Document of The World Bank Report No. 17134-NEP Project Appraisal Document Nepal Multimodal Transit and Trade Facilitation Project October 29, 1997 Infrastructure Sector Unit South Asia Region CURRENCY EQUIVALENTS (As of March 1997) Nepalese Rupee (NR) I100 Paisa US$1 = Nrs. 57.0 SDR - US$1.384 METRIC EQUIVALENTS 1 Meter (m) = 3.28 Feet (ft) I Hectare (ha) = 2.471 Acres (a) I Kilometer (km) 0.62 Miles (mi) GOVERNMENT FISCAL YEAR July 16 - July 15 ABBREVIATIONS AND ACRONYMS ACIS Advanced Cargo Information System ASYCUDA Automated Systems for Customs Data ADB Asian Development Bank BPIP Borrowers Project Implementation Plan BSES Baseline Socio-Economic Survey CAS Country Assistance Strategy CONCOR Container Corporation of India EA Environmental Assessment FCGO Financial Controller General's Office FNCCI Federation of Nepalese Chamber of Commerce and Industry GOI Govemment of India HA Hectares HMGJN Her Majesty's Government of Nepal ICD Inland Container Depot IDA International Development Agency IR Indian Railways MOC Ministry of Commerce MOF Ministry of Finance MOWT Ministry of Works and Transport NITB Nepal International Transportation Board NTTFC Nepal Trade and Transportation Facilitation Committee PIRC Project Information and Rehabilitation Center PIU Project Implementation Unit PPF Project Preparation Facility PSC Project Steering Committee RAP Resettlement Action Plan SOE Statement of Expenditures TA Technical Assistance TMC Terminal Management Company UNCTAD United Nations Commission on Trade and Development Vice President Mieko Nishimizu Country Director Hans M. Rothernbuhler Sector Manager Frannie Humplick Task Team Leader Harald Hansen Nepal Multimodal Transit and Trade Facilitation Project Contents Page No. BLOCK 1 Project Description .................................................2 1. Project Development Objectives .................................................2 2. Project Components .................................................2 3. Benefits and Target Population .................................................2 4. Institutional and Implementation Arrangements ................................................. 2 BLOCK 2 Project Rationale ................................................ 3 5. Country Assistance Strategy Objectives .................................................3 6. Main Sector Issues and Government Strategy .................................................3 7. Sector Issues Addressed by the Project and Strategic Choices .................................4 8. Project Alternatives Considered and Reasons for Rejection .....................................4 9. Related Ongoing or Planned Projects .................................................4 10. Lessons Learned and Reflected in the Project Design .............................................. 4 11. Indications of Borrower Commitment and Ownership ............................................ 5 12. Value Added of IDA Support .................................................5 BLOCK 3 Summary of Project Assessments .................................................5 (Detailed assessments are in various Annexes and in Project Files) 13. Economic Assessment .................................................5 14. Financial Assessment .................................................5 15. Technical Assessment .................................................5 16. Institutional Assessment .................................................6 17. Social Assessment .................................................6 18. Environmental Assessment .................................................6 19. Participatory Approach .................................................6 20. Sustainability .................................................6 21. Critical Risks .................................................7 22. Possible Adverse Issues .................................................8 BLOCK 4 Main Loan Conditions .................................................8 23. Effectiveness Conditions .................................................8 24. Other .................................................8 BLOCK 5 Compliance with Bank Policies .................................................8 ANNEXES 1. Project Design Summary .................................................9 2. Detailed Project Description .................................................11 3. Estimated Project Costs ................................................ 12 4. Cost Benefit Analysis ................................................ 13 5. Financial Summary ................................................ 16 6. Procurement and Disbursement Arrangements ................................................ 18 7. Project Processing Budget and Schedule ................................................ 19 8. Documents in the Project File ................................................ 23 9. Statement of Loans and Credits ................................................ 24 10. Nepal at a Glance ................................................ 26 TABLES A Project Costs by Procurement Arrangements ................................................ 20 B Prior Review Thresholds ................................................ 21 C Allocation of Credit Proceeds ................................................ 22 INTERNATIONAL DEVELOPMENT ASSOCIATION South Asia Region Infrastructure Sector Unit Project Appraisal Document NEPAL Multimodal Transit and Trade Facilitation Project Date: 10/29/1997 [X] Final Task Leader: Harald Hansen Country Director: Hans M. Rothenbuhier Project ID: NP-PE-10509 Sector: Transport POC: ENIPV Lending Instrument: SIL PTI: Yes [X] No Project Financing Data Loan p(] Credit Guarantee For Loans and Credits: Amount: SDR 17.0 million (US$ 23.5 million equivalent) ............. ..y6~..... ................................................................................ ........................................... .......................................................................... Proposed Terms: Multicurrency Single currency Grace period (years): 10 years Standard Variable PCi Fixed LIBOR-based Years to maturity: standard with 40 years to maturity Commitment fee: 0.75% Service charge: standard .................................................................................................................................................................................................................................................... Financing plan (US$m): Source Local Foreign Total Government 5.0 0.0 5.0 IDA M Total 8.4 20.1 28.5 ...................I...................................................................................................................................................................................................................................... Borrower: Kingdom of Nepal (HMG/N) Guarantor: N/A Responsible agencies: Ministry of Commerce (MOC) Estimated disbursements (Bank FY/US$M): 1998 1999 2000 2001 2002 Annual 3.0 7.5 7.5 4.5 1.0 Cumulative 3.0 10.5 18.0 22.5 23.5 For Guarantees: Partial Credit Partial risk Proposed coverage: Project sponsor: Nature of underlying financing: .................... ......... .... ................................... . ............................................................................................................................................................... Terms of financing: Principal amount (US$) Final maturity Amortization profile Finanding Available without guarantee: Yes No Estimated financing cost or maturity with guarantee: Expected effectiveness date: 01/31/1998 Closing date: 12/31/2001 Net Present Value: US$ 112 million Project Appraisal Document Page 2 Country: Nepal Project Title: Multi-Modal Transit and Trade Facilitation Block 1: Project Description 1. Project development objectives (see Annex l for key performance indicators): The principal development objective is to reduce transport costs associated with Nepal's imports and exports. A second set of project objectives are to streamline trade and transit procedures and to improve the efficiency and organization of transit trade documentation and data exchange. ............................................................................................................................................................................................................. 2. Proiect components (see Annex 2 for a detailed description and Annex 3 for a detailed cost breakdown): Component Cost Incl. Contingencies (US$m) % of Total (1) construction of Inland Container Depot (lCD) at Sirsiya (Birgunj)'; 18.0 63.0 (2) improvements to road iCD at Biratnagar; 2.0 7.0 (3) improvements to road ICD at Bhairahwa: 1.9 6.5 (4) procurement of equipment for ICDs; 2.0 7.0 (5) supervision consultants for civil works components; .8 2.5 (6) technical assistance/training for trade facilitation; 1.1 4:0 (7) installation of Automated Systems for Customs Data (ASYCUDA); 1.1 4.0 (8) installation of Advanced Cargo Information System (ACIS); 1.1 4.0 (9) project preparation - PPF; .f 2.0 Project Total: 28.5 100 3. Benefits and target population: * Significant reduction in total transport costs on both import and Transport operators, importers and export cargoes. exporters and ultimately consumers and producers. * Significant reduction to stock financing costs for import and export Importer, exporter and banking cargoes. sectors. * Significant reduction in trade penalties (just-in-time delivery Trading and banking sectors. terms). * Improve overall skill levels of the sub-sector by providing training Trade and transportation for freight forwarders, transport and terminal management communities. operators. * Generation of both temporary and permanent employment Populations living in proximity of opportunities through constructionflmprovement of ICDs. ICDs. * Accelerated economic/industrial development in proximity of Populations living in proximity of ICDs. ICDs. Importers, exporters and freight * Streamlined and simplified customs procedures forwarders. for importexport trade. ~~~~~~~~.................................................................................... .................................... ................................................................................................................... 4. Institutional and implementation arrangements: Implementation period: Project implementation is expected to be completed by mid/end of the year 2000. The implementation period for the civil works components of the project is estimated to be three years. Prequalification of bidders for the civil works has been completed, which will enable award of the civil works contracts shortly after Credit Effectiveness. The institution building components of the project (trade facilitation, ASYCUDA and ACIS) should be fully implemented within the first three years of the project. Executing agencies: The Ministry of Commerce (MOC) will be fully responsible for project implementation and there will be an inter- ministerial Project Steering Committee (PSC) for coordination purposes. A Project Implementation Unit (PIU) has been established within the MOC and will be staffed with staff with the necessary skills and qualifications to implement all of the project components. The PIU will be fully responsible for procurement and implementation of all physical components of the project as well as for the implementation of the trade facilitation components of the project; customs will be responsible for the detailed implementation of ASYCUDA. As part of its bilateral assistance to HMG/N, the Government of India (GOI) plans, in parallel with the project, to fund the construction of a 5 km rail spur to link the current rail terminus at Raxaul with the Sirsiya (Birgunj) ICD. The construction of the rail spur is planned to be completed by the end of 1999 which is well before the projected completion date of the ICD. The civil works cost for the Sirsiya (Birgunj) ICD do not include the cost of land, but include expenditures related to implementation of ACRP for which retroactive funancing of up to US$ 100 thousand has been agreed for expenditures after August 1, 1997. Project Appraisal Document Page 3 Country: Nepal Project Title: Multi-Modal Transit and Trade Facilitation Project oversight: The MOC through the PIU will oversee the implementation of all project components. The PSC, which has been responsible for project preparation, has been reconstituted under the chairmanship of the Secretary of Commerce to provide project coordination for the PIU. The PSC would continue to be made up of representatives from National Planning Commission, Ministry of Finance (MOF), MOC and etc.. The PSC, with the support of IDA, has already prepared the Borrower Project Implementation Plan (BPIP), which was agreed during credit negotiations. This should ensure smooth project implementation and enhanced construction quality. The consultants who prepared the feasibility study and detailed facilities design will be in charge of supervising the civil works components of the project. Monitoring and evaluation arrangements: Overall project monitoring and evaluation will be the responsibility of the PIU. The PIU will prepare and submit to IDA quarterly progress reports. Accounting. financial reporting and auditing arrangements: According to the Constitution of the Kingdom of Nepal 1990, the Auditor General is deemed to be the sole authority to audit HMG/N implemented projects. The Office of the Auditor General will conduct audits of the project accounts at MOC to ensure their regularity, economy, efficiency, effectiveness and propriety, as provided by the law. The Project Director shall prepare all financial statements and will confirm the accuracy of all financial statements concerning all project financial statements. The project will submit the unaudited financial report within 6 months after the end of the Nepalese fiscal year and the audited report within 9 months. These arrangements have been confirmed during Credit negotiations. Since the project is being implemented by government entities (MOC through the PIU), HMG/N's standard financial management system will be used to monitor financial performance. This system provides timely financial information and allows early waming of problems affecting project implementation. Financial records as required by HMG/N's system are reliable and complete. The project will be required to maintain the books of accounts as prescribed by the govemment. In addition, it will maintain a subsidiary loan register and records which will provide information on the loan status. Internal audits will be arranged through Financial Controller General's Office (FCGO) every month to ensure effective internal control. A cash based accounting system will be used for project accounting. The accounting system will be fully integrated with all other financial management systems (budget, treasury and debt management). MOC through the PIU will prepare and submit annual budget requests to MOF. During credit negotiations it was agreed that the accounts officer assigned to the project should have prior experience in handling either IDA or ADB projects and should be knowledgeable with IDA disbursement procedures. HMG/N has already assigned to the PIU one experienced accounts officer and two accountants to handle the accounts of the project. Finally, the project management team will have the ability to process and maintain both SOE and Special Account documentation to IDA's standards. IDA will arrange to have an annual review of SOE accounts. The Special Accounts will be managed by the Project Manager within the PIU. The Project Director will be responsible to handle and operate the special accounts. HMG/N will designate one signatory from MOC to withdraw funds from the IDA Credit. Block 2: Project Rationale 5. CAS objective(s) supported by the project: Document number and date of latest CAS: Report No.: 15508 NEP, April 30, 1996 (i) to improve Nepal's basic transport infrastructure; (ii) to facilitate the improvement of the trade and customs regime under which Nepal's international trade transits through India and across its own borders; and (iii) promote private sector participation and investment in economy. The project is fully consistent with the Nepal CAS discussed by the Board on June 6, 1996, and with the Nepal CAS progress report that will be discussed concurrently with this project on November 25, 1997. .........0..............................0..............................0.... ..0........................... 0 0...........o............ ...... ................................o...o... ...............o...o ........... ...... !..o......... 6. Main sector issues and Government strategy: The country's poor capital stock especially in the area of transport infrastructure is recognized as one of the major constraints for Nepal to achieve a high and sustainable rate of economic growth. Poor transport infrastructure increases transaction costs for the price sensitive tradable sector of the Nepalese economy, making it less competitive in the world market, and hence depressing the countries growth potential. Poor transport infrastructure and cumbersome customs procedures have resulted in most import/export trade being transported by road in break bulk (loose boxes) from/to the port of Calcutta to/from the border where they are customs cleared before being forwarded to their final destination in Nepal. The current system not only results in high direct transport costs, but also in substantial losses from damage and theft. In its development strategy, HMG/N has recognized this constraint to growth. It is in the process of re-prioritizing its budgetary resources (complemented with external assistance) to reduce major infrastructural bottlenecks, particularly in the transport sub-sector. And plans to promote private sector participation and investment to boost infrastructure capacity and efficiency. A second constraint to economic growth is the restrictive provisions of certain protocols of the Trade and Transit Treaty with India of 1991. HMG/N is working toward improving these provisions and should be able, as part of the project, to realize significant gains in trade and transit facilitation through technical assistance and improved procedures. 7. Sector issues to be addressed by the project and strategic choices: The project will address the main sector issue of costly land transport for its foreign trade via India and the lack of physical facilities and efficient trade facilitation arrangements for Nepal's foreign trade. Achieving these objectives will require the implementation of multifaceted institutional reforms (see next para.): Project Appraisal Document Page 4 Country: Nepal Project Title: Multi-Modal Transit and Trade Facilitation * Infrastructure: The initial investments in ICD infrastructure will be funded by HMG/N. The private sector will operate and manage the three ICDs under long term leasehold agreements awarded in a competitive fashion. The construction of these facilities will permit a shift in the current break bulk traffic moving by road toward containerized rail freight movements to Sirsiya (Birgunj) and containerized road traffic movements to Biratnagar and Bhairahwa. * Institutional Development: On the institutional side the private sector will work in partnership with the public sector to improve transit and trade practices. This partnership will take the institutional form of the recently established Nepal Trade and Transport Facilitation Committee (NTTFC). The NTTFC is advising HMG/N on how to accelerate and carry through essential reforms outlined in the Trade Facilitation Action Plan, as well as in the agenda for the facilitation of trade and transit procedures for bilateral discussions with India. A second major institutional development concems the establishment of an independent public body called the Nepal Intermodal Transportation Board (NITB). It will be created by HMG/N, and will be given regulatory power over the three ICDs. The functions of NITB will be exercised through a Board of Members which should include members from both the public and private sectors. Broad representation should ensure that the multiple and sometimes divergent interests of the trade and transportation communities are properly represented in NITB's decisions. The most important function of NITB will be to monitor and enforce terminal leaseholding and concession agreements with the Terminal Management Companies (TMC), who will actually operate the ICDs. It will also monitor/regulate the maximum rates that TMCs can charge for services offered at the ICDs. In addition, NITB will be empowered to negotiate an agency contract with Indian Railways (IR) and thus will be in a position to ensure continuous rail service from Calcufta to the Sirsiya (Birgunj) ICD. Draft documentation for the establishment of NITB has been prepared and submitted to IDA. During negotiations it was agreed that the establishment of the NITB will be a condition of Credit Effectiveness. Finally, the project also provides resources for institution building and human resource development. A small trade facilitation cell within MOC will sustain local human capacity development, as an integral part of technical assistance program. ~~~~~~~~~~~~~~~~............................................................................................................................................................................................................................ 8. Project alternatives considered and reasons for rejection: The primary current transport mode for Nepal's import and export trade is road transport via India, primarily in break-bulk form. This project will make available an alternative competitive mode of transport involving rail transport to and from Sirsiya (Birgunj), as well as improved facilities at Biratnagar and Bhairahwa which will also encourage through container transport (as contrasted with break-bulk) by road. These alternative modes are both more cost effective and environmentally benign. Moreover, the competition which they will provide should put downward pressures on road transport rates and lead to an improvement of service levels. Several alternative sites and several levels of investments were considered before selecting the three terminal sites and scales of facility development. The final selection was based on technical, economic and financial considerations. The facilities were designed for phased development to minimize the initial investments and project risks and to permit cost effective expansion in line with future traffic growth. 9. Related ongoing or planned projects: IDA.(ij Road Mainter ance and Rehabilitation Project (Cr. 2578-NE); and (i) Road Maintenance III project (planned FY98). Asian Development Bank (ADB): (i) Third Road Improvement Project and Rural Infrastructure Development Project (planned); (ii) technical assistance grant to implement ASYCUDA; and (iii) project to improve the freight, passenger handling capacity of the international airport at Kathmandu. ........~~~~~~~~~~~~~~~................................................................................................................................................................................................................... 10. Lesons learned and reflected in the project design: The proposed project would be the first IDA transport operation in Nepal that focuses on intermodal transport, making any direct comparison with other projects difficult. However, projects in the transport sector (i.e. road projects) have all suffered from a lack of adequate counterpart funds and timely payments to contractors, as well as from weakfineffective project management and monitoring frameworks. These difficulties stem in large part from a lack of local managerial and technical expertise required to implement projects effectively and in a timely manner. The technical, managerial and financial weakness of the domestic and regional construction industry has also contributed to the poor implementation record in the transport sub-sector. To overcome the implementation difficulties that IDA has experienced in Nepal, the BPIP has built-in quality control and forward planning mechanisms, which should reduce project implementation problems, including specific measures to reduce human resource and institutional development weaknesses. The BPIP contains a fully developed implementation action plan with physical and institutional implementation targets, that will be closely monitored by both HMG/N and IDA. On the construction side, intemational contractors have already expressed their interest in tendering for the civil works. The project will involve substantial private sector participation in operating the constructed/improved ICDs, and is likely to draw on expatriate management expertise to introduce intemational best practice. There are strong indications that several intemational groups are considering joint ventures or other cooperative arrangements with Nepalese interests to tender for the operation of the ICDs. .. ....................................................................................................................................................................................................................................................... 11. Indicators of Borrower commitment and ownership: The borrower has fully committed to the project from its inception and has actively participated in defining project objectives and in preparing a framework for implementation. Evidence of this commitment can be found in the PPF request and use by HMG/N of approximately US$ 500,000 to fund project preparation activities. HMGIN has established a high level steering commiHtee to oversee project preparation and implementation, thus ensuring its full and active participation in the project. Senior HMG/N officials did confirm at the 1996 Annual Meetings that this project ranked at the top of their priority list for Bank assistance and requested an acceleration in the preparation process. significantly, this project has been equally and strongly supported by both the current govemment and its predecessor govemment, as well as by the private sector through the Federation of Nepalese Chamber of Commerce and Industry (FNCCI). HMG/N has fully endorsed the use of ICB for the procurement Project Appraisal Document Page 5 Country: Nepal Project Title: Multi-Modal Transit and Trade Facilitation of civil works contracts and of intemational consultants for supervision of the works (Annex 6). Also, it has fully endorsed the concept of using private sector operators to operate the ICD facilities. Signiftcantly, HMG/N has also recently concluded negotiations and signed a new trade agreement with India. As indicated earlier, HMG/N has also initiated discussions with India on an agenda for bilateral negotiation and reached agreement with India concerning the rail spur. ~~~~~~~~~......................................................................................................................................................I.................................................................................... 12. Value added of IDA participation: IDA can assist in a uniquely valuable way in helping to facilitate transit and administrative arrangements for moving third country goods between India and Nepal due to its unique understanding of conditions both in Nepal and more importantly in India. In India IDA/IBRD have been recently involved in the preparation of a container transport logistics project with Container Corporation of India (CONCOR) and their involvement with IR in the transport sector spans four decades. This gives iDA/IBRD a critical understanding of the difficulties and constraints facing Nepal's use of its strategic land corridor(s) through India. IDA can facilitate the development of this strategic transit corridor between the two countries by providing financing for basic infrastructure and in providing access to global best intermodal practices and technologies. In addition, IDA can help the development of institutional and human resource capacities required for project success through direct technical assistance and project development. IDA's support builds on experience gained in other national contexts in transport sector deregulation, transit facilitation, private sector participation and in creating competitive business environments. Block 3: Summary Project Assessments (Detailed assessments are in the project files) 13. Economic Assessment [X] Cost-Benefit Analysis: NPV=US$ 103/11/2 million; Cost Effectiveness (see Annex 4): ERR= 45/44/17% (Birgunj/Biratnagar/Bhairahwa) Analysis: Separate calculations have been made for each of the three terminals as well as for the project as a whole. This shows that all of the three terminals are economically feasible, although by different margins. The most economically attractive benefits appear to be available through the development of the main Sirsiya (Birgunj) ICD which accounts for more than half of the project cost. There are significant uncertainties regarding the traffic forecasts but this has been taken into account in the sensitivity analysis (Annex 4). In view of the risk factors which have emerged, the dimensions of the original terminal construction were scaled down and a phased terminal expansion plans were developed for each facility. The technical assistance, including extension of ASYCUDA and introduction of ACIS will yield substantial benefits in the form of improved data availability, stream lined procedures, enhanced human capital, etc. but these are difficult to quantify and have been treated as non-quantified benefits. Finally, the project will also generate substantial environmental benefits by causing a shift in the movement of import/export freight from the road to rail mode of transport especially at the Sirsiya (Birgunj) lCD. These benefits have not been quantified in the economic analysis due to the difficulty in evaluating such benefits. The overall ERR for the project is 40% while the NPV is US$ 112 million (the calculation of the aggregate ERR and NPV include all costs such as supervision, TA, land acquisition and R&R but exclude the unquantifiable direct benefits of the trade facilitation component). Fiscal impact: The project should, overtime, make a significant positive contribution to the national budget. The initial fiscal impact on HMG/N will be limited to meeting the counterpart funding requirements estimated at approximately US$ 5.0 million over the three/four year project implementation period. Once the ICDs are in operation, the lease payments from the TMCs should easily cover the debt servicing requirements of the IDA Credit. In addition, the project will generate additional tax revenue through increased economic activity that will be generated by the constructed/improved ICDs and collateral commercial activities. More specifically, according to the financial projections prepared by the consultants, during the first five years of operations the Sirsiya (Birgunj) lCD should generate an extra US$ 500 thousand in income tax revenue for HMG/N. ~~~~~~~~~~~~~~~. .............................................................................................................................................................................................................................. 14. Financial Assessment (see Annex 5) NPV=US$ 1.7/1.2/0.3 million; FRR= 19/59/26% (Birgunj/Biratnagar/Bhairahwa) Under the project HMG/N will bear the full capital cost of approximately US$ 20 million to construct/improve the three ICDs and to provide the basic equipment required for their operation. HMG/N should recover the capital investment made to construct the facilities from the leasehold fees that TMCs will pay to operate the three facilities. In turn, the TMC's will generate revenue to meet their lease obligations to HMG/N by providing (directly and/or by sub-contracting) a full range of services to the users of the facilities. Thus, actual traffic volumes and the markets' willingness to pay will determine the final level of lease revenue that ultimately is available to HMG/N to meet the debt servicing obligations of the IDA Credit. The proposed phased approach to terminal investment (fine tune capacity as closely as possible with traffic growth) should substantially reduce the financial risk to both the TMC and HMG/N. Furthermore, the construction/improvement of three ICDs to serve three different but complementary markets in the country should better spread the risk of lower than forecasted demand for the facilities. T&........................................................................................................................................................................................................................................................ 15. Technical Assessment: The actual construction/improvement of the three ICDs does not represent a major challenge from a technical/technological point of view. The required construction expertise is widely available world wide. In light of past experience in Nepal particular attention will be paid to managing construction quality, costs and delays. Effective monitoring mechanisms are being developed as part of the BPIP to ensure that the physical works are completed within the stipulated contractual time. Intemationally experienced supervision consultants have been selected to supervise the construction activities to ensure a high and consistent construction quality and timely execution of the civil works. Finally, in order to attract intemationally experienced contractors, the three civil works contracts have been put out to bid as one package following ICB procedures. Project Appraisal Document Page 6 Country: Nepal Project Title: Multi-Modal Transit and Trade Facilitation 16. Institutional Assessment: Institutional support of both project components is considered appropriate and adequate for the project to realize its full potential benefit: a. Overall project implementation will be the responsibility of MOC through the PIU, with the reconstituted PSC providing needed inter-ministerial coordination. Vvith the shift in primary responsibility from MOWT (during project preparation) to MOC (for project implementation), the PIU and PSC have been reconstituted, and the Secretary of Commerce will head the PSC. The Secretary of Commerce will also chair the recently established NTTFC. In addition to its overall project implementation role, MOC will be directly responsible for the implementation of the trade facilitation component of the project with the support of a technical assistance team who will work with and train a strengthened trade facilitation unit within MOC. MOC will also be responsible for the related ASYCUDA component which will be implemented under its guidance by the Department of Customs under MOF. In light of MOC's lack of experience in procurement of equipment and management of civil works, the PIU will be staffed with personnel that have the necessary breadth and depth of skills to oversee their procurement and implementation. b. NITB will regulate and control the TMCs that will operate the ICDs. NITB will competitively tender leasehold rights to one private TMC for each terminal. The negotiated leasehold agreement will serve as the regulatory framework for defining the respective rights and obligations of NITB and the TMCs. NITB will provide an early warning system for the monitoring of terminal operations and their profit performance. Default or failure to perform under the lease agreement(s) will lead to the foreclosure and re- bidding of the original leasehold. ~~~~~~~~~~~~~................. i .......................................................................................................................................................................................................... 17. Social Assessment: In connection with the constructionrimprovement of the three ICDs, land requirements and related social impact are as follows: (i) at Sirsiya (Birgunj), for the project's major, rail-based ICD, about 37 hectares (HA) of privately-owned land is being acquired, affecting about 144 families in the village of Sirsiya (Birgunj) (two families, with a total of 9 persons will need to be resettled, while others will have to be compensated for the loss of land and rehabilitated); (ii) at Bhairahwa, for one smaller, road- based ICD, under 2 ha. of privately-owned land will be necessary to be acquired (affecting about 14 families, but requiring no resettlement); and (iii) at Biratnagar, the other road-based ICD, requires no land in excess to Customs Department's existing reserves. A baseline social and economic survey was completed and the resettlement action plan (RAP, known as Resettlement Policy Framework and Acquisition, Compensation and Rehabilitation Plan or ACRP) drafted for the Birgunj, Bhairahwa project sites have been reviewed/cleared by IDA and approved by HMG/N. Given that the need for additional acquisition of privately-owned land at Bhairahwa became clear only after pre-appraisal, PAFs at Bhairahwa were subsequently surveyed to the same standard as the PAFs at Sirsiya (Birgunj). The new data - both from the Sirsiya (Birgunj) and Bhairahwa additional survey - have been incorporated into the baseline social survey and the RAP documents. The full RAPs has been reviewed by IDA and is in full compliance will all relevant Bank Group's OD's and will be implemented during the life of the project. Apart from the loss of land and the need for economic rehabilitation, other major social impact includes the increased influx of people to Sirsiya (Birgunj). A project Information and rehabilitation center (PIRC) has been established at Sirsiya (Birgunj) and a smaller satellite facility is being established at Bhairahwa. Through the efforts of the Resettlement and Rehabilitation Coordinator (RRC) and local PIRC staff, awareness raising, training and income generation programs will be developed for PAFs. ................................................ ...................................................... ..................I....................................................... .......... ............. ... 18. Environmental Assessment: Environmental Category: B An EA has been prepared and made available to IDA. The major environmental benefit from the project will be reduced air pollution and reduced traffic congestion in Sirsiya (Birgunj). This will be caused by the gradual diversion of traffic from trucks to the new rail service. The civil works contracts would provide for: (i) full restoration and landscaping of burrow areas, quarries and spoil tips opened specifically for this project; (ii) preparing storage areas, especially for diesel fuel and bitumen; (iii) adoption of sanitary arrangements in offices, yards and on site, and; (iv) avoiding contamination of water courses and groundwater. As a result both terminal construction and operation should result in minimal adverse environmental impact and overall the project should have a p vpositive net impact. 19. Participatory Ap roach: Identification/Preparation Implement aior Operation Beneficiaries/community groups COL COL COL Intermediary NGOs/Academic institutions COL COL COL Local government CON CON CON Other donors CON CON CON 20. Sustajnaii 0iy .Project sustainability will be ensured by extensive private sector involvement in the iong term operation of the iCDs. The creation of NITB will ensure that private sector investments and involvement in operating the ICDs is supported by a well conceived and transparent regulatory framework. This, together with the expected financial returns, should enhance the private sector's willingness to invest and operate the ICDs. The result of this competitive process will be to accelerate the development of the rail freight transport mode, and to further strengthen the road transport mode, thus ensuring the long term sustainability of the project. The institution building goals underlying the software components should be sustained through the development of human resources at MOC level. Human resource development is considered critical to enhance Nepalese capacity to deal with trade facilitation issues. The institutional components of the project, if properly implemented, should lead to a long term and permanent reduction in the cost of moving freight to and from Nepal. This should enable a more rapid growth in trade volumes which will generate increasing amounts of business for the three ICDs, further enhancing their long term sustainability. Project Appraisal Document Page 7 Country: Nepal Project Title: Multi-Modal Transit and Trade Facilitation 21. Cfitical Risks (see fourth column of Annex 1): Risk Risk Rating Risk Minimization Measure Project outputs to Insufficient implementation Medium Strengthening of NTTFC through development objectives capacity of the NTTFC to increased involvement of MOC carry out trade facilitation and provision of TA. activities. Deteriorating bilateral Medium Strengthening capability of Nepal relations causing delays in through provision of TA for implementation of Indo- development of bilateral Nepal Transit Treaty. protocols. Lower than expected Medium Use of conservative trade growth growth in trade volumes. figures for forecasting purposes. Project components to Delays in construction of Medium Frequent consultations by outputs Raxaul (India)-Sirsiya HMG/N with IR and GOI to (Birgunj, Nepal) rail spur. ensure timely construction of rail spur. Lower than forecasted Medium Phasing of capital investment traffic volumes moving program to closely match through Sirsiya (Birgunj) capacity with actual demand. ICD. Low private sector Low Continued intensive response and participation consultations and interaction with in operating ICDs. potential private sector operators to foster participation in project. Construction delays, low High ICB together with strict pre- construction quality and qualification criteria, and suitably cost overruns. packaged contracts should ensure that only qualified contractors are selected. Inadequate quantity and Medium Intensive interaction and frequency of freight train consultations by HMG/N with services to Sirsiya (Birgunj) GOI and IR to ensure continued ICD. full support for project. Delays in completing land Low Socio-economic surveys (BSES) acquisition and in R&R of and RAP have been prepared project affected people. and reviewed by the IDA in the field to ensure full compliance with ODs. Failure of Indian/Nepalese Medium Increased dialogue with IR and customs and IR to Indian/Nepalese customs implement changes to Indo- through the bilateral trade Nepal treaty. facilitation working group. Failure of Nepal and India Medium Active negotiations between the to agree on seamless two countries. transit between the two countries. Overall project risk rating Medium Project Appraisal Document Page 8 Country: Nepal Project Title: Multi-Modal Transit and Trade Facilitation 22. Possible Adverse Issues: There are no other possible adverse issues that have not been dealt with in the above risk analysis. Extensive consultation with a wide variety of stakeholders, civil society and HMG/N should ensure that the physical components of the project will be implemented in a transparent manner in full compliance with Bank directives, local norms and laws. Extensive consultations with local communities should also ensure strong local support for the project. Block 4: Main Loan Conditions 23. Effectiveness Conditions: (a) Standard provisions as applicable. (b) The Nepal Intermodal (Development) Board has been duly established. (c) A Project Accounts Officer with qualifications and experience satisfactory to the Association has been assigned to MOC, with responsibility for maintaining Project Accounts (effectiveness condition already met). 24. Other: (a) The Borrower shall maintain the existing inter-ministerial Project Steering Committee (PSC) throughout the project implementation period. (b) The Borrower shall maintain the PIU established within the MOC throughout the period of project implementation with adequate experienced and qualified staff. (c) Contracts with TMCs for operation of the ICDs to be constructed or improved under the project shall be awarded in a competitive tender process. (d) The Borrower shall carry out, or cause to be carried out, the acquisition of land for the project and the resettlement of the people affected by the project in accordance with the ACRP dated November 28, 1996. (e) All necessary steps should be taken by the borrower to ensure timely and effective coordination of project activities with the activities in respect of construction of the rail spur from Raxaul, India, to Sirsiya (Birjunj), Nepal to be financed by the GOI. (f) Conduct by December 31, 1998 a mid-term review of the project. (g) The Borrower shall ensure that all civil works contracts include environmental mitigation measures satisfactory to the Association. (h) The Borrower shall provided NTTFC with funds, facilities, services and other resources to accomplish NTTFC's responsibilities and ensure implementation of an agreed timebound trade facilitation action plan. (i) The Borrower shall maintain adequate policies and procedures for monitoring and evaluating project implementation and shall prepare periodic reports on project implementation. Block 5: Compliance with Bank Policies (RI This project complies with all applicable and relevant Bank policies. -Task L|eader D ry irector Harald Hansen Hans Rothenbuhler Page 9 Annex 1 Project Design Summary Narrative Summary Key Performance Indicators Monitoring and Supervision Critical Assumptions and Risks CAS Objective 1. Improved efficiency in 1.1 Increased international freight 1.1 Customs will monitor growth in 1. I Full commitment by both international trade. flows moving through traffic volumes. HMG/N and GOI to implement Sirsyia(Birgunj), Biratnagar & both the physical and trade Bhairahwa ICDs. facilitation components of project. 1.2 Decrease transit cycle times from 1.2 PIU with help of trade will 1.2 Lower than projected growth ship to ICDs and back from current 20 monitor on an annual basis cycle in Nepalese economy. days to 15 days after one year of times from ship to ICDs. operation and to 10 days after two years of operation. 2. Increased private sector 2. Increased percentage of GDP 2. Nepal Rastra Bank and Bank's participation in economy. generated by private sector economic CEM annual reports. activity. 3. Improved basic transport 3. Increased net value of infrastructure 3. Transport sector infrastructure sector infrastructure. capital stock. investments remaining a high priority for HMG/N. Project Development (Development Objectives to CAS Objectives Objective) 2.1, 2.2 & 2.3 Reduce 2.1 15% decrease in transport costs of 2.1. MOC will collect data on 2.1 Degree of competitiveness of transport costs for the export tradable (import/export) goods after transportation costs & transportation freight industry will determine import sectors of economy. the first year of commencement of market share. share of transport cost savings ICDs operation, and a further 10% passed on to economy. after two years. 2.2 Increase transit market share of 2.2 MOC will collect data on 2.2 Attractive regulatory containerized truck/rail freight vs. transportation costs & transportation framework for private sector break bulk from 5% currently to 25% markets share. investment. after the first year of operation, 35% after the second, and 50% after the third. Project Outputs (Outputs to Development Objectives) 3.1 Improve trade transit 3.1 Full operational status of 3.1 PIU quarterly progress reports. 3.1 Timely construction of infrastructure on the improved/constructed ICDs by June railway spur to Sirsiya (Birgunj). Nepal/India border. 2001 (December 2000 for Biratnagar and Bhairhawa). 3.1.2 Deterioration of road network in Nepal will offset benefits of improving ICDs. 3.2 Enhance customs 3.2.1 Implementation of trade 3.2.1 PIU quarterly progress reports. 3.2.1 Timely implementation of institutional capacities and facilitation action plan by December trade facilitation action plan, operating procedures. 2001. ASYCUDA and ACIS. 3.2.2 ASYCUDA fully operational at 3 3.2.2 UNCTAD & PIU quarterly and 3.2.2 Implementation of Indo- ICDs by June 2001 (December 2000 annual progress reports. Nepal Transit Treaty. for Biratnagar and Bhairhawa). 3.2.3 ACIS fully operational at 3 ICDs 3.2.3 UNCTAD & PIU quarterly and by June 2001 (December 2000 for annual progress reports. Biratnagar and Bhairhawa). Page 10 3.3 Encourage private sector 3.3.1 cost recovery of investment from 3.3.1 TMCs will have to disclose involvement in ICD lease charges in less than 15 years of annual accounts to NITB. opemtion. operations. 3.2.2 TMCs co-investment in terminal equipment to reach US$ 1.0 million by December 2001. Project Components [See Annex 2 for a detailed description.] 4.1.1 Construct & improve 4.1.1.1 Agreed CPM based work 4.1.1.1 PIU to monitor contractors 4.1.1.1 On schedule and within ICDs at Sirsiya (Birgunj), program for 3 ICDs civil works work program. Quarterly & annual budget construction & Biratnagar & Bhairahwa. contracts to be produced by 3/31/98, progress report. improvement of 3 ICDs. and updated every six months. 4.1.1.2 Award all civil works contracts 4.1.1.2 PIU quarterly report by February 1998. 4.1.1.3 Appoint supervision 4.1.1.3 PIU quarterly report consultants for all civil works contracts by February 1998. 4.1.2. Procure equipment for 4.1.2 Delivery of equipment 3 months 4.1.2 PIU quarterly report. 4.1.2 On schedule and within 3 ICDs. before opening of ICDs. budget procurement of equipment. 4.2.1 Implement trade 4.2.1 Implement trade facilitation 4.2.1 PIU quarterly & annual report facilitation TA. action plan & agenda by December on implementation of trade facilitation 2001. agenda 4.2.2 Fund 4.2.2 Detailed action plan for 4.2.2 UNCTAD & PIU quarterly and 4.2.2 On schedule extension/installation of implementation of ASYCUDA & annual progress reports. implementation of ASYCUDA & ASYCUDA & ACIS. ACIS prepared by February 1998. ACIS 4.3 Selection of TMC 4.3.1 Invite bids for TMC concessions 4.3.1 PIU quarterly progress reports. 4.3.1 Transparent and timely operators. by September 1998. selection of TMC concessionaires. 4.3.2 Award of TMC concession agreements by September 1999. Page 11 Annex 2 Detailed Project Description Project Component I - Rail and road Sirsiya (Birguni) ICD (USS 18.0 million)2: This project component includes several categories of civil works including site preparation, earth work, pavement, lighting, fencing, warehouse space construction, goods shed construction, administrative office building, truck scale, electrical systems and utilities suitable for a modem multimodal transfer terminal as well as actions related to the implementation of the ACRP, excluding land acquisition. This 203 thousand square meter "greenfield" facility is designed to receive and originate, on opposite sides, container trains and general merchandise and bulk commodity trains from/to the gateway ports (Calcutta and Haldia). In separate services zones, the facility will provide for expeditious customs inspections and cargo clearances and for ISO container inspection and interchanges as well as for truck parking and loading. Project Component 2 - Road only Biratnagar ICD (USS 2.0 million): This project component includes several categories of civil works, including site preparation, earth work, pavement, lighting, fencing, warehouse space construction, administrative office building, electrical systems and utilities suitable for a road only ICD. This 16 thousand square meter improved facility is designed to transfer cargoes efficiently from trucks to ISO containers and vice versa, to inspect and interchange container equipment and to store cargoes. In addition, the facility will provide for expeditious customs inspections and cargo clearance. Project Component 3 - Road only Bhairahwa ICD (US$ 1.9 million): The scope and type of civil works required to improve the road only facility at Bhairahwa are very similar to what is being done at the Biratnagar ICD. This 15 thousand square meter improved terminal is designed to transfer cargoes efficiently between trucks and between ISO containers and trucks, to inspect and interchange container equipment and to store cargoes. In addition, the facility will provide for expeditious customs inspections and cargo clearance. Project Component 4 - Equipment for three ICDs (USS 2.0 million): For the Sirsiya (Birgunj) ICD three wheeled reach stackers are required with sufficient lifting capacity to handle a fully loaded 40 foot ISO container and to stack them three high. For the Biratnagar and Bhairahwa ICDs, one wheeled reach stacker each with sufficient lifting capacity to handle empty 40 foot containers and to stack them two high is required. Project Component 5 - Supervision consultants (USS 800 thousand): Intemationally experienced supervision consultants will be used to supervise the construction/improvement of the three ICDs. They will have full responsibility as per FIDIC 4 conditions as the "engineer" on site. Project Component 6 - TA for Trade Facilitation (US$ 1.1 million): The main focus of the activities under this component aim at reducing the transport and trade costs associated with Nepal's foreign trade. These activities are: (i) simplification of documents and procedures; (ii) modernization of carrier's liability, multimodal transport and insurance provisions; (iii) modernization of customs administration policies and operational procedures; (iv) strengthening of freight forwarding and customs clearing agency standards and capacity; (v) updating of foreign-currency regulations relating to transit trade. The above activities will lead to adjustments to certain protocols of the Trade and Transit Treaties of 1991 (revised in 1993). Project Component 7 - Introduction of ASYCUDA (USS 1.1 million): Automation of customs data through the introduction of ASYCUDA (Automated Systems for Customs Data), should drastically reduce the incidence of fraud and expedite the clearance of freight by allowing a greater degree of selectivity in customs examinations. The Bank will coordinate with the Asian Development Bank (ADB), with UNCTAD and with Nepalese customs leading to the full introduction of ASYCUDA. It is expected that ADB will first introduce ASYCUDA at Customs House and at the intemational airport in Kathmandu; and that IDA would finance the extension to the three border ICDs (Sirsiya (Birgunj), Bhairawha, Biratnagar) financed under the project. Project Component 8 - Introduction of ACIS (USS 1.1 million): Introduction and full implementation of ACIS (Advanced Cargo Information Systems) as a freight tracking information system in the Calcutta to Sirsiya (Birgunj) ICD rail corridor (the Nepal Corridor) is complementary to ASYCUDA and to the information needs of freight in transit. The project will finance the introduction of ACIS with UNCTAD acting as main provider and executor of technology and implementation know how. When implemented, ACIS should provide the information flows needed by railway operators, customs administration, private sector operators and customs to streamline transit time (reduce immobilization's). Project Component 9 - PPF (USS 500 thousand): Repayment of PPF. 2 The Government of India (GOI) plans to fund in parallel with the project the construction of a 5 km rail spur to link the current rail terminus of Raxaul (India) with the Sirsiya (Birgunj) ICD in Nepal. The construction of the rail spur is planned to be completed by the end of 1999 which is before the projected completion of the Sirsiya (Birgunj) ICD. Page 12 Annex 3 Estimated Project Costs Proiect Component Local Foreign Total -US $ million------- (1) Construction of rail/road ICD at Sirsiya (Birgunj) 4.9 9.9 14.8 (2) Major imnprovements to road only ICD at Biratnagar 0.5 1.1 1.6 (3) Improvements to road only ICD at Bhairahwa 0.4 1.1 1.5 (4) Procurement of equipment for ICDs (including customs laboratories) 0.2 1.5 1.7 (5) Supervision consultants for civil works 0.2 0.5 0.7 (6) Technical assistance and training 0.2 0.7 0.9 (7) Installation of Automated Systems for Customs Data (ASYCUDA) 0.2 0.7 0.9 (8) Installation of Advanced Cargo Information System (ACIS) 0.2 0.7 0.9 (9) Project Preparation Facility (PPF) 0.1 0.4 0.5 Total 6.9 16.6 23.5 Total Baseline Cost Physical Contingencies (10%) 0.7 1.7 2.4 Price Contingencies (10%) 0.8 1.8 2.6 Total Proiect Cost 8.4 20.1 28.5 Page 13 Annex 4 Cost Benefit Analysis Summary For Sirsiya (Birgunj), Biratnagar and Bhairawha ICDs (NR million, 1997 base year) Present Value of Flows Fiscal Impact Economic Financial Analysis Analysis' Taxes Subsidies Benefits/ Revenues: -Sirsiya (Birgunj) ICD; 6,262 1,971 -Biratnagar ICD; 628 323 -Bhairawha ICD; 156 145 Total Benefits; 7,046 2,439 See Note 2 below See Note 3 below Costs/ Expenditures: -Sirsiya (Birgunj) ICD; 699 1,880 -Biratnagar ICD; 58 259 -Bhairawha ICD; 61 130 Total Costs (See Note 4); 980 2,269 Net Benefits (NPV): -Sirsiya (Birgunj) ICD; 5,563 91 -Biratnagar ICD; 570 64 -Bhairawha ICD; 95 15 Total NPV; 6,066 170 IRR: -Sirsiya (Birgunj) ICD; 45% 19% -Biratnagar ICD; 44% 59% -Bhairawha ICD; 17% 26% Overall; 40% 23% Main Assumptions for the Economic Analysis: * The economic benefit from the investment in the Sirsiya (Birgunj) ICD arises mainly from the significant reduction in total transport costs on both import and export of goods by train (with the project) as compared with road transport as it's currently the case (without the project). These benefits are directly reflected in the final price of goods using this facility. * The economic benefit from the investments in both the Biratnagar, and the Bhairawa ICDs arise mainly from the substantial increase in the capacity, as well as from more efficient custom processing, and handling of goods, improvements will lead to time and hence freight cost savings. However, the consultant's assessment of benefits for the Bhairawa facility did not include savings in freight costs, and this has lead to a lower rate of return (ERR= 17%) as compared with Biratnagar and Sirsiya (Birgunj). * In the cost/benefit analysis it was assumed that the costs include both the construction cost of the new Sirsiya (Birgunj) ICD along with the construction cost of the new railway spur estimated at US$ 4 million. * It was also assumed that the existing traffic (using road transport) will be diverted gradually to rail following the opening of the new facility (50% for the first year, 75% for the second year and 100% for the third year and onward). * Forecasted traffic growth was assumed to closely reflect Nepal's long term GDP growth. Note 1: The large difference in economic and financial benefit is due to the fact that the economic evaluation covers the total transport chain while the financial evaluation is limited to the financial assessment of the ICDs from the perspective of a TMC operator. Note 2: The project should have a positive tax impact for HMG/N (see Block 3/13) through the generation of both direct and indirect taxes generated by the economic activity of the 3 ICDs being improved/constructed. Note 3: The only subsidy that will be granted by HMG/N to the TMCs will be the use of the land for the Sirsiya (Birgunj) ICD. Note 4: Total costs includes both the construction costs of the three facilities as well as the costs for construction supervision, R&R, land acquisition and the cost of TA. Page 14 Sensitivity Analysis: The major risks affecting the project implementation (as identified in section 21) are cost overruns and construction delays. In the economic analyses, the risk of construction delay was covered by making conservative assumptions regarding duration of construction for the three facilities. The cost overrun risk was assessed in the sensitivity analysis and has shown to have a small impact on the ERRs. The risk of macroeconomic problems (e.g.; lower economic growth) leading to reduced traffic growth through the facilities was assessed by testing several lower traffic growth scenarios, and it is likely to have only a small impact on the ERRs. Overall the sensitivity of the investments to the different scenarios tested is quite low. Test | ERR | NPV (NRs. Million) Sirsiya (Birgun*) ICD Base Case 45 5563 Shipping costs increased by 20% 41 4599 Shipping costs increased by 30% 40 4117 Traffic decreased by 20% 34 3617 Traffic decreased by 30% 29 2641 Investment cost increased by 20% 39 5377 Investment cost increased by 30% 3 7 5283 Shipping and investmnent costs increased by 200%o, 28 2728 and traffic decreased by 20% l Biratnagar ICD Base Case 44 570 Shipping costs increased by 20% 40 457 ................................................................................................... ................................................................................. ............................................. Shipping costs increased by 30% 37 401 .......................................................... ....................................................................... . ................3. ...................... .......399l Traffic decreased by 20% 37 399 Traffic decreased by 30% 33 314 Invest ent cost increased by 20%io . 40 . 553 l Investment cost increased by 30% 38 544 Shipping and investment costs increased by 20%, 30 291 and traffic decreased by 20 % Bhairahwa ICDl Base case 17 95 Benefits decreased by 20 % 15 59 ................................................................................................... ................................................................................. ............................................ Benefits decreased by 30 % 14 41 Cost increased by 20 16 .............................................................................8.. . . .. . . . .1 Cost increased by 20% 16 85 csineaeby3%............................................................................. .. .............................. ........................ ............................................... Benefits decreased 20% and costs increased 20% 14 49 Switching value study: (a) Sirsiya (Birgunij ICD: Construction cost of this facility would have to increase by 596 percent, shipping costs by 166 percent * or the traffic decline by 42 percent before the NPV falls to zero. (b) Biratnagar ICD: Construction cost of this facility would have to increase by 648 percent, shipping costs increase by 101 percent or the traffic decrease by 67 percent before the NPV falls to zero. (c) Bhairahwa ICD: Construction cost of this facility would have to increase by 185 percent or benefits drop by 53 percent before the NPV would fall to zero. Page 15 Main Assumptions underlying Financial Analvsis: The main sources of revenue for the TMC operators arise both from the earnings from sub-lessees (CFS and Goodshed) and tariffs on different services provided. The consultant undertook a detailed survey of the trucking/shipping industry in order to develop the set of freight rates used in the financial analysis, and what follows are some of the assumptions used: * The financial analysis was developed for the three ICDs from the TMCs prospective, assuming a gradual increase in the lease charge from 8% to 20% of the capital cost of the facilities over the project life. This assumption can be justified by the increase in revenues that will be generated over time by the increase in traffic using the three ICDs. * For the financial analysis of Biratnagar it was assumed that the share of containers using the facility will increase gradually from 40%/O to 80% over the project life. * However, the outcome of the procurement process of both the TMCs and the different operators (CFS and Goodshed), shall determine the actual freight and lease rates. Page 16 Annex 5 Nepal Multimodal and Trade Facilitation Project Financial Summary Years Ending June 30 (US$ million, 1997) Implementation Period Operational Period 1998 1999 2000 2001 2002 P!roject Costs Investment Costs 3.0 7.9 8.0 5.0 1.0 Recurrent Costs 0.8 1.1 1.1 0.4 0.2 Total 3.8 9.0 9.1 5.4 1.2 See Note Financing Sources (% of total project costs IDA 80 83 82 83 83 HMG/N 20 17 18 17 17 Total 100 100 100 100 100 Note: Operational period starts at the end of the project and recurrent costs will be covered by the various TMC operating the 3 ICDs. Page 17 Annex 5 Nepal Multimodal Transit and Trade Facilitation Project Financial Summary for Revenue Earning Project Entities For Sirsiya (Birgunj) ICD TMC Operator3 Years Ending July 15: 2000 through 2005 (In Millions of 1996 Nepalese Rupees) 2000 2001 2002 2003 2004 2005 Average Annual Growth Income Statement Iterns Revenues 186.2 205.6 227.0 250.6 266.7 283.9 8.8% Operating Income 5.8 12.9 20.9 19.7 22.9 26.2 Netlncome(ProfitAfterTaxes) 3.5 7.7 12.6 11.8 13.7 15.7 Funds Statenent Items Interal Sources 16.2 20.5 25.3 34.9 36.8 388 Borrowings 0.0 0.0 0.0 0.0 0.0 0.0 Equity Investments 20.0 0.0 0.0 0.0 0.0 0.0 Total Sources 36.2 20.5 25.3 34.9 36.8 38.8 Capital Expenditures 30.7 5.0 15.3 43.5 5.0 20.4 Working Capital (Increase/Decrea.) 5.5 15.5 10.0 -8.6 31.8 18.4 Debt Service 0.0 0.0 0.0 0.0 0.0 0.0 Total Applications 36.2 20.5 25.3 34.9 36.8 38.8 Balance Sheet Items Current Assets 27.1 46.6 61.0 53.2 87.4 108.3 Less: Current Liabilities 17.3 21.3 25.7 26.5 29.0 31.5 Net Fixed Assets 45.3 39.1 43.3 68.7 55.5 57.7 Total assets 60.1 74.4 93.6 115.3 138.9 164.5 Debt 0.0 0.0 0.0 0.0 0.0 0.0 Equity 60.1 74.4 93.6 115.3 138.9 164.5 Total Liabilities and Equity 60.1 74.4 93.6 115.3 138.9 164.5 Einancal Ratios Operating Income as a % of Revenue 3.1% 6.3% 9.2% 7.9% 8.6% 9.2% Net Income as a % of Revenue 1.9% 3.8% 5.5% 4.7% 5.1% 5.5% Return on Average Invested Capital 11.5% 15.5% 25.1% 23.7% 27.4% 31.4% Current Ratio 1.6 2.2 2.4 2.0 3.0 3.4 A 'projected' Financial Summary (Income Statement, Funds Statement and Balance Sheet) was prepared only for the TMC operator of the Sirsiya (Birgunj) ICD because it is a new facility and will require a much larger capital investment (80% of total) when compared to the other two IFTs being financed under the project, for which only projected income statements have been prepared. 4 Forecast for Sirsiya (Birgunj) ICD is based on the base case scenario for traffic projections, revenues and costs. Page 18 Annex 6 Nepal Multimodal Transit and Trade Facilitation Project Procurement and Disbursement Arrangements Procurement Bank financed works, goods and services will be procured using the latest Bank guidelines. The procurement methods applicable to the various expenditure categories are sunmmarized in Table A. Bank standard bidding documents will be used for ICB. Prior review - All ICB contracts. - All contracts for goods and works with an estimated value of US$ 100,000. - Consultants' contracts with an estimated value of US$ 50,000 for firms and US$ 5,000 for individuals. - All single source consultants contracts, consultant contracts for assignments of a critical nature as determined by the Bank, amendments to contracts raising their value above 15% for firms and 15% for individuals. - Terms of reference for all technical assistance inclusive of studies and training. Disbursemen Use of Statements of expenses (SOE): - Contracts not exceeding US$ 100,000 equivalent for works and goods. - Consultants contracts not exceeding US$ 50,000 for firms and US$ 5,000 for individuals. - Local training. Special acun To be established in Nepal Rastra Bank with authorized allocation of US$ 2.0 million. Project Accounts and Audits - Executing agencies would maintain separate accounts of project expenditures in accordance with sound accounting practices. - Project accounts would be audited in accordance with Bank auditing guidelines. - An audit report, including separate opinions on the operation of the special account and the use of SOEs, would be submitted to the Bank within nine months of the end of the government's fiscal year. Page 19 Annex 7 Nepal Multimodal Transit and Trade Facilitation Project Project Processing Budget and Schedule A. Project Budget Planned Actual (through FY97 N/A US$ 574,000 B. Project Schedule Planned Actual Time taken to prepare the project (months) First Bank mission (identification) 09/16/1992 09/16/1992 Appraisal mission departure 05/15/1996 06/28/1996 Negotiations 02/10/1997 03/06/1997 Planned Date of Effectiveness 01/31/1998 NYD Prepared by: MOC/MOWT Preparation assistance: PPF No. P801-2-NEP for US$ 490,000 Bank staff who worked on the project include: Harald Hansen, Fabio Galli, Ron Kopicki, Surendra Govinda Joshi, Moncef Chaabouni, Thampil Pankaj, Jelena Pantelic. Page 20 Table A: Project Costs by Procurement Arrangements (in US$ million equivalent) Expenditure Category Procurement Method Total Cost (including contingencies) ICB NCB Other N.B.F 1. Works Construction of ICD (dry-port) at 17.9 17.9 Sirsiya (Birgunj) (14.0) (14.0) Improvement of ICD at Biratnagar 2.0 2.0 (1.7) (1.7) Improvement of ICD at Bhairahwa 1.9 1.9 (1.6) (1.6) 2. Goods Equipment for ICDs 2.0 2.0 (1.9) (1.9) 3. Consultant Services & Training Supervision consultants for civil 0.8 0.8 works components5 (0.7) (0.7) Installation of Automated Systems for 1.1 1.1 Customs Data (ASYCUDA)6 (1.0) (1.0) Installation of Advanced Cargo 1.1 1.1 Information System (ACIS)6 (1.0) (1.0) Technical assistance/training6 1.1 1.1 (1.09) (1.0) 4. R&R costs for expendi. category1L 0.1 0.1 (0.1) (0.1) 5. Miscellaneous Project preparation PPF 0.5 0.5 (0.5) (0.5) Total 23.8 4.7 28.5 (19.2) (4.3) (23.5) Note: N.B.F. = Not Bank-financed. Figures in parenthesis are the amounts to be financed by the IDA credit. 5 By consultant who carried out feasibility study and design in accordance with existing contract. 6 UNCTAD who has developed and has proprietary rights to the ASYCUDA and ACIS systems will retain individual experts to install systems and provide related training and technical assistance. 7 Subject to retroactive funding for expenses after August 1, 1997. Page 21 Table B: Prior Review Thresholds Expenditure Category Type of Procurement Prior Review Contract Value 1. Works Construction of ICD (dry- ICB US$ 100,000 US$ 21.9 million port) at Sirsiya (Birgunj) Improvement of ICD at Biratnagar Improvement of ICD at Bhairahwa 2. fGods Equipment for ICDs ICB US$ 100,000 US$ 2.0 million 3. Services Supervision consultants for Sole source procurement as US$ 50,000 US$ .8 million civil works components continuation of present contract for feasibility study and detailed design Installation of Automated Sole source procurement US$ 50,000 US$ 1.1 million Systems for Customs Data with UNCTAD who will retain (ASYCUDA) individual experts Installation of Advanced Same as for ASYCUDA US$ 50,000 US$ 1.1 million Customs Information System (ACIS) Technical assistance/training Same as for ACIS and US$ 50,000 for firms and US$ 1.1 million ASYCUDA except for US$ 5,000 for individuals procurement of individual experts and related equipment 4. Miscellaneous Project preparation PPF Originally procured through US$ 5,000 US$ .5 million short list I~Tai US$ 28.5 million Page 22 Table C: Allocation of Credit Proceeds Expenditure Category Amount in SDR Financing Percentage (US$ equivalent) (1) Civil Works 11,430,000 900/o of the costs of civil works. (15,800,000) (2) Goods including reach stackers, 1,300,000 100% of foreign or ex-factory costs fork lifts and other equipment (1,800,000) and 700/o of local expenditures for other items procured domestically. (3) Services including supervision 2,600,000 100% of total expenditures. consultants, training, etc. (3,600,000) (4) R&R costs for Category I project 100,000 expenditures (100,000) (5) Refunding of Project Preparation 370,000 Advance (PPF) (500,000) (6) Unallocated 1,200,000 (1,700,000) Total 17,000,000 (23,500,000) Page 23 Annex 8 Nepal Multimodal Transit and Trade Facilitation Project Documents in the Project File A. Borrower Project Implementation Plan, March 6, 1997, HMG/N B. Bank Staff Assessments Country Assistance Strategy of the World Bank Group for Nepal, Report No. 15508-NEP, April 30, 1996 Proposed Multimodal Transit and Trade Facilitation project Appraisal Mission Aide Memoire, July 11, 1996 C. Other: (a) Nepal Multimodal Transit & Trade Facilitation Project, Project Preparation Services, Final Report, January 1996, Volume I - RITES (b) Nepal Multimodal Transit & Trade Facilitation Project, Project Preparation Services, Final Report, January 1996, Volume 2 - RITES (c) Nepal Multimodal Transit & Trade Facilitation Project, Project Preparation Services Bhairahwa Terminal, Draft Final Report, March 1997, Part-1, RITES (d) Nepal Multimodal Transit & Trade Facilitation Project, Project Preparation Services, Final Report Executive Summary, January 1996, RITES (e) Multimodal Transit and Trade Facilitation Project, Report on Mission to Calcutta, 10 December 1995, G. De Monie (f) Nepal Multimodal Transit & Trade Facilitation Project, Mission to Assist the Task Force on Transit and Facilitation Issues, 17 August to 18 September 1996, Richard Henshaw (g) Nepal Multimodal Transport and Trade Facilitation Project, The Resettlement Policy Framework and Acquisition, Compensation and R Rehabilitation Plan (ACRP) (h) Model & spreadsheets of economic/financial analysis for Sirsiya (Birgunj), Biratnagar and Bhairawha ICDs (i) Model income statement, balance sheet, funds flow statements for Sirsiya (Birgunj) TMC operator Page 24 Generated: October 29, 1997 Status of Bank Group Operations in Nepal IBRD Loans and IDA Credits in the Operations Portfolio Difference Between expected Original Amount in USS Millions and actual Last ARPP Loan or Fiscal disbursements a/ Supervision Rating b/ Project ID Credit Year Borrower Purpose No. IBRD IDA Cancellations Undisbursed Orig Frm Rev'd Dev Obj Imp Prog Number of Closed Loans/credits: 54 Active Loans IDA19240 1988 HM6N MAHAKALI IRRIG. II 0.00 41.30 0.00 .30 -.30 0.00 S S IDA20440 1989 GOVERNMENT OF NEPAL ENGINEERING EDUC. 0.00 11.40 0.00 5.81 4.85 0.00 S S IDA20280 1989 HMG, NEPAL HILL COMMUNITY FORES 0.00 30.50 17.00 5.38 21.35 4.36 S S IDA21440 1990 HMGN BMAIRAWA LUMBINI III 0.00 47.20 0.00 7.22 2.34 0.00 S S IDA22390 1991 HMG/NWSC URB WATER 6 SAN REHAB 0.00 60.00 0.00 54.82 52.31 0.00 U U IDA23640 1992 HMGN TELECOMS. V 0.00 55.00 0.00 18.10 15.65 0.00 HS HS IDA23570 1992 GOVT OF NEPAL BASIC & PRIMARY EDUC 0.00 30.60 0.00 7.88 7.23 0.00 S S IDA23470 1992 HMG/N POWER EFF IMPROVEMEN 0.00 65.00 0.00 26.24 23.03 0.00 S S IDA24300 1993 HMGN SUNSARI MORANG HEADW 0.00 28.00 0.00 5.41 6.10 0.00 S S IDA26000 1994 GOV. OF NEPAL POPULATION 6 HEALTH 0.00 26.70 0.00 23.75 23.79 0.00 S S IDA25780 1994 HMG ROAD MAINT.6 REHAB. 0.00 50.50 0.00 30.44 30.05 0.00 U U IDA25600 1994 MIN OF EDU.& CULTURE HIGHER EDUCATION 0.00 20.00 0.00 16.15 16.51 0.00 S S IDA29120 1997 HMG RURAL WS& SANITATION 0.00 18.28 0.00 16.93 17.70 0.00 S S IDA29770 1998 KINGDOM OF NEPAL AGRI RES 6 EXTENSION 0.00 24.30 0.00 23.95 0.00 0.00 Total 0.00 508.78 17.00 242.38 220.61 4.36 Active Loans Closed Loans Total Total Disbursed (IBRD and IDA): 263.82 819.27 1,083.09 of which has been repaid: 0.00 44.13 44.13 Total now held by IBRD and IDA: 491.78 709.91 1,201.69 Amount sold : 0.00 0.00 0.00 Of which repaid :0.00 0.00 0.00 Total Undisbursed : 242.38 0.00 242.38 a. Intended disbursements to date minus actual disbursements to date as projected at appraisal. b. Following the FY94 Annual Review of Portfolio performance (ARPP), a letter based system was introduced (HS - highly Satisfactory, S - satisfactory, U - unsatisfactory, HU - highly unsatisfactory): see proposed Improvements in Project and Portfolio Performance Rating Methodology (SecM94-901), August 23, 1994. Page 25 NEPAL: STATEMENT OF IFC's Committed and Disbursed Portfolio (As of June 30, 1997) (In USS Millions) Committed Disbursed IFC IFC FY Company Loan Equity Quasi Partic Loan Equity Quasi Partic Approval 1975/93 Soaltee Hotel 0.00 .45 0.00 0.00 0.00 .45 0.00 0.00 1994 Himal Power 31.13 0.00 0.00 0.00 8.63 0.00 0.00 0.00 Total Portfolio: 31.13 .45 0.00 0.00 8.63 .45 0.00 0.00 Anrovals Pending Commitmnt I, Eu Qi Pat 1996 B3HOTE KOSHI 21.00 3.00 0.00 27.00 1994 KHIMTIKHOLA 0.00 0.00 3.00 5.00 1997 NEPAL HANA BANK 0.00 1.32 0.00 0.00 Total Pending Commitment: 21.00 4.32 3.00 32.00 Page 26 Nepal at a glance 10/23/97 POVERTY and SOCIAL South Low- Nepal Asia income I Development diamond Population mid-1996 (millions) 22.0 1,264 3,229 GNP per capita 1996 (US$) 220 380 500 Life expectancy GNP 1996 (billions US$) 4.8 481 1,801 Average annual growth, 1990-96 Population (%) 2.5 1.9 1.7 Labor force (%) 2.4 2.1 1.7 GNP Gross Most recent estimate (latest year available since 1989) per primary capita enrollment Poverty: headcount index (% of population) 42 Urban population (% of total population) 14 26 29 Life expectancy at birth (years) 55 61 63 Infant mortality (per 1, 000 live biths) 91 75 69 Child malnutrition (% of children under 5) 70 .. .. Access to safe water Access to safe water (3 of population) 44 63 53 Illiteracy (% of population age 15+) 73 50 34 Gross primary enrollment (% ofschool-age population) 109 98 105 Male 130 110 112 - Nepal Low-income group Female 87 87 98 KEY ECONOMIC RATIOS and LONG-TERM TRENDS 1975 1985 1995 1996 Economic ratlos' GDP (billions US$) 1.6 2.6 4.4 4.5 Gross domestic investmenVGDP 14.5 21.9 23.4 23.2 Exports of goods and services/GDP 8.9 11.5 24.2 22.5 Openness of economy Gross domesticsavingstGDP 10.0 13.4 13.0 8.6 Gross national savings/GDP 13.3 15.0 15.6 10.4 Current account balancetGDP -0.7 -6.8 -7.8 -12.8 Interest paymentstGDP 0.0 0.3 0.7 0.7 Savings 1 Investment Total debtVGDP 2.1 22.5 54.7 53.5 Si Total debt service/exports 1.1 6.8 7.8 6.8 Present value of debtUGDP .. .. 26.9 Present value of debtlexports .. .. 97.9 Indebtedness 197545 1986-96 1995 1996 199745 (average annual growth) GDP 3.2 5.1 3.4 5.3 4.7 Aa o m u GNP percapita 0.5 2.5 1.2 2.1 2.0 -Nepal Low-ncomegroup Exports of goods and services .. 13.0 7.1 -5.8 5.6 STRUCTURE of the ECONOMY (36 of GDP) 1975 1985 1995 1996 Growth rates of output and Investment(%) Agriculture 71.8 51.7 41.8 42.0 20 Industry 8.2 15.1 22.7 22.7 10 / Manufacturing 4.2 5.7 9.5 9.7 o Services 20.1 33.2 35.5 35.3 91 92 93 94 05 9e .10 Private consumpton 82.4 77.2 77.8 81.7 -20 General govemment consumpbon 7.6 9.4 9.2 9.7 Imports of goods and services 13.4 20.0 34.6 37.1 GDI GDP (average annual growth) '197-85 1986-96 1995 1996 Growth rates of exports and Imports (%) Agriculture 2.1 2.9 -0.3 4.4 so Industry .. 7.8 3.9 5.8 s0 Manufacturing .. 10.0 2.0 9.0 40 Services .. 6.2 5.6 6.4 30. 20 Private consumption .. 4.9 2.8 9.2 10 General govemmentconsumption .. 4.8 18.5 9.1 0 f Gross domestic investnent .. 4.6 4.7 0.7 -10 91 92 93 04 Imports of goods and services .. 18.9 14.9 19.0 Gross nabonal product 3.2 5.1 3.7 4.6 Exports 0-Imports Note: 1996 data are preliminary estmates. The diamonds show four key indicators in the country (in bold) compared with its income-group average. If data are missing, the diamond will be incomplete. Page 27 Nepal PRICES and GOVERNMENT FINANCE 1975 1985 1995 1996 Inflation (%) Domestic prices (% change) 25 Consumer pr'ces .. 4.1 7.6 8.1 20 Implicit GDP deflator 27.5 11.4 6.3 6.6 S10 Govemment finance s (% of GDP) o , Current revenue .. 8.4 11.2 11.3 91 92 93 94 95 96 Current budget balance . -1.4 0.4 0.5 GDP def. C-O-CPI Overall surplus/deficit .. -9.6 -6.6 -7.5 TRADE 1975 1985 1995 1996 Export and Import levels (mill. US$) (millions US$) Total exports (fob) 154 358 354 1.4W Pulses 56 33 35 1.2 Manufactures (Garments) 26 103 96 aw Total imports (ci 43 131 165 GM Food 5 5 6 0 Fuel and energy 1 9 99 2 Capital goods94 29 77 0 i Exportprceindex(1987=100) .. 90 143 152 90 91 92 93 94 9e 96 Importpriceindex(1987=100) .. 96 134 139 oExports *Impors Termsof trade (1987=100) .. 94 106 109 BALANCE of PAYMENTS (millions US$) 1975 1985 1995 1996 Current account balance to GDP ratio (%) Exports of goods and services 139 301 1,063 1,003 0 o- Imports of goods and services 209 522 1,519 1,653 2 90 g 91 92 93 9 95 9 Resource balance -71 -221 -456 -650 -4 Net income 10 0 5 -3 Netcurrenttransfers 49 43 108 84 || Current account balance, I before official capital transfers -11 -178 -343 -569 -10 Financing items (net) -21 130 333 545 -12 Changes in net reserves 32 49 10 24 -14 Memo: Reserves induding gold (mill. USS) *- 105 704 669 Conversion rate (locaU/US5) 10.5 17.8 49.9 55.2 EXTERNAL DEBT and RESOURCE FLOWS 1975 1985 1995 1996 (millions US$) Composton of total debt, 1996 (mill. US$) Total debt outstanding and disbursed 34 590 2,398 2,504 IBRD 0 0 0 0 IDA 6 236 1,023 1,034 F: 41 G: 26 Total debt service 2 23 94 93 E: 417 IBRD 0 0 0 0 IDA 0 2 14 15 B:1034 Composition of net resource flows Official grants 8 75 107 137 Offidail creditors 8 91 118 231 Privatecreditors 0 6 -10 -13 Foreign direct investment 0 0 0 0 D: 943 44 Portfolio equity 0 0 0 0 World Bank program Commitments 0 131 0 0 A- IBRD E-BilatelI Disbursements 2 33 79 78 B-IDA D-Otw ermuliketral F-Private Principal repayments 0 0 7 7 C - IMF G - Short4erm Net flows 2 33 72 71 __t Interest payments 0 2 7 8 Net transfers 2 31 65 63 Developmnent Economics IMAGING Report No.: 17134 NEP Type: PAD
Groupe de la Banque mondiale · Project Appraisal Document
Nepal - Multimodal Transit and Trade Facilitation Project
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Groupe de la Banque mondiale
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Project Appraisal Document
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Népal
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Banque mondiale