China - Phosphate Development Project

Document of The World Bank FOR OFFICIAL USE ONLY Report No. 16244 IMPLEMENTATION COMPLETION REPORT CHINA PHOSPHATE DEVELOPMENT PROJECT (LOAN 2958-CHA) January 14, 1997 Environment and Municipal Development Operations 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 authorization.  CURRENCY EQUIVALENTS Currency Name: Renminbi Currency Unit: Yuan (Y) Y 1.00 =$0.115 Y8.70 = $1.00 FISCAL YEAR January 1 - December 31 WEIGHTS AND MEASURES 1 cubic meter (m3) = 1.308 cubic yards 1 metric ton (t) = 1,000 kilograms or 2,204.6 pounds 1 kilometer (km) = 0.62 miles ABBREVIATIONS AND ACRONYMS CNCCC - China National Chemical Construction Corporation CPI - Central Planning Institute (MCI) GAMS - General Algebraic Modeling System GOC - Government of China GPC - Guizhou Phosphate Company ICB - International Competitive Bidding ICBC - Industrial and Commercial Bank of China ICR - Implementation Completion Report MCI - Ministry of Chemical Industries Mt - million tons Mtpy - million tons per year SAR - Staff Appraisal Report TSP - triple superphosphate (fertilizer) WMFDG - Wengfu Mining and Fertilizer Development Group Vice President (Acting) : Marianne Haug, EAP Director : Nicholas C. Hope, EA2 Division Chief : Jane Loos, EA2EM Staff Member : Christopher Wardell, Principal Mining Engineer, IENIM  FOR OFFICIAL USE ONLY CONTENTS PREFACE .......................................................... iii EVALUATION SUMMARY .......................................................... iv PART I: PROJECT IMPLEMENTATION ASSESSMENT .................................1 A. Project Objectives and Description ...........................................................1 B. Achievement of Project Objectives ...........................................................2 C. Implementation Record and Major Factors Affecting the Project ...............4 D. Project Sustainability ...........................................................5 E. Bank Performance ...........................................................6 F. Borrower Performance ...........................................................6 G. Assessment of Outcome ............................................................6 H. Future Operation ............................................................6 I. Key Lessons Learned ...........................................................7 PART II: STATISTICAL TABLES ............................................................8 Table 1: Summary of Assessments ............................................................ 8 Table 2: Related bank loans ...........................................................9 Table 3: Project Timetable ...........................................................9 Table 4: Loan/Credit Disbursements: Cumulative Estimated and Actual ..... 10 Table 5: Key Indicators for Project Implementation ...................................... 10 Table 6: Key Indicators for Project Operation ................................................ 10 Table 7: Studies included in Project ........................................................... 10 Table 8a: Project Costs ........................................................... 11 Table 8b: Project Financing .......................................................... 11 Table 9A: Economic Costs and Benefits ........................................................ 12 Table 9B: Economic Costs and Benefits-Underlying Assumptions ............ 13 Table 9C: Financial Costs and Benefits-Option 1 ..... . ................................. 14 Table 9D: Financial Costs and Benefits-Option 2 ....................................... 15 Table 9E: Financial Costs and Benefits-Underlying Assumptions .............. 16 Table 9F: Sensitivity Tests .......................................................... 17 Table 10: Status of Legal Covenants .......................................................... 18 Table 11: Compliance with Operational Manual Statements ......................... 19 Table 12: Bank Resources: Staff Inputs .......................................................... 19 Table 13: Bank Resources: Missions ........................................................... 20 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 without World Bank authorization.  - 11 - Annex 1: ICR Mission Aide Memoire .......................................... 21 Annex 2: Operation Plan for the Wengfu Phosphate Mine ........................................ 23 Annex 3: Borrower's Contribution to the ICR ......................................... 29  - iii - IMPLEMENTATION COMPLETION REPORT CHINA PHOSPHATE DEVELOPMENT PROJECT (LOAN 2958) PREFACE This is the Implementation Completion Report (ICR) for the Phosphate Development Project in China, for which Loan 2958-CHA in the amount of $62.7 million was approved on January 31, 1989, and made effective on April 28, 1989. The loan was closed on December 31, 1995, following two one-year extensions to the original loan closing date of December 31, 1993. Final disbursement took place on February 22, 1996, following provision of a four-month grace period. The ICR was prepared by Christopher Wardell, Industry and Mining Division, Industry and Energy Department, Finance and Private Sector Development and reviewed by Mr. Austin Hu, Acting Chief, Environment and Municipal Development Operations Division, East Asia and Pacific Regional Office, and by Mr. Yo Kimura, Project Advisor, EA2DR. The Borrower provided inputs to the ICR that are included as Annexes. Preparation of this report was begun during the Bank's ICR mission in January 1996. It is based on material in the project file. The Borrower contributed to the preparation of the ICR by exchanging views on the project preparation, procurement, implementation and initial operations' experience and related issues; by preparing its own set of evaluations on the project's preparation and execution; and by commenting on the draft ICR.   - iv - CHINA PHOSPHATE DEVELOPMENT PROJECT (LOAN 2958-CHA) EVALUATION SUMMARY Introduction 1. The Phosphate Development Project was one of four fertilizer projects financed by the Bank in China to assist in implementing the three top priorities that the Government had set for the sector, which the Bank agreed with, namely: (a) expansion, rehabilitation and energy saving in nitrogen production; (b) rapid expansion of phosphate fertilizer capacity using locally available phosphate rock; and (c) development of domestic potash resources. The first project-the Fertilizer Rehabilitation and Energy Saving Project (Loan 2541 -CHA) dealt with four large- and medium-sized ammonia/urea plants. The second project was the Fertilizer Rationalization Project (Loan 2838-CHA), which was to improve efficiencies at five plants, expand phosphate production at one of them, and improve institutional capacities through the introduction of modem financial and operational management. The third and fourth projects were the Phosphate Development Project (Loan 2958-CHA)-the subject of this ICR-and the Hubei Phosphate Project (Loan 3066-CHA), both of which were to expand phosphate supplies both in their own right and as demonstration projects for further development of the country's phosphate resources. Project Objectives 2. The project was to assist China in achieving its priority goals for the fertilizer sector, especially in reducing the nutrient imbalance in fertilizer use by expanding production of phosphate fertilizers from domestic phosphate resources. The project was to devise appropriate strategies including an optimal investment program to meet phosphate needs in a least-cost manner; develop the first major mine in the investment program; and strengthen the capability of the Ministry of Chemical Industries (MCI) to plan development of chemical subsectors, including phosphates. 3. During project preparation, a Phosphate Subsector Study was carried out jointly by MCI and the Bank, which defined an investment program to develop local phosphate deposits. The phosphate deposit at Wengfu was chosen as the first major investment as it would demonstrate efficient development of domestic phosphate deposits using modem mining and beneficiation technologies. There were also consultancy services to install and further develop the computer-based phosphate investment optimization model and to improve management and operations/maintenance practices at the Wengfu project.  - v - Implementation Experience and Results 4. Although project implementation was delayed, and the independent project for construction of the triple superphosphate (TSP) fertilizer plant' that was originally expected to use the project's output is even further delayed, the project is likely to reach and sustain the main development objective of supplying additional phosphate concentrates to the fertilizer market and thus help decrease the nitrogen-phosphate- potassium (N-P-K) imbalance in fertilizers-an important aspect of sector policy; physical objectives will be met by early 1998 when the TSP fertilizer plant is completed (para. 7); substantial institutional development at the Wengfu Mining and Fertilizer Development Group (WMFDG), the implementing agency, has taken place (para. 11); environmental protection has been integrated into the project (para. 12); the financial and economic rates of return at 13.9 and 10.2 percent, respectively, although lower than originally forecast, are acceptable; and prices for the project output are based on market conditions (para. 13). The beneficiation plant performance and reliability tests were successful and a strong and experienced management and operations team has been developed at WMFDG. On the basis of these developments, the project is considered sustainable 5. The technical assistance component of the project dealing with subsector investment optimization was partly successful as preliminary runs of the computer model gave clear signals for the priority investments in the phosphate sector-including Wengfu. However, the transfer of the subsector optimization model to MCI was not achieved, although computer facilities were established at MCI and are in use on statistical and planning tasks. 6. The project was completed at a cost of $243.3 million, compared to the forecast cost of $221.8 million (Part II, Table 7A). Financing arrangements were essentially as planned (Part II, Table 7B) with central and provincial governments covering the major part of the financing not covered by the Bank loan. However, due to an initial shortage of central government funds, the implementing agency was obliged to take short-term and relatively high-interest commercial loans from local banks. The project construction was completed in March 1995 compared to the planned construction completion date of June 1994, a delay of some nine months. The commissioning of the beneficiation plant was finished in September 1995. 7. Certain key factors affected the achievement of the project objectives in a timely manner. Government approval of the project was delayed, which in turn delayed agreement on local funds to commence construction. Throughout project implementation, delays continued in the Government's mobilization of funds for The TSP plant will be completed three years late at end-1997. It is outside of the scope and financing of the Bank-financed project but is an important part of the operation as most of the phosphate concentrate is planned to be used in the TSP plant.  - vi - construction. These delays were caused in part by the increased local currency costs due to higher-than-expected local rates of inflation and the credit squeezes implemented by Government during the project period. During the initial procurement phases, WMFDG incurred delays in finalizing technical specifications for equipment and plant items to be procured by international competitive bidding. The most serious delay was in the agreement between the Government and bilateral agencies for funding the TSP plant, which is now scheduled for completion in late-1997. WMFDG has done well in identifying alternative domestic and export markets for its phosphate concentrate products, but limited rail transportation capacity to export ports could constrain the operation from achieving the full physical objective of 1.8 million tons per year (Mtpy) phosphate concentrates until the TSP plant comes on stream. The implementing agency handled construction management and supervision well but did not fully utilize construction management, scheduling and monitoring tools. The Bank could have done better during project implementation by providing more appropriate and extensive staff resources at regular intervals to support implementation by identifying key implementation issues, and then defining action plans. 8. Due to the remedial measures taken, however, the major development objective is likely to be met. The project represents the first, large-scale, high-technology phosphate mine and beneficiation plant built in China and has thus provided a sound basis for subsequent subsector developments. Summary of Findings, Future Operations, and Key Lessons Learned 9. Domestic market constraints required WMFDG to identify export market opportunities pending completion of the TSP plant. Since constraints in rail transport capacity out of Guizhou province have imposed limitations on exports, Government has committed itself to assist WMFDG to gain access to an increasing share of available rail capacity until the TSP plant is commissioned. Thereafter, marketing of products should not present an issue. The presence of strong and experienced WMFDG management and operations personnel should ensure project sustainability (Section D). 10. There are three key lessons to be learned from the project implementation experience. First, it is essential to ensure that all components that are important to the project are integrated and proceed simultaneously. If one component is missing or delayed (the separate TSP plant project in this case), the project cannot reach its objectives in the original timeframe. Second, no matter how much care is exercised during project preparation and appraisal, implementation issues will arise and the Bank can provide greater assistance in resolving these issues by assigning the necessary supervision resources. Finally, it is important to earmark funds for technical assistance components in a more precise manner. This was not done for the implementation of, and training for, the subsector investment optimization model and affected the development of skills in MCI (Section I).   - 1 - IMPLEMENTATION COMPLETION REPORT CHINA PHOSPHATE DEVELOPMENT PROJECT (LOAN 2958-CHA) PART I: PROJECT IMPLEMENTATION ASSESSMENT A. PROJECT OBJECTIVES AND DESCRIPTION 1. The project was to assist China in achieving one of its priority goals for the fertilizer sector under the Seventh and Eighth Five-Year Plans, namely to correct the nutrient imbalance in fertilizer use by expanding the production capacity for phosphate fertilizers, particularly for high-grade products such as triple superphosphate (TSP) and Monoammonium Phosphate (MAP), based on domestic phosphate resources. 2. More specifically, the project was to help Government: (a) devise appropriate strategies for developing an efficient phosphate industry, including an optimal investment program to meet phosphate needs in a least-cost manner; (b) implement the first major mine development of the investment program; and, (c) strengthen the capability of the Ministry of Chemical Industries (MCI) to plan the development of the chemical subsectors, including phosphates. 3. During project preparation, considerable progress was made in meeting points (a) and (c) through the Phosphate Subsector Study to define an investment program to the year 2000 to develop local phosphate deposits. The Study was carried out jointly by MCI and the Bank. 4. Wengfu was chosen to be the first major investment to be implemented as it would provide a demonstration model for the efficient development of domestic phosphate deposits using modern mining and beneficiation technologies. The project was expected to increase China's local supply of phosphate rock by about 25 percent. 5. The project had two major components: (a) Wengfu Mine Development-namely, to start up and operate: (1) an open-pit mine at Wengfu in Guizhou Province; (2) a modem beneficiation  plant to produce concentrate at the mine site; and (3) a slurry pipeline to carry the concentrate some 50 kilometers (km) to the rail siding; and, (b) technical assistance, which included: (i) consultancy services for project management and mine workshop maintenance; and, (ii) technical assistance for developing a computer-based sector investment optimization model; the model was to be installed, maintained and further developed by MCI to strengthen its subsector planning capability. B. ACHIEVEMENT OF PROJECT OBJECTIVES 6. Sector Policy Improvements. During project preparation, the important sector policy issue of correcting the imbalance in fertilizer nutrient use, as regards phosphates, was examined in detail by the Bank and MCI in concert. Methodologies for identifying the most cost effective solutions were developed, and specific investment recommendations were made that have formed the basis for other projects in the sector. 7. Physical Objectives. The project was designed to produce 2.5 million tons per year (Mtpy) of phosphate ore for processing in the beneficiation plant designed to yield 1.8 Mtpy of phosphate concentrates starting January 1994. The major portion of the concentrates (1.2 Mtpy) were to be supplied to a TSP fertilizer plant to be constructed at the terminus of the slurry pipeline adjacent to the rail loading facilities, the balance (0.6 Mtpy) to be supplied to five compound-fertilizer plants under construction across China. Project construction commenced in November 1990, approximately 18 months behind the original plan of June 1989, due to delays in Government approval of the project design and in the mobilization of local funds and in procurement. Construction was completed in 53 months in March 1995, somewhat faster than the original forecast of 60 months. Beneficiation plant load tests were successfully completed in April 1995 and performance tests in September 1995. All performance indicators were reached or exceeded. Preproduction operations continued through April 1996, after which full commercial operation commenced. The annual production of phosphate concentrate and its sale in domestic and export markets are presented in the Operations Plan attached to the ICR mission Aide Memoire (annexed to this report). This indicates that all the physical objectives will be met in 1998, following startup of the TSP plant in late 1997. 8. Technical Assistance Objectives. The technical assistance directed at improving project management and workshop maintenance was carried out in a number of phases over the project implementation period. It included visits by international specialists to China and return visits of Chinese managers and engineers to the specialists' offices in the United States. The project management assistance was successful in helping the Wengfu Mining and Fertilizer Development Group (WMFDG) upgrade and strengthen its management structure and team. Although a number of maintenance training workshops  - 3 - were conducted by international specialists, WMFDG recognizes that additional training in this area will be important in order to lift maintenance and materials management practices to standards necessary to ensure the efficiency and security of the project. This additional training should be paid for from the cash flow from operations. 9. The technical and financial assistance directed at the computer-based sector investment optimization model was generally successful, on the basis that preliminary runs on the model carried out jointly by MCI and the Bank gave clear results for the priorities of the next investments in the phosphate sector, including the selection of Wengfu as the first major investment. It also pointed to the subsequent selection of the Dayukou and Huangmailing integrated phosphate mine, beneficiation and fertilizer operations that were financed by the Bank under the ongoing Hubei Phosphate Project (Loan 3066-CHA). 10. Less successful was the technical assistance for installation and development of the model to strengthen MCI's subsector planning ability. The computer purchased by MCI under the project for installing the model was never used for this purpose, although it has been put to good use in statistical applications for MCI. Incompatibility between the hardware and the software, General Algebraic Modeling System (GAMS), for running the model was a problem. Toward the end of the project period, there was a revival of interest in installing the model but the necessary resources could not be made available and the model has not yet been installed. 11. Institutional Development. The original implementing agency for the project was the Guizhou Phosphate Company (GPC), located in the provincial capital of Guiyang. Following construction startup, GPC appreciated the difficulties of managing construction distant from the project site, and so established the Wengfu Mining and Fertilizer Development Group (WMFDG) at the project area to manage construction. Throughout the project period, WMFDG has progressively expanded its management and staffing, and developed a well-structured and competent group solely responsible for project implementation and operation. Extensive management, operations and maintenance training has been undertaken under the project, which placed WMFDG in a strong position to ensure the project's success. 12. Environmental Protection. No serious environmental issues were foreseen at the mine site and beneficiation plant and none have developed. Dust at the mine site is controlled in the usual manner by effective haul-road construction and spraying with water from tankers procured under the project. Overburden dumps are located close to the mine site. The natural consistency of the overburden materials provides a mixture of large and small rocks with a natural sealing tendency. Dust and noise tests undertaken at the beneficiation plant during performance tests have confirmed compliance with Ministry of Health and State Labor Bureau standards. The beneficiation plant has been designed in accordance with Chinese engineering standards, which do not always match up to international standards, especially in safety features like stairways, headroom and enclosures for conveyors and operating equipment. WMFDG recognizes that additional  - 4 - enclosures need to be constructed at conveyor transfer points for better control of dust emissions. Construction of the initial tailings pond dam has been completed and the dam will be developed progressively over the project life. Some leaking of solids through the dam wall is evident, but the dam will self-seal as sufficient solids settle out during initial operations. Filter press wastewater is fully recycled to the mine site. The effluent from the tailings dam will pass through a monitoring station to ensure that it will not pollute the streams into which it will flow. 13. Economic and Financial Objectives. Significant economic and financial benefits were estimated at project appraisal. Although at loan closing these benefits are lower than originally forecast, they are still positive (Part II, Tables 8A, 8C and 8D) and can be considered satisfactory. The actual economic rate of return of 13.9 percent underscores the beneficial impact of the project on the Chinese economy. The forecast return at appraisal was 26 percent. It is lower now because the revenue will be delayed due to the delay in startup of production and of the TSP plant. The financial rate of return is now forecast at 10.2 percent compared with the appraisal estimate of 12.4 percent. Higher local currency costs and the longer implementation period than considered at appraisal have been partially offset by increases in concentrate prices that WMFDG is able to achieve in export markets (Y 374 per ton) and through the freedom to market outside of the state allocation plan at negotiated prices with domestic buyers, as agreed under the project. If concentrate prices were constrained to the levels set by MCI for other producers (Y 230 per ton), the financial rate of return would be reduced to 5.3 percent. The economic rate of return is sensitive to revenue decreases from changes in concentrate prices, but even with prices decreases of 10 percent, the economic rate of return at 11.7 percent is satisfactory. The financial rate of return is also sensitive to revenue changes: decreases of 10 percent over the estimated revenues would result in a financial rate of return of 7.6 percent, a level which would cause financial problems for the project. Such a price decrease is, however, considered unlikely as domestic prices can be expected to rise to import parity prices in the short to medium term, China will be a net importer of phosphates for the foreseeable future, and WBFDG is free to negotiate prices. 14. Public Sector Management. The project was the first in a planned series of phosphate fertilizer investments to be implemented by MCI to improve domestic supplies and provide high grade inputs. MCI has been closely involved in all phases of project planning and implementation, and has benefited from project training programs. MCI considers that this experience has been of considerable benefit in improving its management capabilities for future projects. C. IMPLEMENTATION RECORD AND MAJOR FACTORS AFFECTING THE PROJECT 15. Project implementation has met its primary development objective-the provision of additional phosphates-and has practically attained the institutional, financial and economic goals that were set. The factors that impeded project implementation included: delays in initial procurement; slow mobilization of domestic funds; the delay in the TSP  - 5 - plant construction; delayed production-and hence revenue-buildup; and the difficulties in finding interim domestic and export markets until the TSP plant construction is completed. 16. Factors not Subject to the Borrower's Control. The availability and prices of domestic construction inputs (steel, cement, equipment, labor, etc.) foreseen at appraisal deteriorated significantly during implementation as demand for these inputs grew markedly under the rapidly developing market economy. This resulted in project implementation delays and local cost overruns as WMFDG was forced to compete for inputs and to come to terms with rapidly increasing construction costs. Although the total project cost was only about 10 percent higher than anticipated at appraisal, the local cost component of the project almost doubled in current Renminbi terms, placing considerable strain on local-cost financing. Delays in securing local financing requirements were exacerbated by the credit squeezes implemented by Government during the project period. 17. Factors Subject to the Borrower's Control. The most serious problems within the government's control were the slow formal approval of the project design, and the delays in mobilizing funding for the TSP plant. 18. Factors Subject to the Implementing Agency's Control. The implementing agency WMFDG was less effective than could have been expected in a number of areas: delayed initial procurement due to excessive time taken to finalize technical specifications for international competitive bidding (ICB) documentation; slow development of the project management team, and drawn-out preparation of construction and project master schedules, and critical path identification. Reporting was deficient throughout major portions of project implementation. The transition from construction to startup and initial operations was not as expeditious as it could have been. Alternative marketing arrangements, necessitated by delays in the construction of the TSP plant, were slow to develop. Focus on the financial implications of delayed project completion, cost overruns and revised marketing arrangements was inadequate. Concern for the financial implications of the delay was lacking for some time. Although technical assistance for project management and maintenance was mobilized as necessary throughout the project implementation period, some of it was incomplete at the loan closing date. D. PROJECT SUSTAINABILITY 19. There is a high probability that the project will be financially and economically viable and will reach and maintain its major objective of producing 1.8 Mtpy of phosphate concentrates as procurement of all equipment is complete, the performance and reliability tests of the concentrator were successful, and competent WMFDG management and operations teams are in place. There may be some further delays because of marketing and transport difficulties brought on by the delayed TSP plant. The project should reach its planned production by early 1998, when the TSP plant  -6 - construction is completed. From that date, the project is considered likely to be fully sustainable. E. BANK PERFORMANCE 20. Project identification and appraisal were well-focused but the SAR was of limited help in procurement, construction, implementation and initial operations. No details were provided in the SAR of the equipment items scheduled for Bank financing, their estimated costs and scheduling. Project performance indicators and the project implementation schedule, consistent with then practice in the 1980s, were not developed with sufficient detail and specificity. 21. Supervision missions provided a focused discussion of key issues, which assisted MCI and WMFDG to address project implementation delays and difficulties in an orderly manner, but the frequency of supervision was limited. In all, 65 person-days were spent in the field on supervision from May 1990 to April 1994, an average of less than 3 staff- weeks per year (Table 11). A more intense supervision effort might have reduced project implementation delays. It could also have helped the Government to better understand the importance of an early commitment to the construction of the TSP plant, and WMFDG to identify optimal interim marketing arrangements Lastly, more efforts should have been made to assist MCI/CPI to install the subsector planning model and thus complete the technical assistance component. F. BORROWER PERFORMANCE 22. First, formal approval for project commencement was delayed due to overall capital allocation constraints. Second, there were delays in implementation due to inadequacies in the provision of counterpart funds; however, the borrower made considerable efforts to deal with the higher-than-expected local costs and completion was well within the planned implementation period. Third, there were inadequacies in the provision of counterpart and foreign bilateral funds that have delayed the completion of the TSP Plant with a consequent negative impact on project financial and economic benefits. G. ASSESSMENT OF OUTCOME 23. On the basis that the major physical (development) objective is considered reachable and sustainable, that satisfactory sector policy and institutional objectives have been met, and that financial and economic benefits are likely to be positive and acceptable, the project outcome is rated as satisfactory. H. FUTURE OPERATION 24. The WMFDG corporate plan is focused on production and marketing to maximize sales revenue in the domestic and export markets pending completion of the TSP plant. It incorporates discussions with central and provincial governments and other lenders for  financial restructuring that will ensure a healthy financial position for the company. The recruitment and training of the management team and operations personnel are complete and future operations should be satisfactory. 25. Indicators for monitoring and evaluating the future operation of the project were not identified during project appraisal, but some were devised during supervision. They refer mostly to the physical performance of the facilities and can be used only when the plant is operating. They deal mostly with the performance of the beneficiation plant (product quality, input consumptions, labor productivity, concentrate output) and with overburden and ore excavation rates at the mine, including equipment and labor productivity. I. KEY LESSONS LEARNED 26. A number of key lessons can and should be learned from the implementation of this project. First, in designing the scope of a project, care needs to be taken to ensure that all subcomponents are adequately captured by the project. In this project, the development of the mine and beneficiation plant, which received World Bank financing, was disconnected from the construction of the TSP plant, which was to get bilateral financing. The covenanted agreements that the TSP plant would be built and ready for operations in accordance with terms of reference and timing agreed between the Bank and the Company were inadequate to secure the integrated nature of the project. In fact, the Company had no power to influence the schedule for securing of necessary bilateral financing for the TSP plant. As a minimum, a Government commitment to complete the TSP construction to a time-bound schedule should have been obtained and the necessary foreign financing secured prior to commencement of the project. Even better, the project design should have encompassed all components in an integrated project. 27. Second, in order to assist borrowers and implementing agencies to define and develop corrective action plans when difficulties arise, the Bank must ensure that adequate supervision resources are allocated and used properly. 28. Last, care must be exercised in designing technical assistance components to ensure that adequate funds are specified in the loan agreement so that the components are implemented effectively. The subsector planning component of the project was not completed due, at least in part, to inadequate funding allocations.  - 8 - PART II: STATISTICAL TABLES TABLE 1: SUMMARY OF ASSESSMENTS Achievement of Objectives Not Substantial Partial Negligible Applicable Macroeconomic policies x Sector policies x Financial objectives x Institutional development x Physical objectives x Poverty reduction x Gender concerns x Other social objectives x Environmental objectives x Public sector management x Private sector development x Project Sustainability Likely Unlikely Uncertain x Bank Performance Highly Satisfactory Satisfactory Deficient Identification x Preparation x Appraisal x Supervision x Borrower Performance Highly Satisfactory Satisfactory Deficient Preparation x Implementation x Covenant compliance x Assessment of Outcome Highly Satisfactory Satisfactory Ungatisfactory Highly Unsatisfactory x  TABLE 2: RELATED BANK LOANS Year of Loan Title Purpose Approval Status Preceding Operations Ln 2541-CHA Improve efficient of nitrogenous fertilizer 1985 Completed Fertilizer Rehabilitation sector through rehabilitation and energy- & Energy Saving saving measures Ln 2838-C-IA Improve production efficiency of 1987 Completed Fertilizer Rationalization medium plants through renovation/tech- nology, expand phosphate production and improve institutional capacity Following Operations Ln 3066-CHA Medium-size integrated phosphate mine 1989 Nearing completion Hubei Phosphate and fertilizer plant development Cr 2159-CHA Establish models for small nitrogenous 1990 Proceeding satisfactorily Hebei Agriculture and phosphate plant rehabilitation Development TABLE 3: PROJECT TIMETABLE Steps in project cycle Date planned Date actual Identification 07/08/84 07/08/84 Project Brief 10/09/84 10/09/84 Preappraisal 05/86 11/29/87 Appraisal 09/86 03/16/88 Negotiations 03/87 05/09/88 Board presentation 04/87 06/15/88 Signing 01/31/89 01/31/89 Effectiveness 04/28/89 04/28/89 Project Completion 04/30/94 03/30/96 Loan closing 12/31/93 12/31/95  - 10- TABLE 4: LOAN/CREDIT DISBURSEMENTS: CUMULATIVE ESTIMATED AND ACTUAL ($ million) FY90 FY91 FY92 FY93 FY94 FY95 FY96 Appraisal estimate 1.2 9.4 34.5 58.3 62.7 - - Actual by year 1.5 1.8 11.1 21.9 14.8 6.8 0.6 Actual accumulated 1.5 3.3 14.4 36.3 51.1 57.9 58.5 Actual as % of estimate 125 35 42 62 81 - - Date final disbursement 02/22/96 TABLE 5: KEY INDICATORS FOR PROJECT IMPLEMENTATION Key implementation indicators in SAR /a Estimated Actual Commencement of site preparation 07/88 10/90 Commencement of equipment installation 07/90 12/91 First shipment of phosphate concentrate 12/93 Completion of pipeline engineering 07/89 12/90 Commencement of project management technical assistance 07/88 11/89 Commencement of mine equipment maintenance technical 04/89 11/89 assistance /a Specific project implementation indicators were not outlined in the SAR but were developed by Bank staff during initial stages of project implementation. TABLE 6: KEY INDICATORS FOR PROJECT OPERATION There were no specific indicators set apart from financial covenants. TABLE 7: STUDIES INCLUDED IN PROJECT Study Purpose as defined at appraisal Status Impact of study Project Management Upgrade WMFDG structure Completed Effective institutional development Mine Maintenance Maintenance management Completed Maintenance management improved  - 11 - TABLE 8A: PROJECT COSTS ($ million) Appraisal estimate Actual/latest Item Local Foreign Total Local Foreign Total Licenses and engineering 3.8 0.2 4.0 2.9 0.7 3.6 Equipment, materials and spares 22.8 50.1 72.9 24.2 55.1 79.3 Civil works and erection 70.8 - 70.8 78.5 - 78.5 Training and technical assistance - 0.6 0.6 - 0.4 0.4 Other 12.5 1.3 13.8 46.7 1.0 47.7 Base Cost 109.9 52.2 162.1 152.3 57.2 209.5 Physical contingencies 11.0 5.2 16.2 - - - Price contingencies 12.8 5.7 18.5 - - - Installed Cost 133.7 63.1 196.8 152.3 57.2 209.5 Incremental working capital 4.6 - 4.6 12.4 - 12.4 Interest during construction 9.4 11.0 20.4 21.4 - 21.4 Total Financing Required 147.7 74.1 221.8 186.1 57.2 243.3 TABLE 8B: PROJECT FINANCING ($ million) Appraisal estimate Actual/latest Item Local Foreign Total Local Foreign Total IBRD loan - 62.7 62.7 - 57.2 57.2 GOCloan 143.1 11.0 154.1 47.0 - 47.0 ICBC loans 4.6 - 4.6 - - GOC funds - 0.4 0.4 - - - Short-term loans - : - 30.2 - 30.2 Construction Bank loan - - - 89.5 - 89.5 Construction Bank bond - - - 22.9 - 22.8 Total 147.7 74.1 221.8 186.1 57.2 243.3  - 12 - TABLE 9A: ECONOMIC COSTS AND BENEFITS 0 0e0 0ot C .MN 9 x e o o01 o ~ x vw _x ro 0-