. 53); (g) unavailability of the Malagasy financing contribution at the contracted times (see para. 36); (h) lack of competencies, mainly of DTM staff (see para. 53); and (i) the inadequacy of preliminary studies for the dredging component (see para. 11 and 40);. 11. Overall Bank performance was satisfactory. However the objectives at appraisal were ambitious and very demanding for the Borrower. The frequency of supervision missions exceeded the pace of the project's progress. Also worth noting is the virtual absence of accounting for project accounts (see para. 50). Borrower performance was satisfactory for the  iv port of Toamasina but deficient for DTM ports, whose management capability was not strong enough to adequately implement the project. 12. Despite numerous hurdles, the project overall outcome is satisfactory. Summary of Findings, Future Operation and Key Lessons Learned. 13. The project saved the ports subsector from important degradation. To further upgrade the condition of Malagasy ports, a reform agenda should be pursued through sector adjustment and lending. Future efforts should: (a) emphasize the importance of maintenance works, to ensure that investment lasts; (b) reorganize the ports sector by developing in the three main regional ports autonomous entities and involving private sector participation in Toamasina; (c) study and implement a tariff system indexed on a stable currency especially for DTM ports, and examine the scope for harmonizing SEPT's tariffs with those of other ports in the Indian ocean; (d) ensure the implementation of an efficient cost recovery system to finance ongoing maintenance and renewal of equipment as required; and (e) simplify administrafive and customs procedures, especially for coastal shipping. In addition, the Bank should invest IDA resources in infrastructure rather than equipment (see para. 56). 14. The most important lessons learned from this project suggest future efforts should seek to: (a) ensure the capacity of the implementing agencies for new operations as well as the availability of local funds; (b) design projects that are well focused and limited in their scope; (c) contract maintenance works to private operators rather than by force account; (d) set up an effective system for managing the information necessary for supervision and implementation completion reporting; and (e) set up a sound accounting system, choose an accounting software, both acceptable to the Bank, and accept auditing process for project accounts as a condition of effectiveness.   IMPLEMENTATION COMPLETION REPORT MADAGASCAR PORTS REHABILITATION PROJECT CREDIT 1752-MAG PART I: PERFORMANCE ASSESSMENT Project Identity Name: Ports Rehabilitation Project Credit number: 1752-MAG RVP unit: Africa Department: Central Africa and Indian Ocean Department Country: Madagascar Sector: Transportation Background 1. Madagascar is the fourth largest island in the world with about 12 million inhabitants unevenly distributed across an area of about 590,000 sq.lan. The central highlands and the east coast are the most populated. The topography is generally rugged and a central mountain range traverses the country from north to south. The climate is mainly marne-tropical, with cyclones and heavy rainfall particularly frequent on the east coast Exports are largely agricultural; coffee, cloves, vanilla and shrimp are the most important. Some minerals are also exported, including graphite, chromite and mica. 2. Transport Sector. The country's transport sector accounted for about 14% of GDP and about 26% of total government expenditures in 19891. Weak road and railway networks have given rise to dense domestic air and coastal transport networks consisting of 17 airports and 16 ports. Extemal transport needs are met largely by maritime transport for freight and air services for people. 3. Port Subsector. The most important ports are Toamasina (the main international port), Mahajanga, Antsiranana and Toliara. These four ports handle about 90