China - Xiamen Port Project

Document of The World Bank FOR OFFICIAL USE ONLY Report No. 15057 IMPLEMENTATION COMPLETION REPORT CHINA XIAMEN PORT PROJECT (LOAN 3007-CHA) OCTOBER 30, 1995 Infrastructure Division China and Mongolia Department East Asia and Pacific Regional Office 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 authodization.  CURRENCY EQUIVALENTS Currency Name = Renminbi Currency Unit = Yuan (Y) Yuan rate per $1.0 1985 2.94 1990 4.78 1986 3.45 1991 5.32 1987 3.72 1992 5.53 , 3.72 1993 5.76 1989 3.76 i,! 9.60 1995 8.50 FISCAL YEAR January 1 - December 31 MEASUREMENT EQUIVALENTS Metric System British/US system 1 meter (m) = 3.281 feet 1 square meter (m2) = 10.764 square feet 1 cubic meter (m3) = 15 s 1 5 cubic feet I kilometer (km) = 0.621 mile 1 ton-km = 0.621 ton-mile 1 ton = 2,208 pounds PRINCIPAL ABBREVIATIONS AND ACRONYMS USED dwt - deadweight ton (for vessel) EA2DR - Office of Director, Country Department 2, East Asia and Pacific Region EA21N - Infrastructure Division, Country Department 2, East Asia and Pacific Region EIRR - Economic Internal Rate of Return GOC - Government of China ICB - International Competitive Bidding ICR - Implementation Completion Report LCB - Local Competitive Bidding Ln - Loan LRMC - Long Run Marginal Cost MOC - Ministry of Communications MOF - Ministry of Finance NPV - Net Present Value REIRR - Reevaluated Economic Internal Rate of Return RFA - Reevaluation on Average Net Fixed Assets RRFA - Rate of Return on Average Net Fixed Assets RVP - Office of Regional Vice President SAR - Staff Appraisal Report SEZ - Special Economic Zone teu - twenty-foot equivalent unit (for container) TA - Technical Assistance XPB - Xiamen Port Bureau  FOR OFFICIAL USE ONLY CONTENTS PREFACE ......................................m EVALUATION SUMMARY ................................................. iv PART I. IMPLEMENTATION ASSESSMENT .................................................. 1 A. Project Objectives .................................................1I B. Achievement Of Objectives ..................................................2 C. Major Factors Affecting the Project ..................................................,.9 D. Project Sustainability .10 E. Bank Performance .10 F. Borrower Performance .10 G. Assessment of Outcome ..10 H. Future Operations .11 I. Findings and Lessons Learned .II PART II: STATISTICAL ANNEXES .13 Table 1: Summary Of Assessments . . .13 Table 2: Related Bank Loans/Credits . . .14 Table 3: Project Timetable ... . .14 Table 4: Loan Disbursement . . .15 Table 5: Key Indicators for Project Implementation . .......................................... 16 Table 6: Key Indicators for Project Operation (Action Plan) ... 19 Table 7: Studies Included in the Project ................... .................................... 20 Table 8: Project Costs, Financing and Allocation of Loan Proceeds 21 Table 9: Economic Cost, Benefit and Major Financial Indicators . 23 Table 10: Status of Covenants 24 Table 1 1: Bank Resources: Staff Input ....25 Table 12: Bank Resources: Missions ....25 APPENDIX A: ICR PREPARATION MISSION'S AIDE-MEMOIRE .27 APPENDIX B: BORROWER'S CONTRIBUTION TO THE ICR .29 APPENDIX C: MAP .33 ANNEX 1: FINANCIAL ANALYSIS . .35 This document has a restricted distribution and may be used by recipients only in the performance of their ofricial duties. Its contents may not otherwise be disclosed wiLhout World Bank authorization.  - ii - ANNEX 2: ECONOMIC ANALYSIS ............................................. 38 A . Traffic .............................................. 38 B. Ship Time Analysis ............................................. 40 C. Berth Operations ............................................. 40 D. Economic Costs and Benefits ............................................. 42 E. Overall Economic Reevaluation and Sensitivity Analysis .................... ........ 44  - 11 - IMPLEMENTATION COMPLETION REPORT CHINA XIAMEN PORT PROJECT (LOAN 3007-CHA) PREFACE This is the Implementation Completion Report (ICR) for the Xiamen Port Project in China for which Loan 3007-CHA for US$36 million was approved on December 13, 1988 and made effective on January 9, 1990. The loan, which was extended once for one year, was closed on March 31, 1995. Final disbursements were made on May 5, 1995. The loan amount was fully disbursed. The ICR was prepared by Messrs. Toshiro Tsutsumi (Task Manager) and Han- Kang Yen (Economic and Financial Analyst) of the Infrastructure Division, China and Mongolia Department of the East Asia and Pacific Region and reviewed by Messrs. Richard Scurfield (Chief, EA2IN) and Yo Kimura (Project Adviser, EA2DR). The Borrower provided comments that are included as appendices. Preparation of this ICR was started just before the project closing date and was based on material in the project file. The Borrower contributed to the ICR by evaluating the project's execution and initial preparation.  - iv - IMPLEMENTATION COMPLETION REPORT CHINA XIAMEN PORT PROJECT (LOAN 3007-CHA) EVALUATION SUMMARY Objectives 1. When the project was identified in the mid-1980s, most Chinese ports were badly congested and container berths, bulk cargo berths, port equipment, storage yards and transport infrastructure (for distribution) were in short supply. In fact, it appeared that congestion would threaten the expansion of China's foreign trade. Traffic in Xiamen Port, which is located in Xiamen Island, Fujian Province, across the straits from Taiwan, had become particularly heavy and even faster growth was projected: The island was declared a Special Economic Zone (SEZ) in March 1984 (one of only four in the country) with special status to facilitate foreign investment in export-oriented industries (due to its close proximity to Taiwan and the important opportunities this offered for economic growth). 2. The project's main objectives were to improve operations and maintenance at the port, increase its capacity to handle cargo flow, and help preserve the environment. To achieve these ends, the project would: (a) implement an action plan to improve port operation, maintenance and environmental protection; (b) incorporate environmental protection measures in the port master plan; (c) transfer technology in areas such as long- term planning (master planning), financial planning and control, and berth management; (d) expand the port's capacity through construction of a container berth, two multi- purpose berths (that could be converted to container berths), a coal berth and a barge berth; and (e) train port operators, maintenance personnel and managers. Implementation Experience and Results 3. The project was completed satisfactorily by March 31, 1995. The closing date was extended for one year due to a delay in implementing civil works and procuring equipment to handle containers; the latter occurred because two multipurpose berths were modified to handle container traffic. 4. Despite the one-year delay, project implementation was satisfactory because all objectives were achieved: Physical components were constructed, equipment was procured, and the action plan, training and a study were carried out. Training provided  extensive courses for both managers and workers and the Xiamen Port Bureau's (XPB) operational and maintenance capacity was improved (para. 8.c). The Master Plan Study provided a solid basis for future development (para. 8.a); implementation of an action plan improved the port environment; port operations became more efficient (para. 8.b), physical capacity was substantially increased with the addition of container/multipurpose berths and a coal berth (para. 10). These achievements were partly due to the project's relative lack of complexity and to good coordination between the XPB and the Ministry of Communications (MOC), which has overall responsibility for the port sector. 5. Bid evaluations, which involved a two-step process (one by the end-user and the other by the central evaluation committee), took nine months at the start of the project. However, the procurement period was shortened by about three months after XPB became familiar with the Bank's Procurement Guidelines. 6. The project's benefits were also achieved, including savings in (a) cargo-handling costs, (b) ship waiting and berthing time, and (c) cargo time. The economic internal rate of return (EIRR) was estimated at 40.1% against 31.3% in the SAR, which is considered satisfactory (para. 30). 7. Cost estimates at appraisal were reasonable. The final cost was estimated at about US$82.3 million (or Y 249.3 million plus US$36.0 million) against US$90.3 million (or Y 220.50 million plus US$36.0 million) at appraisal (para. 12). 8. XPB's financial performance is solid. Although the operational ratio (operating costs/operating revenues) was higher than estimated in the SAR (60% against 55%) due to sharp domestic price increases in 1993, XPB absorbed this by increasing the amount of container traffic it handled. Since container traffic will most likely expand further, XPB's financial condition will remain solid. 9. During project implementation, no environmental or resettlement problems arose. Sustainability 10. At completion, the project appeared sustainable. Because port traffic will undoubtedly grow along with rapid economic development in the Xiamen area, the port's expanded facilities will be needed. In fact, traffic in containerized cargo has soared, and the project's container terminals are much more efficient than the one built earlier, due to the advanced facilities, equipment and trained staff. In addition, XPB is financially stable and has enough resources to maintain and operate the port efficiently (para. 33). (XPB could even raise the port's productivity further and provide services at competitive costs). Findings and Lessons Learned 11. The findings and lessons include the following: (a) XPB capably implemented the construction and procurement of equipment, carried out studies and developed its organization. However, it could  - vi - improve efficiency even further by introducing real competition--by allowing more terminal companies to operate; at present, there are only two, but private foreign companies would like to enter the market (paras. 40-4 1); (b) The flexible project designs included in the project for converting the wharves were essential; they allowed authorities to respond rapidly to changing demand (paras. 3 and 31). (c) When Borrowers are unfamiliar with Bank procedures, delays--as occurred with procurement under this project -- are unavoidable. For this reason, the Bank's project workshops are helpful. However, because local staff are often moved to other positions, it would be useful if additional workshops or training in procurement would be provided; (d) Performance indicators with regard to port operations, maintenance and environmental quality were clearly stated in the SAR (to monitor the project's progress) and proved quite useful; (e) Project design was relatively straightforward, which averted the problems with coordination among various agencies; and (f) Courses offered outside the country for managers should be tailored specifically for the staff being sent, because in some cases, those covered by project funding were too general (para. 8.c).  - I - IMPLEMENTATION COMPLETION REPORT CHINA XIAMEN PORT PROJECT (LOAN 3007-CHA) PART I. IMPLEMENTATION ASSESSMENT A. PROJECr OBJEcTIvEs 1. When this project was identified in the mid-1980s, most Chinese ports were badly congested and container berths, bulk cargo berths, port equipment, storage yards and transport infrastructure (for distribution) were in short supply. In fact, it appeared that congestion would threaten the expansion of China's foreign trade. In particular, traffic in Xiamen Port, which is located in Xiamen Island, Fujian Province, across the straits from Taiwan, expanded rapidly and an even faster growth rate was projected. The entire island was declared a Special Economic Zone (SEZ) in March 1984, one of only four in the country (Shenzhen, Zhuhai, Shantou and Xiamen), and granted special status to facilitate foreign investment in export-oriented industries. This status and close proximity to Taiwan, with which relations had improved substantially, offered important opportunities for the island's economic growth. 2. The project's main objectives were to improve operations and maintenance at the port, increase its capacity to handle cargo flow, and help preserve the environment. To achieve these ends, the project would: (a) implement an action plan; (b) incorporate environmental protection measures in the port master plan; (c) transfer technology in areas such as long-term planning (master planning), financial planning and control, and berth management; (d) expand the port's capacity; and (e) train port operators, maintenance personnel and managers. 3. Development under the project consisted of: (a) Constructing one container berth for 35,000 dwt ships, two multipurpose berths for 25,000 dwt ships that could be converted to container berths when needed, one coal berth for 35,000 dwt ships and a barge berth for 1,000 dwt barges. The construction involved (i) dredging about 580,000 m3 of soft soil and about 27,000 m3 of rock; (ii) building about 2,800 m of revetments; (iii) reclaiming and backflilling about 2.5 million m3 of rock, sand and yard pavement; (iv) building railways, roads, warehouses and storage yards; (v) installing water supply, sewerage and power supply systems; (vi) providing load/unloading equipment, navigational aids, operating equipment and boats; and (vii) erecting auxiliary buildings;  -2- (b) Training port managers, operators and other specialists in port operations, supervision of maintenance and construction and methods of financial control; (c) Reviewing and updating the port master plan; and (d) Implementing an action plan to improve port operations, maintenance and environmental protection. B. ACHIEVEMENT OF OBJECTIVES Project Implementation 4. This was the sixth Bank-assisted port project in China, following the Three Ports Project, Tianjin Port Project, Huangpu Port Project, Dalian Port Project, and Ningbo and Shanghai Ports Project (Table 2). It was the first Bank project for Xiamen port. 5. Civil Works. These included the construction of (a) a barge berth, under local competitive bidding (LCB), (b) container and general cargo berths, under international competitive bidding (ICB), and (c) a coal terminal (not Bank financed). Three contracts were awarded to domestic contractors following the evaluation procedures required by the different sources of finance. Construction of the container and multipurpose berths was delayed for eight months because a multipurpose berth was changed to a container berth to meet the increasing container traffic. Among other aspects, this involved extending the crane rails, paving the stockyard and procuring added equipment for containers (one quay- side crane and two rubber-tired gantry cranes). 6. Two domestic consulting companies supervised the construction of barge berths and the coal terminal, and a joint venture supervised the construction of the major work- the container/multipurpose berths. The latter arrangement was quite successful in familiarizing domestic consultants and the Borrower with intemational practices. 7. Procurement of Equipment. Procurement was in three tranches. One was for equipment needed for container, general cargo and coal handling, under ICB (the first package); another was for the additional equipment for the containers under ICB (the second package); and the last was for minor equipment under direct shopping. Except for the long evaluation period (nine months) for the first package, implementation was satisfactory. The first package contained nine bids (see Table 5C for details), which were opened on October 7, 1991 (75 days after issuance), and the evaluation report was submitted to the Bank for review in July 1992. Evaluation was in two stages (common in Bank-financed port projects): one was at the regional level by the Xiamen Port Bureau (XPB) and the other was at the central level, by the State Evaluation Committee. Seven months were needed to finalize the regional evaluation. This rather prolonged evaluation period was due to: (a) XPB's inexperience evaluating bids for equipment under ICB and its need for additional time to become familiar with Bank guidelines; and (b) the many types of equipment included in the package. The evaluation period for the second  -3 - package lasted only three months because XPB was familiar with Bank procedures and only two bids were involved. No particular problems occurred with procurement under shopping. 8. Technical Assistance (TA) and Training. This involved (a) the master plan study, (b) an action plan for operations and environmental protection, and (c) training. (a) The master plan study, which was originally produced by XPB and the Waterway Institute of the Ministry of Communications (MOC), was successfully updated by international consultants and a local firm, along with XPB. The aim of the study-to provide XPB with the capability to update the master plan periodically-was achieved. After it was completed in July 1992, XPB, with the help of the Waterway Institute, updated the master plan twice, due to the rapid increase in traffic. The study also provided a solid basis for the port's long-term development--including the rapid increase of containerized cargo. XPB has prepared a 'Feasibility Study" for the next step of development in line with the master plan; (b) The action plan for operations, maintenance and environmental protection-- which included eight elements to improve operations, four to improve maintenance and seven to protect the environment--was successfully carried out (see Table 6). (i) With regard to operations, the target for increasing the berth throughput at the old terminals (see Table 6-1) was mostly achieved; throughput at Heping berth, which was recommended to be phased out, was decreasing quickly; and, the average berth time of vessels (days) was significantly reduced; (ii) With regard to maintenance, roads were maintained and upgraded as planned, periodic inspections were carried out, and the reform program (which was designed to improve maintenance) was introduced; (iii) With regard to the environment, equipment to prevent oil pollution was pIocured, coal stopped being handled at Gaoqi berth (as soon as the new coal terminal was constructed), and a drainage ditch was provided at Dongdu District berth 3 to collect and treat fertilizer mixed with oil and water. (c) XPB conducted extensive training (both in China and abroad) beyond what was planned in the SAR (7,201 course enrollments) against 2,063 course enrollments in the SAR, which helped improved the quality of staff (Table 5B). Domestic training, which was designed to help staff at two new stevedoring companies operate the new berths, was carried out in three steps: Theoretical and on-the-job training at the Hai-tian Stevedoring  -4 - Company, training at other ports (such as Qingdao), and training in safety at Xiamen. (Two stevedoring companies were established under XPB-the Hai-tian Stevedoring Company and Shi-hui-shan Dock Works; about 60% of the staff were experienced, as they were transferred from XPB's existing terminal, and the rest were new college graduates). Another 91 managers and 37 technicians attended courses abroad at the Singapore Port Training Institute, Antwerp Port Training Institute and Hamburg Port Training Center. Computer training was particularly helpful since the new container/general cargo operations required computerized advanced technology. However, it was also felt that some management courses were too general; thus, in the future, courses must be carefully selected. 9. The project closing date was extended for one year due to the delay in construction and the procurement of equipment. Project Results 10. All project objectives were achieved during implementation: (a) XPB's operational and maintenance capabilities were improved, as the targets in the action plan were achieved; (b) The port became more efficient (see Table 6) and its capacity was substantially increased by the addition of container/general cargo and coal berths; (c) The port's environmental quality was improved. Although it is not yet possible to determine if efficiency will be increased over the long- term, indicators are positive because the institutional goals were also substantially achieved (through TA). 11. The project's benefits were also achieved, including savings in (a) cargo-handling costs, (b) ship waiting and berthing time, and (c) cargo time. The EIRR is estimated at 42.5% against the 31.3% in the SAR, which is considered satisfactory. 12. Cost estimates at appraisal were reasonable. Final project costs are estimated at about US$82.3 million (or Y 249.3 million plus US$36.0 million) against US$90.3 million (or Y 220.50 million plus US$36.0 million) estimated at appraisal. The difference when expressed in US dollars is due to the devaluation of the local currency (Y 1.0=$1/3.7 at appraisal against Y 1.0=$1/8.50 at completion or Y 1.0=$1/5.385 overall average). The local currency increase was due to local price hikes during implementation. 13. No environmental or resettlement problems arose during implementation.  -5 - Financial Performance 14. Past Performance. The port's financial performance from 1987 to 1994 was on the whole satisfactory. A comparison of actual performance with estimated targets at appraisal (1994 was the last year forecast in the SAR) shows a much higher than expected average annual growth rate of after-tax income (48.7% a year in the ICR against. 20.1% a year forecast). Tariffs were increased each year; however, traffic grew at a lower rate than the SAR estimates: The volume of traffic handled by the port in 1994 was 17.9% lower than the level forecast (9.6 million tons in the SAR vs. 7.9 million tons in the ICR). This dampened growth in operating revenues to 34.4% per year, a figure still higher than the 22.0% per year forecast at appraisal. Actual expenditures show that operating costs rose at a rapid rate due to rampant inflation, but tax payments were far lower than appraisal estimates, resulting in consistently strong after-tax profits. 15. The SAR's conservative financial forecasts were developed when the country's policy was to control prices for almost every major commodity at the State level; as a result, cost increases and inflation were rare. In addition, the State handled the allocation of major resources during the previous three decades and only charged users the 'planned" prices. At the time the SAR was prepared, there was no indication that the cost of resources or the rate of inflation would change. Therefore, the financial forecasts assumed that: (a) real port charges would remain virtually constant; and (b) the rate of inflation would be minor (from 6.5% a year to 8.0% a year from 1987-1994). 16. These assumptions, although reasonable at the time, now appear conservative due to the much higher than expected cost-push inflation that occurred throughout China. In recent years, price controls on almost all commodities were lifted. During 1987-94, although the port's tariff was controlled by the State, unit tariffs increased by an average of 21.0% a year (against 6.8% a year forecast in the SAR). Still, this increase did not match the rapid average unit price hike in operating costs of 22.1% a year (6.3% was forecast); this was mainly due to higher fuel, materials, and wage costs and depreciation- most of which had to be paid on the basis of market prices. 17. Highlights of the port's income statements for selected years, as compared with the SAR forecast, are summarized below (details are in ANNEX 1, Table 1.1).  - 6- 1987 I 1990 I 1994 SAR SAR ICR SAR ICR ----------------(Y million)--------------------- Operating revenue 31.0 60.9 55.7 124.5 245.8 Less: Operating taxes 1.3 2.6 2.4 5.4 9.0 Net sale (1) 29.7 58.3 53.3 119.1 236.8 Less: Operating costs (2) 16.9 33.6 31.5 65.9 142.7 Operating profit 12.8 24.7 21.8 53.2 94.1 Less: Other expenditures 0.8 5.4 1.5 9.9 2.0 Profit before tax (3) 12.0 19.3 20.3 43.3 92.1 Less: Taxes 7.1 11.5 3.0 25.8 13.8 Profit after tax 4.9 7.8 17.3 17.5 78.3 Average net fixed assets (4) 106.2 269.0 152.6 425.4 688.1 Operating ratio (2)/(1) 57.0 57.6 59.1 55.3 60.3 Return on average net fixed assets(%) 11.0 7.0 13.3 10.0 13.4 (3)l(4) 18. XPB's financial performance, as indicated by 1994 after-tax profit (the latest financial year), exceeded appraisal estimates primarily due to stronger-than-expected revenue growth related to container traffic-a highly profitable category of cargo handling. Operating ratios, however, were only slightly higher than the appraisal targets (60.3% in the ICR vs. 55.3% in the SAR). This was caused by tariffs that did not keep pace with rapidly increasing costs. 19. The rate of return on average net fixed assets (RRFA) in 1994 improved from 11.0% in 1987 to 13.4% in 1994 (10.0% forecast), largely due to the increases in before tax profits being larger than the increase in the value of net fixed assets. 20. In July 1993, XPB adopted new financial reporting procedures that were more similar to Western accounting systems; thus, some traditional accounts were abolished and replaced by new ones. Also, the new system is accelerating the commercialization and privatization of the port by providing Westernized accounting instruments. 21. XPB revalued its fixed assets (RFA) in March 1994. It was expected that after this, the port's RRFA would decline further. However, it only dropped to 13.4% in 1994, from 18.4% in 1993, because the port's RFA was too conservative: For the first time in over 40 years, the RFA increased the fixed assets. But the figure was only by an average  - 7 - of about 50% in book value and 38% in net value. Also, the impact of the RFA was diluted further when the value of new fixed assets was averaged with the under-valued fixed assets from the previous year. In addition, a 32.3% increase in before-tax profits in 1994 absorbed some of the negative impact from the RFA. 22. It is very important for XPB to apply the correct market value on its fixed assets because this would allow the agency to take the proper depreciation (based on the value of fixed assets) and replace its aging facilities without jeopardizing the port's financial capacity. 23. Present Performance. Despite the rapid increase in operating costs, the port's finances were still sound at the end of 1994: The current ratio of the port was 1.4, which is lower than the SAR's original projection of 3.1 but still acceptable; the debt service coverage was 47.3%, which was higher than the SAR forecast of 30.4%. However, the percent of current assets in the form of cash declined slightly from 68.9% in 1987 to 64.8% in 1994 (against the 79.7% forecast), while the ratio of accounts receivable to total current assets increased from 15.8% in 1987 to 26.4% in 1994 (vs. a forecast of 10.5%). The rising accounts receivable ratio represents lower liquidity, which affects the availability of cash for paying current obligations. 24. Salient points of the port's balance sheet during these years are summarized in the table below (see ANNEX 1, Table 1.2 for more detail): 1987 1 1990 l 1994 SAR SAR ICR SAR ICR =------------------(Y million)------------------- Assets Net fixed assets 147.0 304.0 156.2 436.7 899.3 Current assets 21.2 56.1 91.5 128.3 571.1 Special fund assets /a 7.6 7.6 10.2 7.6 - Total 175.8 367.7 257.9 572.6 1,470.4 Liabilities and equity State funds 147.0 241.2 155.2 307.0 76.9 Long-term debt 0.0 66.6 0.0 134.1 496.7 Current liabilities 10.5 20.8 65.9 40.9 419.4 Special funds 18.3 39.1 36.8 90.6 0.0 Equity 0.0 0.0 0.0 0.0 477.4 Total 175.8 367.7 257.9 572.6 1,470.4 Debt:Capital (%) 0.0 21.6 0.0 30.4 47.3 Current ratio 2.0 2.7 1.4 3.1 1.4 La Including deferred assets.  -8 - 25. Future Performance. Despite the high increase in operating costs, the port still enjoys a healthy range of liquidity, leverage, and profitability ratios (due to the rapid increase in container operations, as noted earlier). Moreover, traffic trends indicate that container traffic will continue to grow rapidly. The port's new responsibility for financing its capital investments has not yet affected its cash flow (ANNEX 1, Table 1.3), but is expected to weigh more heavily in the near future. In addition, XPB is planning to expand operations with new construction, set to begin soon. Thus, it is expected there will be a strong demand for capital inflows in the coming years. 26 In order to further strengthen the port's financial condition, the following is recommended: (a) Total Tax Exemption: If the government wants the ports to be financially independent, it should grant them tax exempt status. This is necessary because the ports cannot set tariffs (so as to cover entire operating costs), as these are still tightly controlled by the State. And, tariffs always favor the users-ship and cargo owners--instead of the investors (the port authority) because the government considers the port operation as a public service. (b) Urban Construction Cost Sharing: At present, most of the costs of the urban infrastructure needed to complement the port expansion (for the construction of roads, railways, bridges, sewerage, electricity and water supplies outside the port expenditures) are solely bome by the port authority. Since the biggest beneficiary of the port's expansion is the city, part of the costs on these items should be negotiated and shared by the city government. Economic Re-evaluation 27. The economic analysis in this report was based on the re-evaluation of data on traffic, operational performance, costs and benefits of project components. The methodology used was similar to that employed in the SAR and is summarized as follows: (a) Capital investment and maintenance costs were revised to reflect July 1995 prices and are included in the cost stream; (b) The benefits stream, also reflected in July 1995 prices, was included, and consists of savings in port handling, ship port time (berth and waiting), cargo port time (berth and waiting), and coal transport costs. Benefits began to accrue for coal, general cargo and container berths in 1995; and (c) A project life of 20 years was assumed and the capital investment period for all berths was from 1989 to 1995. 28. During preparation, it was understood that the two Bank-financed multifaceted berths would be converted to handle container traffic once the project was completed, to  -9- respond to growing demand. However, because container traffic grew much more rapidly than expected, XPB converted one of the berths during construction. This was included in the ICR economic analysis. 29. Two factors are responsible for improving the re-evaluated economic internal rate of return (REIRR). These include: (a) cargo value and handling costs; and (b) much better than expected container traffic. However, these factors were offset by the much lower than expected handling of coal traffic (one of the port's major clients is expanding its own coal-handling facilities), and an increase of 23.1% in the cost of capital (in constant 1995 prices). 30. Based on a reassessment of the revised data, the REIRR is 40.1%, which is considerably higher than the SAR estimate of 31.3% (see Annex 2). The REIRR and SAR estimates, in terms of net present value (NPV), are given below. SAR ICR Best estimate of rate of return (%) Total project 31.3 40.1 Of which: a. General cargo and container berths 24.1 44.0 b. Coal berth 45.2 23.8 Net present value (12%) (million Yuan) 1,014.7/a 2,158.2 /a Y 501.8 million in July 1988 prices were inflated by a factor of 2.0222 to July 1995 prices. C. MAJOR FACTORS AFFECTING THE PROJECT 31. Positive influences included: (a) A rapidly developing economy in the area and country that increased port traffic (particularly container traffic); (b) A simple and flexible project design (for the multipurpose/container berth); (c) The Borrower's experience in implementing projects; and (d) A close working relationship between the Borrower and Bank. 32. Negative factors included: (a) Price hikes during implementation that increased project costs slightly and port operating costs significantly; and  - 10- (b) XPB's lack of familiarity with the Bank's procurement guidelines. D. PROJECT SUSTAINABILITY 33. At completion, the project appeared sustainable. Because port traffic will undoubtedly grow, along with rapid economic development in the Xiamen area, the port's expanded facilities will be needed. In fact, traffic in containerized cargo has soared and the project's container terminals are much more efficient than the one built earlier, due to the advanced facilities, equipment and trained staff. In addition, XPB is financially stable and has enough resources to maintain and operate the port efficiently. XPB could, however, raise the port's productivity even further and provide services at competitive costs. E. BANK PERFORMANCE 34. The Bank identified the issues and prepared the project well and in a timely fashion; it was identified in April 1987 and appraised in March 1988. Bank staff resources leading to appraisal were officially zero, because the project was combined with the Ningbo Port Project and staff-weeks up to preappraisal were charged to the latter. Bank supervision was also efficient: The annual average input of staff resources was 7.4 staff- weeks, which included various specialties (see Table 12). This was possible because the supervision of six Bank-financed port projects was well coordinated. It should be noted that the flexible approach used to convert wharves for containerization was also successfully adopted in other port projects (in Tianjin, Ningbo and Shanghai). 35. With regard to procurement, the Bank took a consistent position and provided guidance, when necessary. F. BORROWER PERFORMANCE 36. In general, the Borrower's performance was good and preparation and implementation were adequate. The action plan targets were substantially met during implementation, and as shown in Table 10, Part II, covenants were generally met, as well. The Borrower's performance, therefore, was evaluated as satisfactory. G. ASSESSMENT OF OUTCOME 37. This project is assessed as '"atisfactory" because it achieved all major objectives without any major shortcomings. It was not assessed highly satisfactory, because completion was delayed for one year. 38. Net present value was positive, Y 2,158.2 million against Y 1,014.7 million in the SAR (see para. 30), when flows were discounted at 12% for a major portion of the investment.  H. FUTURE OPERATIONS U 39. The project provided port facilities that should be able to handle traffic until the late 1990s. However, XPB should begin planning the next phase, since preparation and construction require several years and future congestion could translate into serious losses to the economy. 40. The decentralization of port management from the central government to the municipal level has been successful: XPB, an autonomous entity under the municipal government, has shown it can implement projects and manage the port capably. However, it has enjoyed a monopoly position since it was established (as with other port authorities in China) and has therefore not lowered operating costs significantly. Thus, to improve its operational efficiency even more, XPB could introduce the concept of competition among its subsidiary companies that operate terminals; or, it could promote joint ventures with experienced foreign operators. 41. It is understood that private operators are negotiating to create a joint venture company with XPB to operate the new container terminals. XPB also intends to develop an additional container terminal with foreign private funds (perhaps under a Build-Own- Transfer scheme). If these materialize, XPB's monopoly position will disappear. 42. Because of the need to increase the port's efficiency, authorities will need to monitor its efficiency and financial performance. To accomplish this, they will need to evaluate: (a) ship waiting time, and (b) cargo handling volume per day per vessel (as indicated in para. I1), and moves (load/unload) of container boxes per hour per crane. These data will be available from the statistics provided by XPB. I. FINDINGS AND LESSONS LEARNED 43. The findings and key lessons from project implementation include: (a) XPB capably constructed the port facilities, procured equipment, conducted studies and developed its organization; (b) Flexible project designs for wharf conversion, as were included in this project, are essential; they allow authorities to respond rapidly to demand; (c) When Borrowers are unfamiliar with Bank procedures, delays--as occurred in this project with procurement--are unavoidable. For this reason, the Bank's project launch workshops are helpful. However, because local staff are often moved to other positions, it could be useful if additional workshops or training in procurement would be provided; (d) Performance indicators with regard to port operations, maintenance and environmental quality were clearly stated in the SAR (to monitor the project's progress) and proved quite useful;  - 12 - (e) Project designs, which were relatively straightforward, helped avoid coordination problems among different agencies; and (f) Courses offered outside the country for managers should be tailored specifically for the staff sent, because in some cases, those covered by project funding were too general (para. 8.c).  - 13 - PART U: STATISTICAL ANNEXES TABLE 1: SUMMARY OF ASSESSMENTS A. Achievement of objectives Substantial Parial Negligible Not applicable Macro policies x Sector policies x Financial objectives x Institutional development x Physical objectives x Poverty reduction x Gender issues x Other social objectives x Environmental objectives x Public sector management x Private sector development x Other (specify) x B. Project sustainability Likely Unlikely Uncertain x Highly C. Bank performance satisfactory Satisfactory Deficient Identification x Preparation assistance x Appraisal x Supervision x D. Borrower performance Preparation x Implementation x Covenant compliance x Operation (if applicable) x E. Assessment of outcome x  -14- TABLE 2: RELATED BANK LOANS/CREDITS Loan/credit title Purpose Year of approval Status Preceding operation 1. Three Ports Project expansion 1982 completed on 6/30/88 2. Tianjin Port Project expansion 1986 completed on 10/31/94 3. Huangpu Port Project expansion 1987 completed on 12/31/94 4. Dalian Port Project expansion 1988 completed on 12/31/93 5. Ningbo and Shanghai Ports Project expansion 1988 to be completed on 12/31/95 Following operations 1. Shanghai Port Restructuring and Development Project expansion 1992 to be completed on 6/30/99 TABLE 3: PROJECT TIMETABLE Item Date planned Date actual Identification - 04/87 Preparation 09/87 09/87 Appraisal 01/88 03/88 Negotiations 05/88 09/88 Board approval 09/88 12/13/88 Signature - 09/08/89 Effectiveness - 01/09/90 Project completion 03/31/94 03/31/95 Loan closing 09/31/94 03/31/95  - 15 - TABLE 4: LOAN DISBURSEMENT (in $) Planned Actual CumuIative Cumulative Period Disbursements disbursements Disbursements disbursements 07/01/89 - 09/30/89 2,000,000.00 10/01/89 - 12/31/89 5,000,000.00 7,000,000.00 01/01/90 - 03/31/90 2,000,000.00 9,000,000.00 04/01/90 - 06/30/90 3,000,000.00 12,000,000.00 07/01/90 - 09/30/90 3,000,000.00 15,000,000.00 1,494,638.69 1,494,638.69 10/01/90 - 12/31/90 3,000,000.00 18,000,000.00 1,500,000.00 2,994,638.69 01/01/91 - 03/31/91 3,000,000.00 21,000,000.00 927,702.84 3,922,341.53 04/01/91 - 06/30/91 3,000,000.00 24,000,000.00 540,474.18 4,462,815.71 07/01/91 - 09/30/91 2,000,000.00 26,000,000.00 - 4,462,815.71 10/01/91 - 12/31/91 3,000,000.00 29,000,000.00 1,638,530.29 6,101,346.00 01/01/92 - 03/31/92 1,000,000.00 30,000,000.00 955,165.99 7,056,511,99 04/01/92 - 06/30/92 1,000,000.00 31,000,000.00 390,104.97 7,446,616.96 07/01/92 - 09/30/92 1,000,000.00 32,000,000.00 2,678,091.36 10,124,708.32 10/01/92 - 12/31/92 1,000,000.00 33,000,000.00 2,718,935.43 12,843,643.75 01/01/93 - 03/31/93 1,000,000.00 34,000,000.00 815,085.17 13,658,728.92 04/01/93 - 06/30/93 - 34,000,000.00 3,393,055.29 17,051,784.21 07/01/93 - 09/30/93 1,000,000.00 35,000,000.00 2,184,838.38 19,236,622.59 10/01193 - 12/31/93 - 35,000,000.00 3,129,085.49 22,365,708.08 01/01/94 - 03/31/94 1,000,000.00 36,000,000.00 5,120,319.40 27,486,027.48 04/01/94 - 06/30/94 1,666,435.15 29,152,462.63 07/01/94 - 09/30/94 3,041,863.16 32,194,325.79 10/01/94 - 12/31/94 2,480,959.25 34,675,285.04 01/01/95 - 03/31/95 - 34,675,285.04 04/01/95 - 06/30/95 1,324,714.96 36,000,000.00  - 16- TABLE 5: KEY INDICATORS FOR PROJECr IMPLEMENTATION . A. Implementation Project Planned Actual Completion component Start Finish Start Finish delay (months) Civil Works 1. Barge berths Preparation 01/88 09/89 01/88 04/90 7 Construction 11/89 06/90 03/90 04/91 9/a 2. Coal terminal Preparation 01/88 02/90 01/88 03/90 1 Construction 11/88 08/92 11/88 06/93 10/b 3. Container and multipurpose berths Preparation 01/88 07/90 01/88 12/89 -7 Construction 04/89 12/92 12/90 01/94 13/c Equipment 1. Coal terminal 02/92 12/92 10/93 11/94 23/d 2. Container and multipurpose berths 06/91 03/93 10/93 12/94 21/e /a Three-month delay in starting construction and 6-month delay due to slippage of a bank. Ib Preparation of construction was delayed. /c Bid preparation including prequalification was delayed due to unfamiliarity of XPB with the Bank guidelines and implementation was delayed for 8 months. /d Preparation of procurement was delayed. te Preparation of procurement was delayed and delivery of equipment was delayed due to the delay in civil works.  - 17- Table 5: (CONT'D) B. Training (person-time) Planned Actual Containers General Coal Total Containers General Coal Total purpose pupose Workers 379 630 371 1,380 368 5,173 99 5,640 Technicians 70 58 70 198 122 881 17 1,020 Management 88 58 88 234 75 343 4 422 Service 92 67 92 251 13 104 2 119 Total 629 813 621 2.063 578 6.501 122 7.201 Overseas Training Planned Actual Persons Duration Person- Persons Duration Person- (month) months months Management 27 1 27 91 1 91 Technicians 16 2 32 37 1 37 Workers 3 2 6 6 1 6 Training Schedule (Annual Training) Planned Actual 1989 200 1990 500 1,404 1991 500 2,150 1992 863 790 1993 1,529 1994 1,328 Total 27063 7.201  - 18 - Table 5: (CONT'D) C. Procurement (under ICB) Itam Prequalifi- cation doc. PQ evalua- Bid Evaluation Evaluation to the Bank tion to the documents Bid report to Signing period (months) Bank to the Bank opening the Bank contract (months) Civil Works (Container and Dec-88 Aug-89 Feb-90 May-90 Sep-90 Oct-90 4 multipurpose berths) Package I (equipment for Feb-91 Oct-91 Jul-92 Dec-92 9 container, general cargo and coal teaninal) Package 2 (additional Jun-93 Aug-93 Nov-93 Jan-94 2 equipment for container) Dired Shopping Feb-91 Oct-91 Jun-92 Sep-92 3 List of Eauipment Unit Contract amount ($'000) Package I 1. Quay-side container crane 1 2,613 2. Rubber-tired gantry cranes 2 2,444 3. Portal cranes 2 1,273 4. Mobile cranes (16 tons) 6 297 5. Coal unloader (10 tons) 2 1,137 6. Coal stacker/reclaimer 2 1,137 7. Coal loader (800 t/h) 1 498 8. Communication equipment 1 398 9. Fire-fighting tug boat (2,940 kW) 1 2,520 Package 2 1. Quay-side container crane 1 3,697 2. Rubber-tired gantry cranes 2 252,113/a /a Japanese Yen.  - 19- TABLE 6: KEY INDICATORS FOR PROJECT OPERATION (ACTION PLAN) Planned Actual Existing 1990 1995 1994 1. Berth Throughput ('000 tons) Dongdu, berth 1, container 14 (TEU) 30 (TEU) 0 / 131(TEU) Dongdu, berth 1, general cargo 215 200 500 0 /a Dongdu, berth 2, grain 740 1,000 1,500 1,011 Dongdu, berth 3, fertilizer 380 500 800 730 Dongdu, berth 4, break-bulk 400 500 600 1,097 Dongdu, 0-SOm berths, general cargo 200 200 200 118 Dongdu, boat berth, general cargo 150 200 250 479 Dongdu, berth 6, general cargo (phase II) 500 380 Dongdu, berth 7, general cargo (phase It) 500 509 Dongdu, berth 8, container (phase II) 50 (TEU) 54 (TEU) Dongdu, coal berth (phase II) 1,500 137 Gaoqi berths 220 300 600 168 /b Heping berths 350 350 200 159 Jc 2. Average Berth Time of Vessels (Loading) (days) Coal 2.0 2.0 1.0 NA /d Nonmetallic ore 8.8 7.0 5.0 4.3 Steel 0.6 1.0 1.0 0.5 Bagged sugar and grain 3.8 3.0 2.0 3.5 Bulk grain 1.2 1.0 1.0 NA /d Cement 1.1 1.0 1.0 NA /d Timber 1.7 1.0 1.0 NA /d Fertilizer 4.3 3.0 2.0 2.7 General cargo 3.8 3.0 3.0 1.0 Container 1.3 1.0 1.0 0.3 3. Average Berth Time of Vessels (Unloading) (days) Coal 10.0 8.0 2.0 3.1 Steel 5.2 4.0 3.0 2.7 Timber 4.3 3.0 3.0 2.2 Cement 13.3 11.0 8.0 4.7 Nonmetallic ore 7.9 7.0 6.0 4.2 Bagged sugar and grain 12.1 10.0 8.0 3.9 Bulk-grain 25.0 12.0 8.0 7.7 Bulk fertilizer 33.9 16.0 10.0 11.8 Metallic ore 5.4 5.5 Bulk sugar 10.4 9.0 7.0 16.2 General cargo 2.1 2.0 2.0 0.2 Container 2.3 1.0 1.0 1.5 /a Container traffic at the existing old terminal is planned to shift to the new terminals in 1995. However, container traffic increase was higher than expected and the new terminals were not operational in 1994; containers, therefore, were handled at No. I berth, which was fully occupied by containers. /b Coal traffic was terminated. Tc This berth is planned to fade out. /d Not available--traffic was low and sample number is too small for reliable data.  -20- TABLE 7: STUDIES INCLUDED IN THE PROJECT Master Plan Study (a) Purpose as defined at appraisal The study was to update the port plan that XPB had provided for future port expansion enabling the port to cope with the future requirements of anticipated traffic increase. The study provided the long term development plan to the year 2005. The study also enhanced the planning capability of XPB so that it can periodically update the master plan in the future. (b) Status Satisfactorily completed in July 1992. (c) Impact of study XYB participated in updating the Master Plan together with the foreign consultants and domestic consultants, and developed a capability in updating Master Plans when required.  - 21 - TABLE 8: PROJEcT COSTS, FINANCING AND ALLOCATION OF LOAN PROCEEDS Project Costs Planned Actual Y .oJ00oo Y*o00 8'000 Local ?oreibn ToIl Locrl ioreiin Tot l Locl Forelan otal Local Fore Totl Civil Works A. Continer J& jcnenl& cupg 1. Continerberu 8 4.5S7 10,767 15,354 1,240 2,910 4150 2,995 30.011 33,006 556 4,458 5,014 2. Generalcargobert 5846 13,542 19,38 1,510 3.660 5.240 3.548 33.835 37,383 659 5,026 5,685 3. Revetment-west pat 3.996 9,213 13,209 1,0S0 2,490 3,570 4.220 4,24S 8,468 714 631 1,415 4. Revetment-east 999 2,294 3,293 270 620 890 1,609 1.999 3,60S 299 297 596 5. Dredgigg-rock 0 0 0 0 0 0 1.820 0 1,820 338 0 338 6. Dredging-bsin 14S 740 888 40 200 240 313 1.279 1.662 71 190 261 7. Ch.nnel dredging-rock 0 5,232 5,232 0 1,414 1,414 1.004 S,099 9,103 186 1,203 1,389 Channel dredging 333 3,130 3,463 90 846 936 943 4.712 5655 175 700 875 S. Sheds,yardpavemnent 1,517 5957 7,474 410 1,610 2,020 5,613 1,010 6,693 1,055 150 1,205 9. Road pavement (container) 592 2,405 2,997 160 650 S10 2,021 1.4S1 3,502 375 220 595 10. Stackminyad 482 1,850 2,332 130 500 630 4,003 3.231 7.234 743 480 1,223 General crgo yard 260 962 1,222 70 260 330 438 1,030 1,468 81 153 234 Apron stack yard 260 999 1.259 70 270 340 2,009 1,670 3,679 373 248 621 11. Roads (others) 260 2,442 2,702 70 660 730 4,446 3,541 7,987 826 526 1.352 Cable trench 112 407 519 30 110 140 1,050 929 1,979 195 138 333 12. Auxili rybuilding 7,178 7,178 14,356 1,940 1,940 3,880 35,653 0 35,653 6,621 0 6,621 13. Earthwork/bcfilling 18055 0 18.055 4,880 0 4,880 17154 0 17,154 3.1S6 0 3,186 14 Watersupply&sewage 1,536 1,536 3,072 415 415 830 3888 0 3888 722 0 722 15. Power supply 0 2,849 2.849 0 770 770 8,476 0 8.476 1,574 0 1,574 16. Cornmunications 112 1,184 1,296 30 320 350 931 5.763 64694 173 856 1,029 17. Navipational aid& 0 1,998 1,998 0 540 540 3,051 0 3,051 567 0 567 18. Environmental protection 925 0 925 250 0 250 1,501 0 1,501 279 0 279 19. Railway msideport 518 518 1,036 140 140 280 0 0 0 0 0 0 20. Roads rails&,nfr outsideport 13,117 13,117 26,234 3.545 3.545 7,090 34.105 916 35,021 6,333 136 6,469 21. Othen 13.060 4,S84 17,944 3.530 1,320 4,850 31,049 0 31.049 5,766 0 5,766 Subtotal 73.9 93.203 167. 19.971 2.10 4511 171.980 103.75 234 31.937 15412 47.32 B. Coalberlh 22. Berthandrevetment 4,108 5,994 10,102 1,110 1,620 730 16,5S8 0 16.588 3,080 0 3,080 23. Roads and yards 4,791 4,792 9.53 1.295 1.295 2.590 8628 0 8.628 1602 0 1602 24. Reclamtion 2,331 2,331 4,662 630 630 1,260 8.331 0 8,381 1,556 0 1,556 25. Water supply and ae-ag 222 222 444 60 60 120 2,406 0 2,406 447 0 447 26. Powersupply 1,850 1,850 3,700 500 500 1,000 8,713 0 8,713 1.618 0 1,618 27. Communications facilities 0 185 185 0 50 50 964 94 1,058 179 14 193 28. Environmental protection 1,333 814 2,147 360 220 580 3,94S 0 3,948 733 0 733 Subtotal 14. 1.18 2I.271 3955 4375 12Q 492.M 94 49722 21 1A 9230 TotalCixvilWor SS528 109.391 197.91 23.2 29565 53421 221,01 103.148 325456 4153 15426 56.5 Equipment A. Contamer mid general 75rg0 29. Loadin/iunloading equipmnent 7,91S 31,657 39,575 2,140 8,556 10696 S201 79357 87,551 1,523 117SS 13,311 30 Port serviceveel 0 7,999 7,999 0 2,162 2.162 2,747 14S837 17.5S4 510 2204 2,714 31. Portvehicle 0 303 303 0 82 82 439 0 439 82 0 82 B. Coal berth 32. Loadingunloadingequipn-ent 2,849 18,833 21,682 770 5,090 5,860 12,812 23,394 36.206 2,379 3,475 5,854 33. Controfslytem 481 481 962 130 130 260 2,224 1,158 3,382 413 172 585 34 Ventilation and refrilgeation 0 333 333 0 90 90 474 0 474 iS 0 88 Subtotal 11.24S 72.S 3.4 16.110 IS0 26.897 IDIS.746 145643 49i 17.639 MOM 35. Spare parts(10%) 1,125 5,961 7,086 304 1,611 1,915 0 13,249 13,249 0 1.961 1,968 TotalEqui t 12.313 0 77I941 334 172.1 216 26S97 13199 15S.991 4995 129 24 Technical At 7 6 223e 4 tr Ining 36. Masterplan 740 962 1,702 200 260 460 36 1,717 10 703 7 255 262 37. Action plan 740 370 1,110 200 too 300 0 0 0 0 0 0 38. Fnancial mformation ystem 0 0 0 0 0 0 0 0 0 0 0 0 39 Construction supervision 1,4S0 I,S50 3,330 400 500 900 762 3,171 3,933 142 471 613 40. Environmental monitoring 1,480 2,220 3.700 400 600 1,000 0 0 0 0 0 0 41. Trainmng 1,4S 88 2.368 400 240 640 40 1.784 1,S24 7 265 272 Total TA and Trainins 5 20 CM 12.9 3 LM00 L7Q 3U3N S3S hm L70 IS 97 I'm Total[BaCas 106J21 11I.24S 21L09 2MM1 4M9M M 215 4943 24.1A 491.1S5 4U303 360 12.303 Physical contingencies (10%) 10.682 18,125 21.807 Z887 4,899 7,7S6 TIQl 117.03 199373 316.87 31 7521 I1= 13542 Price contingencies 12,S41 23,976 36,817 1,591 3,025 4,616 Crand Total 130f34 23137 353.701 33A347 54Si! f21 249J343 242414 425 46,3e3 6i0f 12.303 Exchange rate Planned S-Y 3.70 Actual. Y I.0=51/5.385 (from Yto S) Sl.O=Y 6 732 (from S to Y)  - 22 - Project Financing Sources Planned Actual ($'000) ($'000) Bank loan 36,000 36,000 Domestic financing (XPB and Government) 54,300 46,280 Total 90.300 82.280 Allocation of Loan Proceeds Category Original Actual allocation disbursements Loan Loan ($'000) ($'000) 1. Civil Works 13,920 14,436 2. Goods 17,530 20,603 3. Consultants' service & training 1,200 967 4. Unallocated 3,350 0 Revolving fund -6 Total 36.000 36.000  - 23 - TABLE 9: EcoNoMIc COST, BENEFIT AND MAJOR FiNANCIAL INDICATORS SAR ICR Total Traffic (1994): Of which: General Cargo (mln tons) 9.6 7.9 Coal (mln tons) 2.6 1.9 Container ('000 teu) 3.0 0.9 43.5 220.0 Financial (1994, in %): Return on average net fixed assets 10.0 14.5 Operating ratio 55.3 62.3 Debt capital ratio 30.4 47.2 Debt service coverage 2.3 2.2 Current ratio 3.1 1.3 Economic (July 1995 prices): Total cost (million Yuan) 745.1 566.6 NPV (million Yuan) 1,000.5 2,301.9 Economic rate of return (in %) 31.3 42.5  - 24 - TABLE 10: STATUS OF COVENANTS Agree- Original Revised ment Section Status Date Date Description of Covenant Comments Loan 2.02(b) OK 09/08/89 Borrowers to open and maintain a special account in the name of XPB. 4.01(a) OK Borrower shall cause XPB to maintain proper records and accounts. 4.01(b) OK Borrower shall have financial Audited report for records and accounts audited each fiscal year was and furnished to the Bank no received in due time later than six months after the end of each fiscal year. Project 2.06 OK 09/08/89 XPB shall update the Master The study was Plan no later than December completed in July 31, 1990. 1992. 4.01(a) OK XPB shall maintain proper records and account. 4.01(b) OK XPB to have accounts audited Audited report for and sent to the Bank not later each fiscal year was than six months after the end of received in due time fiscal year.  - 25 - TABLE 11: BANK RESOURCES: STAFF INPUT FY 1988 1989 1990 1991 1992 1993 1994 1995 Total Preappraisal 0 Appraisal 0 Negotiations 5 5 Supervision 1.1 10.9 9.6 8.2 10.2 4.2 44.2 Completion Total 49.2 TABLE 12: BANK RESOURCES: MISSIONS Performance rating Number Imple- Types of Stage of project Month/ of Days in Specialized staff skills mentation Development problems cycle year persons the field represented /a status /b objectives /b Identification 04/87 4 5 EGR, EC, FA, OP Preparation Preappraisal 09/87 5 5 EGR, EC, FA, OP, ENV Appraisal 09/88 5 7 EGR, EC, FA, ENV, EGR Supervision 1 09/89 2 4 OP, FA/EC Supervision 2 05/90 2 5 OP, FA/EC 1 1 Supervision 3 11/90 3 4 OP, EGR, FA/EC 1 1 Supervision 4 04/91 2 3 OP, FA/EC 1 1 Supervision 5 08/91 2 3 OP, FA/EC 1 1 Supervision 6 03/92 2 1 OP, EGR Supervision 7 09/92 1 4 OP 1 1 Supervision 8 03/93 2 3 OP, EGR 1 1 Supervision 9 09/93 1 1 EGR 1 1 Supervision 10 12/93 2 4 EGR, FA/EC 2 1 Imple. delay Supervision 11 04/94 2 1 EGR, FA/EC 2 1 Supervision 12 12/94 2 1 EGR, FA/EC S S Completion 03/95 2 14 EGR, FAIEC /a EGR: Engineer; FA: Financial Analyst; EC: Economist; OP: Operations Specialist; ENV: Environmentalist. /b 1: Highly satisfactory; 2: Satisfactory; S: Satisfactory.  - 27 - Appendix A APPENDIX A: ICR PREPARATION MISSION'S AIDE- MEMOIRE March 15-28, 1995 1. A World Bank mission comprising Messrs. T. Tsutsumi and H.K. Yen visited Xiamen Port from March 15 to 28, 1995 to prepare the Implementation Completion Report (ICR). The mission wishes to thank the officials of the Government of China (GOC), Ministry of Communications (MOC), as well as the management and staff of Xiamen Port Bureau (XPB) and Xiamen Harbour Construction Command (XHCC) for the courtesies and cooperation extended to it during this visit. 2. This Aide-Memoire summarizes the agreements reached with XPB/XHCC officials on the preparation of the ICR. The agreements of the mission, as incorporated in this Aide-Memoire, are subject to review and confirmation by Bank management. The View of the Bank and XPB/XHCC 3. The Bank mission and XPB/XHCC have the same view on the project implementation: the project is expected to be satisfactory completed on March 31, 1995. ICR Preparation 4. The Bank started preparation of the ICR in December 1994 (during the previous supervision mission), requesting XPB/XHCC provide necessary information and data. The Bank received draft information and data in February 1995. 5. The mission visited the project site and discussed with XPB/XHCC on the preparation of the ICR. The mission have obtained necessary information and reached agreements on the actions to be taken as follows: (a) XPB/XHCC will review the draft ICR which the Bank ICR mission left, XPB/XHCC will send their comments to the Bank by May 1, 1995, if any, (b) the Bank will send a confirmation of the Bank management on the agreement between XPB/XHCC and the Bank ICR mission; will send a draft ICR to the Borrower, MOC and XPB/XHCC (to be confirmed by MOC), by June 15, 1995; (c) XPB/XHCC's comments as well as their own evaluation will be sent to the Bank by July 15, 1995; and  - 28 - Appendix A (d) the Bank will finalize the ICR and send to the Board of the Bank by September 30, 1995. 6. Procurement of Additional Spare Parts. XPB advised the mission that additional spare parts at a price of $40,402.41 would be procured by amending the existing contract, CCNFB-S9428 16, with China Harbour Engineering Corp. (China). Although this amendment is the second time, the total amendment amount will be about 6 percent of the original price and the delivery of the spare parts is expected to be completed before March 31, 1995 (Closing Date of the project). The mission expressed no objection to the amendment. If the amendment amount would exceed the remaining loan amount, the difference would be borne by XPB. XPB will inform the amendment of the contract to the Bank as soon as possible. March 28, 1995 Xiamen, China  - 29 - Appendix B APPENDIX B: BORROWER'S CONTRIBUTION TO THE ICR Section A 1. The Second Phase Project at Dongdu Harbor District of Xiamen Port is an important project in Xiamen, China which was implemented by Xiamen Port Bureau. The project includes civil works, procurement of mechanical equipment and other associated works. It is a port construction project applying the World Bank loans through International Competitive Bidding and introduction of construction supervision system. The project construction was officially commenced in October 1989. Two container berths and one general cargo berth were put into simple operation at the end of 1993. The whole Xiamen Port Project was inspected and accepted by the State Acceptance Committee on December 8, 1994 to begin official operation. 2. The project design is reasonable in general layout, handling technology and quay structure type. The equipment parameters are reliable and economic with a higher automation of technological process which satisfy functional requirements. In general, project objectives are achieved and the project is a success. That greatly expands Xiamen Port's capacity in cargo traffic. 3. During the project implementation, many advanced techniques were adopted and significant benefits have been achieved. For example, channel dredging applied cabin overflow operation method, thus increasing efficiency and saving investment. For construction of barge berth, partial vibroflotation foundation bed was used instead of traditional whole riprapping foundation bed. New techniques such as vibroflotation under water, plastic drain plate driving above water and horizontal transportation of 160-ton reinforced concrete caisson by means of water cushion, etc. were adopted. It was the first time for Xiamen Port to apply large-sized gravity type caisson structure for its quay construction, which has greatly accelerated construction progress, improved construction quality, achieved better technical and economic results and increased Xiamen Port's construction level. 4. Construction of the following components such as container berths, general cargo berth and coal terminal as well as associated handling equipment, harbor fire-fighting tug boat, coal terminal central control system and telecommunication system, etc. under this project have greatly enhanced the comprehensive capacity and function of Xiarnen Port and facilitated the expansion of Xiamen Port's traffic. The cargo throughput of the whole port in 1994 reached 11.40 million tons.  - 30 - Appendix B 5. The method of Sino-foreign joint venture for the civil works construction supervision was adopted which suited the Chinese situation. Construction supervision was jointly undertaken by a joint venture of Scott Wilson Kirpartic Consulting Engineers based in the UK in association with Zhong Bei Harbor Engineering Supervision Corporation in China and engineers from Xiamen Harbor Construction Command. Through the close cooperation between Chinese and foreign construction supervisors and specialists, they learned from each other which was beneficial for them to make various proper judgments and decisions and has ensured the satisfactory execution of the project. Consultant service by the foreign consultants, construction supervision and local and overseas training enable technical and management staff from Xiamen Port to widen their view, learn and obtain some international practice, advanced technology and management experiences which have enhanced the staffs technical and management level and ensured the project quality. 6. Particular attention was given to environmental protection and safety construction. During the project implementation, environmental protection and safety facilities such as sewage treatment plant, ventilation and dust removal as well as fire fighting were equipped in accordance with the related regulation of the state. The inspection and assessment made by the departments concerned of the local govemment show that the results are satisfactory. 7. Procurement of this project through ICB was executed by a working team which comprised experienced technical personnel and specialists from Xiamen Port. They were familiar with the World Bank's guidelines and FIDIC conditions, with a better ability in English and rich project management experience. Therefore, the project was executed satisfactorily. They also applied their experience obtained from the construction of ICB items to LCB items. Commercial affairs in the bid document for the construction of barge berth and revetment works through LCB which was approved by the World Bank has become a model for bid invitation of local items in Xiamen Port. 8. The project design was basically undertaken by the Chinese design institute, i.e., the Fourth Design Institute of Navigational Engineering of MOC and the Third Design Institute of Navigational Engineering of MOC. In general, the design is a success. The design institutes made a great effort to ensure the satisfactory execution of the project. 9. Technical documents for marine structure, channel works and procurement of equipment were jointly prepared by Xiamen Port Bureau and the design institutes. The consulting service thereof was provided by the experts from SOROS Associates in America and China International Engineering Consulting Company in China. Some reliable and advanced techniques were incorporated in the well-knit and detailed technical specification which fully complied with local actual situation. Practice has proven that the tendering work was successful. 10. Master Plan of Xiamen Port was jointly studied and prepared by Xiamen Port Bureau and China Waterway Planning Design Institute of MOC. Han-Padron Associates Consulting Engineers in America was engaged to provide the consulting service thereof  - 31 - Appendix B The Master Plan conforms to Xiamen Port's actual condition and provides a reliable and scientific basis for the development plan, general layout and construction of Xiamen Port. 11. In accordance with the port master plan and the demand of increasing container traffic, in the last project period, one quayside container crane and two rubber-tired container gantry cranes were procured by using the Bank's loan savings-more than $6 million. No. 7 general cargo berth was converted to a container berth in due time. The evaluation speed was quick. The result of tendering was satisfactory. 12. The project was accepted by the state in December 1994. Berths No. 6, 7 and 8 were put into simple operation in 1993. The throughput in that year reached 1.51 mnillion tons. The whole project began operation simply in 1994 with a throughput of 2.13 million tons completed. Since the formal operation in 1995, and up to August 31, 1995, the throughput amounted to 2.185 million tons. This has greatly enhanced Xiamen Port's capabilities and promoted Xiamen City's economic development. This project is a success. 13. Generally the project was implemented strictly following the SAR. Marine structure, channel works, roads and stacking yards, handling mechanical equipment, harbor fire-fighting tug boat, telecommunication system and central control system in coal terminal were completed and delivered in the contracted period. 14. When the first package of equipment was procured, it took us a long time to make investigation and studies again and again on the bidders' qualification for quayside container crane so that the bid evaluation was delayed for several months. Section B 15. The ICR drafted by the World Bank is comprehensive. It describes completely all the major items of the project executed and analysis provided is mainly correct and complies with the actual conditions. 16. With respect to the data of each item in the list of ICR, we acknowledge that they are correct and generally conform to the actual situation. 17. With regard to the reason for one year's extension of project closing date, we agree what is stated in the ICR, i.e., the closing date was extended once for one year due to delay in implementing civil works and procuring additional equipment for container handling because of the conversion of No. 7 general cargo berth to a container berth, Section C 18. From the project appraisal to reimbursement deadline, the World Bank was very positive and effective. Xiamen Port Bureau appreciates all officials and experts from the World Bank who participated in this project for their efforts and their contributions made to the port devilment. It gave us deep impression of their strong sense of serious responsibility, scientific way in management and spirit of job respect.  - 32 - Appendix B 19. During the whole implementation period, we have been keeping a close cooperation and mutual respect with the Technical Division, Communication Division and Disbursement Division of the Bank. Especially with the guidance on all aspects granted by the Bank's experts, Xiamen Port Bureau overcame various difficulties in project implementation and completed the project satisfactorily. 20. Each site supervision mission from the World Bank made a significant effect on the project execution. They inspected the site situation twice a year and collected first-hand information, resolved problems that occurred during construction to accelerate the construction procedure by strengthening a mutual understanding and trust. The Bank's mission gave us great support on savings application for procurement of additional container cranes, etc. and also especially extension of closing date and reallocation of loan. The Bank officers' instruction, understanding and quick responses to our request facilitated the project implementation.  - 33 - Appendix C APPENDIX C: MAP  _ 34 _ Appendix C .. a-na-i l ; [At K U j Ii i ,H 1q11~ ~~ ! of } IIiliUii,l  - 35 - A.^NEX I ANNEX 1: FINANCIAL ANALYSIS Table 1.1: XIAMEN PORT BUREAU: Income Statement (December31, '000 Yuan) 1984 198S 1986 1987 1958 199 199 1991 1992 1993 1994 Eat TraMfc Wholepon(r000ton) 2,900 3,354 3,195 4.305 4,686 5.126 5.2S9 5,700 6,479 9.206 11,406 PortAuthority('000ton) 2.700 3,165 2.9S5 3,t76 3.951 3.676 3.444 4,136 4,645 6,285 7,883 Container('000tu) S3 192 14 0 14 0 21 1 27.5 45.3 74.1 105 153.6 2200 Revenue Loading/unloading 8,975 12,920 13,687 16.S15 21.443 29,987 33,488 42,540 66.9t3 107.608 141.610 Storage 1,542 3,S12 2,627 2,321 3,662 6,405 5,411 7,126 13,631 21.S98 28,k17 Other 3,077 4,028 5,320 8.SS9 9,S63 7.69S 10.410 22.495 35.634 57.246 75,335 Marketing 1,557 2,503 2,457 3,308 4.,66 6,023 6.424 0 0 0 0 Subtotal iJJIj l a 24.091 31 033 J0S1J 50t 72,1jj 11614S I6L752 248.762 Operating Taxes Loading/uloading 2'0 417 442 550 700 9S0 1.097 1,365 2.150 3,117 3.911 Storage 46 122 S5 123 19S 34S 295 390 729 1,057 1,326 Other 117 215 229 243 249 217 292 1,465 2,048 2,968 3.724 Marketing '7 267 265 358 526 653 700 0 0 0 0 Total Operatic. tax LLD i021 L!lll 276 1.673 2919 2 NU l9 4.927 7.142 19 Net Sales Loadtng/unloading 8.705 12,503 13,245 16,265 :0.743 29,007 32.391 41,175 64,833 104,491 137,699 Storge 1,496 3,690 2.542 2.196 3,464 6.057 5,116 6,736 12,902 20,t41 27,491 Other 2.960 3,813 5,091 S.346 9.614 7,4S1 10,118 21,030 33,586 54,271 71,611 Marketing 1,4S0 2236 2.192 2.950 4,340 5,370 5.724 0 0 0 0 Total et Sales 144 L 2242 23.070 29.77 39t61 4795 53I49 6t941 111321 1797610 236Si11 Operating Costs Loadinglunloading 5,738 7.659 8,427 10,923 15.163 19.043 20.554 23,361 32,170 60,634 79,750 Storage 1,167 1,516 1.499 1.806 _.155 4.364 3.279 2,695 6.51t 12,2t5 16.158 Other 1.625 1.397 3,060 3.666 4,529 4.835 6,707 11.295 11.884 35,592 46,813 Marketing 240 271 441 562 814 970 1,015 0 0 0 1 Totl Operatline Cots s7ro IIJ43 13.427 16 997 2,661 29212 31!SS3 37.3SI !7S_72 10011SI 42722 Operating Proflt Loadinglunloding -_967 4,944 4818 5,342 5,580 9,964 11837 17,314 32.663 43.857 57,949 Stor ga 329 2.174 1.043 390 1.309 1.693 1.837 4,041 6,3S4 8.556 11.333 Other 1.335 1.916 2031 4,6S0 5.085 2,646 3.411 9,733 14,702 1.6S6 24,798 Markettng 1.240 1.965 1.751 23SS 3.526 4,400 4,709 0 0 0 (1) Total OnerilnerProfIt La7' 101199 I" 1L5Q0 is,00 It701 21.794 315! hL72j 71" 2