PPA:PAK 15031

ASIAN DEVELOPMENT BANK

CURRENCY EQUIVALENTS

Currency Unit - Pakistan Rupees (PRs)

At Appraisal

At Project Completion At Postevaluation

PRs1 .00 = $0. 0822

$0. 0396

S0.0323$1.00 = PRs12.16

PRs25.19

PRs31 .00

ABBREVIATIONS

ADBPDOFBEAEIRRPCRPEMPFHAPPAR

(i)(ii)(iii)

Agricultural Development Bank of PakistanDirectorate of Fisheries, Government of BalochistanExecuting AgencyEconomic Internal Rate of ReturnProject Completion ReportPostevaluation MissionPasni Fisheries Harbor AuthorityProject Performance Audit Report

NOTES

The fiscal year (FY) of the Government ends on 30 June.In this Report, '$" refers to US dollars.In this Report, "ton' (t) refers to metric ton.

PE - 451

CONTENTS

Page

BASIC PROJECT DATAMAPS: II

III

HIGHLIGHTS

1

BACKGROUND

2

A. Rationale

2B. Formulation

2C. Objectives and Scope at Appraisal

2

D. Financing Arrangements

3E. Project Completion

4F. Ex-Postevaluation 4

Ill. IMPLEMENTATION PERFORMANCE

4

A. Design 4

B. Contracting, Construction, and Commissioning

5C. Organization and Management

6

D. Actual Cost and Financing 7

E. Implementation Schedule 7

F. Technical Assistance 7

G. Compliance with Loan Covenants

8

IV. PROJECT RESULTS

8

A. Operational Performance

8B. Institutional Development

9

C. Financial Performance

10D. Economic Reevaluation

11

E. Socioeconomic and Sociocultural Results

12F. Women in Development

12

G. Environmental Impacts and Control

12H. Gestation and Sustainability

12

V. KEY ISSUES FOR THE FUTURE

13

A. PFHA Autonomy 13

B. Credit Design 13

VI. CONCLUSIONS

13

A. Overall Assessment

13B. Lessons Learned

14C. Follow-up Actions

14

APPENDIXES

15

Actual

31 .2a17.632.7

2.7

Actual

6-25 May 19829-29 Aug 1982

21 Dec 198214 Jan 198311 May 198428 Dec 1984

Feb 199226 Aug 1991

93

PCR PPARNot Calculated 15Not Calculated Not Calculated

No. of Missions

Person-days

1

80118

6C 69gC 1221

381

30

BASIC PROJECT DATABalochistan Fisheries Development Project (Loan No. 619-PAK[SF])

PROJECT PREPARATION/INSTITUTION BUILDING:Person-

TA No. TA Project Name Iy months Amount Approval Date

397-PAK Balochistan Fisheries DeveLopment PP 22 $350,000 23 Jan. 1981500-PAK Balochistan Fisheries Development AO - $250,000 21 Dec. 1982

As per BankKEY PROJECT DATA ($million): Loan Documents

Total Project Cost 42.4Foreign Currency Cost 28.5Bank Loan Amount/Utilization 35.4Bank Loan Amount/Cancellation

KEY DATES: Expected

Fact-findingAppraisalBoard ApprovalLoan AgreementLoan Effectiveness 14 Apr 1983First DisbursementProject Completion 31 Dec 1989Loan Closing 30 Jun 1990Months (Effectiveness to Completion) 80

KEY PERFORMANCE INDICATORS (%): AppraisalEconomic Internal Rate of Return (ELRR) 28Financial Internal Rate of Return (FIRR) 26 to >50b

BORROWER: Islamic Republic of Pakistan

EXECUTING AGENCIES: (I)

Pasni Fisheries Harbor Authority (PFHA)(ii) Agricultural Development Bank of Pakistan (ADBP)(iii) Directorate of Fisheries, Government of Balochistan (DOFB)

MISSION DATA:

Type of Mission

Fact-findingAppraisalProject Administration:

- Review- Special Project Administration- Project Completion

Postevaluation

Excluding the reallocation of $11.0 million to the Special Assistance Program for Pakistan in 1991.b Component range for fishing operators, ice plants, harbor operations, fishmeal plant operations.

Some of these missions also reviewed other Bank-financed projects in the country.

I 27°00N

() City

0 Town____JL__ Road (Metalled)

Road (Unmetalled)

Trail

River

Mand

Turbat

I Jiwani Gwadar Jabeli Sur Rassmai Bander

I- 25°00N

KAHACHI

95-1646a HR

-o

)0N -1

63°00E

65°00E

PA K IS TA N

BALOCHISTAN FISHERIES DEVELOPMENT PROJECTBALOCHISTAN COAST

0 20 40 60

Kilometers

4

63°00E

Panjgur

Hoshab JHALAWAN

PasnuKalmat

I àOrmara

\N LOCATION OF PASNIFISHERIES HARBOR

65°00E

27°00N -1

40 50 100

Meters

Area of Limited Access

- - - Site Boundary

(Boundaries not necessarily authoritative)

NORTH BREAKWATER

STARBOARD BEACON

-cN.)

/ " DEPARTMENTOF j/ . IRRIGATION COMPOUND /

GUEST HOUSE 4' ''MINISTRY OF ' ,' -----/

COMMUNICATIO

/

JIJ

OFFICE

DEPARTMENT OF

/

FISHERIES OF

S(/p

DECK LEVELS

PA K IS TA NBALOCHISTAN FISHERIES DEVELOPMENT PROJECT

PASNI FISHERIES HARBOR LAYOUT

/

_\

SURFAC'

WATER TA KPUMP ROOM

9HOTLL

/

PORT BEACON

CREST LEVELS

SOUTH CAUSEWAY

SOUTH BREAKWATER

95-1648b HR

I. HIGHLIGHTS

1. Objectives and Scope. The Project aimed to assist the development of marinefisheries in Balochistan and to improve the socioeconomic conditions and the nutritional intakeof fishing communities through (i) construction of a fisheries harbor complex at Pasni;(ii) provision of credit lines to the private sector for the construction of marketing, processing,and transportation facilities and to fishermen for the purchase of marine engines and modernfishing gear; (iii) training programs for fishermen, extension officers, and staff of the PasniFisheries Harbor Authority (PFHA); and (iv) consulting services to assist in the design andimplementation of the Project.

2. Cost, Financing, and Schedule. The actual cost of the Project was $31 .2 million,$1 1.2 million less than the appraisal estimate of $42.4 million. Compared with an approved loanamount of $35.4 million, disbursements amounted to $32.7 million, including $1 1 .0 millionallocated to the Special Assistance Program for Pakistan in 1991. The Project was completedin February 1992, 26 months later than envisaged at appraisal.

3. Implementation. The Project succeeded in constructing the fisheries harborcomplex at Pasni and in delivering the training programs. Funding of marine engines and fishinggear was less than envisaged at appraisal, as was the take-up of credit for the purchase andoperation of marketing and transport facilities. However, the targeted number of marine enginesand quantum of fishing gear were met from alternative funding sources. Minor changes in scopesaw the addition of protection works at the harbor, an increase in the allocation of fellowships,and increased consulting services. Because local conservation practices bar the catch ofsardines, the construction of the fishmeal plants was indefinitely deferred.

4. Institutional Aspects. The organizational arrangements involved three ExecutingAgencies (EAs): the Balochistan Government's Directorate of Fisheries (DOFB), the AgriculturalDevelopment Bank of Pakistan (ADBP), and PFHA. The project staff added to their experiencein implementing fisheries development projects and gained operational experience. Thereremains a need to strengthen the financial viability of the Project through increased user chargesand through the development of improved financial and management information systems.

5. Environmental Impact. No environmental risk factors resulting fromoverexploitation and waste disposal were evident. However, erosion problems associated withthe harbor require attention.

6. Cost/Benefit Assessment. The Project accelerated the introduction of largediesel-powered fishing vessels and demonstrated the importance of improved fishing gear.Based on participating fishermen's net operating returns and the capital costs of the Project,including expenditure on institutional support, the Project shows an economic internal rate ofreturn (EIRR) of 15 percent. The socioeconomic status of the vessel owners and crew wasenhanced considerably.

7. Overall Performance and Sustainability. Except for the poor utilization of thecredit lines, implementation closely followed the appraisal design and plan for execution and theProject's objectives were largely met. The Project facilities are soundly constructed and theeconomic benefits are considered sustainable. Taking into account the success of the Project

in achieving its aims and the ex-post EIRR of 15 percent, the Project is rated generallysuccessful.

8, Feedback. The Project brought attention to (I) the need to ensure at appraisalthat implementation of the components does not compete with alternative programs andorganizations offering cheaper credit arrangements, (ii) the importance of engaging contractorswith proven experience, and (iii) the need to ensure in the design for management of projectsthat the representation and requirements of Steering Committees are practical and that theestablished harbor authorities are vested with stronger management autonomy.

II. BACKGROUND

A. Rationale

9. The waters along Pakistan's 1,100-kilometer coastline have abundant fishresources. The Three-Year Public Sector Development Plan (1981/82-1983/84) recognized thatdevelopment of this resource could improve the socioeconomic conditions of the populationliving in the arid coastal areas, increase the supply of inexpensive protein food, and increaseforeign exchange earnings. The overall thrust in developing the fisheries sector was to(I) introduce larger vessels; (ii) expand the use of motorized vessels and modernize fishingequipment; and (iii) improve fisheries infrastructure, including harbors, onshore facilities, andtraining.

B. Formulation

10. A Project preparatory study was undertaken between July and November 1981under a Bank technical assistance. 1 Details of the Project components and implementationarrangements were finalized after a Bank Fact-finding Mission in May 1982 and an AppraisalMission in August 1982. Project formulation took cognizance of the experience and lessonsderived from implementation of the then only postevaluated fisheries project in Pakistan. 2 Thispointed to the need for design proposals to take into account fishermen's preferences for marineengines and to include workshops by the supplier for the repair and maintenance of engines.Three Executing Agencies (EAs) were given responsibility for implementing the Project: theBalochistan Government's Directorate of Fisheries (DOFB), the Pasni Fisheries Harbor Authority(PFHA) and the Agricultural Development Bank of Pakistan (ADBP).

C. Objectives and Scope at Appraisal

11. The principal objective of the Project was to assist the development of marinefisheries in Balochistan by (I) increasing fish production, (ii) improving the skills of fishermen andthe operating efficiency of fishing vessels, and (iii) improving the socioeconomic well-being offishermen and individuals who would work in marketing and onshore facilities. The scope of the

TA No. 397-PAK: Balochistan Fisheries Development, for $350000, approved on 23 January 1981; financedby the Government of Switzerland.Loan No. 54-PAK: Fisheries Development Project, for $6.73 million, approved on 22 December 1970.

3

Project included the following components: (i) the development of a fisheries harbor at Pasni,involving construction of a 600-meter breakwater, fuel and water replenishment facilities, fourjetties, an auction hail, staff housing, and maintenance and administrative offices; (ii) a credit linefor the purchase of 700 engines and 1,560 sets of fishing gear; (iii) a credit line for theconstruction of marketing and storage facilities, including five ice-making plants with adjoiningchiller storage; the purchase of transportation facilities, including two insulated trucks and fourfish-carrying vessels, and the construction of two fishmeal plants; (iv) provision of training,extension, and fellowships; and (v) a total of 202 person-months of consulting services to assistwith Project design and implementation. 1 Technical assistance was also provided to strengtheninstitutional capabilities and assist with project benefit monitoring and evaluation.2

12. The Project, although centered around the development of a fisheries harbor atPasni, was expected to also benefit fishermen living along a 250-kilometer coastal stretchbetween Jiwani and Ormara. Specific Project facilities to be provided outside the Pasni Harborarea included one ice-making plant at Turbat (inland center) and one fishmeal plant at Gwadar.Administrative facilities for implementing training and extension services and for processingsubloans were to be available at Jiwani, Gwadar, Pasni, Turbat, Ormara, and Uthal (see map).

D. Financing Arrangements

13. The Project cost at Appraisal was estimated at $42.4 million with a foreignexchange component of $28.5 million, The Bank's Special Fund loan of $35.4 million, approvedon 21 December 1982, covered the full foreign exchange cost and $6.9 million of the localcurrency cost. The balance of the Project cost ($7.0 million) was to be funded by theGovernment of Pakistan ($4.5 million) and ADBP ($2.0 million), and from the equity contributionsof private sector borrowers ($0.5 million).

14. Approximately $23.2 million of the Bank loan was to be made available by theBorrower to the provincial government of Balochistan for use by PFHA to finance the foreignexchange cost and part of the local cost of constructing the fisheries harbor at Pasni. Another$1 .7 million was to be used by DOFB for financing the foreign exchange cost of training,extension services, fellowships, and consulting services. The balance of the Bank loan ($10.5million) was to be onlent by the Borrower to ADBP to be extended as credit to fishermen for thepurchase of marine engines and fishing gear ($7.5 million), and to the private sector for thepurchase of marketing, processing, and transport facilities ($3.0 million). Onlending terms toADBP included interest at 4 percent per annum and a 15-year repayment period including 4years grace. Relending to fishermen and the private sector was at an annual interest rate of 11percent.

Consulting services included 154 person-months for design, implementation, operation, and managementof the harbor facilities; and 48 person-months for training and extension services covering the installation andmaintenance of marine engines and the teaching of modern fishing operations.TA No. 500-PAK: Balochjstan Fisheries Development, for $250,000, approved on 21 December 1982.

4

E. Project Completion

15. The Project completion date envisaged at appraisal was 31 December 1989. AProject Completion Report (PCR) prepared by the Bank's then Agriculture Department inSeptember 1993 discusses the design, scope, implementation, and operational aspects of theProject. The PCR covered the Project's implementation in adequate detail, and in its overallassessment, it considered that the physical as well as the socioeconomic objectives of theProject were met. Because Project-related data were not available, the EIRR for the Project wasnot reestimated.

F. Ex-Postevaluation

16. This Project Performance Audit Report (PPAR) focuses on pertinent aspects of theProject, in particular, the adequacy of Project preparation and the effectiveness of Project design,management, and institutional strengthening. The PPAR presents the findings of thePostevaluation Mission (PEM), which visited the Project area in May 1995, and is based on areview of the PCR, the Appraisal Report, material in Bank files, and discussions with Bank staff,senior officials of the EAs, and other agencies of the Borrower. Copies of the draft PPAR wereprovided to the Borrower, EAs and Bank staff concerned for review and comments. Commentsreceived were taken into consideration in finalizing the Report.

Ill. IMPLEMENTATION PERFORMANCE

A. Design

17. The conceptual design and specifications envisaged at appraisal were for the mostpart followed. The design for the harbor would have been more complete if it had also included(i) a heavier crane for transferring cargoes, (ii) a winch or towing vehicle to haul vessels onto theslip, (iii) cradles for supporting slipped vessels, and (iv) fish boxes for transferring fish landingsto the auction hail. The civil engineering design for the harbor anticipated that constructing abreakwater would result in a shift in the tidal mark. However, the tidal mark shift on the southside has fallen more rapidly than expected and on the north side the shoreline has been erodedas far back as the edge of the coastal road. 1 There has been an associated decrease in theharbor's depth, which has increased the need for dredging. 2 The extent of erosion has raisedconcern for the possible contamination of Pasni's freshwater supply. It is recommended that anengineering review be conducted as soon as possible to address these concerns.

18. Utilization by fishermen of the credit line for the purchase of marine engines andfishing gear was affected by complementary programs sponsored by the United NationsDevelopment Programme (UN DP), the Food and Agriculture Organization (FAO),the Governmentof Japan, and the subsidized programs of DOFB (see Appendix 1). Other factors affecting the

The tidal mark on the south side has fallen some 80 meters while erosion on the north side has been evenmore significant.PFHA is not equipped with a dredge.

5

use of credit were the high tax on imported engines and fishing gear, which was not applicableto purchases made through the fishermen's cooperative in Karachi, and a preference for buyingreconditioned engines and cheaper fishing gear available in the market rather than buying newreplacement engines and fishing gear.

19. Similarly, the private sector did not utilizethe credit line for marketing, processing,and transport facilities. This reflected in part the decision of the private sector to obtain thesefacilities with funding from nonproject sources and in part the uncompetitive price of importedcomponents and preferences for secondhand equipment. For other subcomponents, the PEMfound the private sector was not ready to invest and therefore avail itself of credit. 1 As a result,investment interest in new trucks with cold storage facilities and for engines to fit fish-carriervessels was not forthcoming. The planned construction of two fishmeal plants did not occurbecause of a self-imposed ruling by fishermen not to catch sardines.

20. In the end, only $0.342 million out of the $10.5 million available for credit underthe Bank loan was utilized. With the benefit of hindsight, the Project design failed to take intoaccount the customs and preferences of the fishermen and the availability of funds from othersources.

B. Contracting, Construction, and Commissioning

1. Consultants' Performance

21. It was envisaged at appraisal that specialist expertise would be required to ensureefficient Project implementation and to strengthen the operational capacity of PFHA and DOFB.Funding approval was given for the appointment of (i) a firm of port engineering consultants withresponsibility to PFHA for the detailed design, engineering investigations, and supervision of theconstruction of Pasni Harbor; (ii) one harbor management expert with responsibility for preparingand implementing operational procedures for the harbor and for assisting and training PFHA staffin management and administration; and (iii) one marine engineer and one master fisherman toassist DOFB in preparing specifications for the marine engines and fishing gear, and for trainingfishermen and extension officers. A total of 300 person-months of consulting services wereutilized compared with the 202 person-months envisaged at appraisal.

22. The services of the engineering consultants, which covered site investigations,detailed design, tendering, and construction supervision, proved particularly effective. Theservices of the master fisherman and the marine engineer to enhance the skills of DOFB staff aswell as for the training of fishermen and boat operators were hampered by deficiencies in thecoordination and timing of Project activities and by delays in the procurement of instructionalequipment and materials. Some planned formal training activities had to be shelved and trainingmaterials available under a separate program utilized on an ad hoc and as available basis.Working within these constraints, the effectiveness of these consultants was satisfactory.Although the terms of reference assigned to the harbor management advisor were appropriate,it appears the consultant appointed was lacking in relevant developing country experience,

Investors' readiness is linked to the availability of infrastructure, communication facilities, market outlets, andthe desire to wait and see how Pasni further develops.

6

suggesting in hindsight that more careful selection of this appointment was warranted. Overall,the PEM concurs with the PCR and the Government's view that the consultants performed theirservices satisfactorily.

2. Civil Works

23. The fisheries harbor was developed and constructed as envisaged, except forminor modifications. Civil works for the construction of the harbor component were competentlyhandled and reflected the sound management and systematic approach taken with Projectdesign and implementation. The harbor breakwater, jetties, arid other Project facilitiesconstructed at Pasni were of sound and lasting quality. All civil works were carried out byinternational contractors. Special credit was given by the engineering consultants and PFHA tothe exceptional competency of the principal contractor.

3. Procurement

24. In general, the EAs did not experience any difficulties in following the Bank'sGuidelines on Procurement. There were delays in the procurement of instructional equipmentcaused by delays in administrative attendance. The procurement of marine engines and fishinggear was to be carried out by ADBP on behalf of committed subborrowers and the purchasesstored by DOFB for distribution against delivery notes issued by ADBP. Although utilization ofthis component was poor for reasons outlined in para. 19, the PEM also found evidence thatADBPwas not comfortable with the Bank's procurement arrangements, which imposed additionalresponsibilities not normally the domain of a commercial lender.

25. The quality of the materials and equipment procured for harbor construction,operations, training, and the provisions made by suppliers for repair and maintenance weresatisfactory.

C. Organization and Management

26. Organization and coordination arrangements agreed upon at Appraisal were forthe most part complied with. PFHA was responsible for the construction, and operation andmaintenance of the fisheries harbor and fish handling facilities at Pasni. DOFB was responsiblefor training and extension, and ADBP was responsible for providing credit.

27. A Project Steering Committee made up of senior officials from the FederalGovernment and the provincial government of Balochistan was established. 1 The Committee wasto meet monthly to evaluate and review the progress of the Project and remove any impedimentsto implementation. The Committee was also made responsible for formulating general policiesfor operating the fisheries harbor. While the PEM found the Steering Committee's role to beinitially effective, meetings with a sufficient quorum became increasingly difficult to convene.

These included Federal Government representatives from ADBP, the Planning Commission and the Ministryof Food and Agriculture; and representatives from the provincial government including PFHA, the Planningand Development Department, the Finance Department, the Livestock and Fisheries Department, and theDirectorate of Fisheries.

7

Implementation was completed through responsible direction from and coordination betweenDOFB and PFHA. The practical difficulties of convening regular meetings with representativesfrom high offices and from distant cities is a lesson worth keeping in mind for the managementof future projects.

28. The Bank's involvement facilitated the implementation of the Project. FrequentBank missions during the initial period of Project implementation helped ensure that problemsrelated to procurement and selection of consultants were quickly overcome.

D. Actual Cost and Financing

29. The total Project cost of $31 .2 million compares with the appraisal estimate of$42.4 million (see Appendix 2). The lower cost was largely due to the underutilization of thecredit lines and to savings made on the physical and price contingency provisions. The cost ofthe Project was financed by the Bank for $21 .7 million (70 percent) and the Borrower for $9.5million (30 percent). Actual loan utilization amounted to $32.7 million, which includes $1 1.0million reallocated to the special assistance program for Pakistan to mitigate the impact of theGulf crisis.

E. Implementation Schedule

30. The Project was considered completed in February 1992 with the expiry of theservices of the harbor management advisor. Although overall completion was 26 months laterthan envisaged at appraisal, testing and commissioning of the harbor complex was completedin June 1989 followed by start-up operations in July 1989. The main reasons for the later thanexpected completion were (I) an initial delay of 13 months in declaring the Bank loan effective,(ii) approximately five months extra time needed for completing the preparation and evaluationof tender documents, (iii) additional time needed for installing equipment, and (iv) delays in theappointment of consultants. The delay in declaring the loan effective was due to slowadministrative approval for the promulgation of the PFHA ordinance.

F. Technical Assistance

31. The formulation and design of the Project were based on a feasibility studyconducted between July and November 1981 by a team of international consultants. Theselection of Pasni for the development of a fisheries harbor took into account the central locationof Pasni and technical site issues. The Bank's Fact-finding Mission which visited the Project areain May 1982, concurred with the choice of Pasni. The choice of site appears justified.

32. Under TA No. 500-PAK, the Government appointed a Project Advisor to assistDOFB and PFHA to develop and strengthen their institutional capacities, and recruited a localinstitution to undertake benefit monitoring and evaluation of the Project. The Project Advisor wasengaged for a total of 29 months, of which the final 8 months were financed under the Bankloan. Although delays in the appointment of the Project Advisor impacted adversely on hiseffectiveness, the expert's performance was nevertheless satisfactory.

33. The benchmark survey and monitoring required under the Bank loan agreementwere competently completed by a local firm of engineering consultants. Baseline surveys were

8

carried out in 1986 and the baseline study report finalized and submitted to the Bank in January1987. A final report, which included monitored changes, was completed and submitted to theBank in March 1991. However, the intended purpose of monitoring and feedback to EAs wasonly partially accomplished because of inappropriate terms of reference and scheduling forfeedback.

G. Compliance with Loan Covenants

34. In general, the EAs' compliance with the loan covenants was satisfactory. Therewere areas of noncompliance or incomplete compliance relating to the submission of progressreports and audited financial statements, the execution of a management agreement betweenPFHA and the provincial government of Balochistan, and the appointment of key staff in PFHA,which did not significantly affect implementation but reflected on institutional weaknesses and,in the case of the management agreement, raises concerns for the sustainability of benefits (seeparas. 57 and 58).

35. The loan covenant for a management agreement between PFHA and the provincialgovernment of Balochistan was intended to allow PFHA to operate with minimum recourse togovernment. Although the PFHA ordinance vests the responsibilities for operation andmaintenance of the harbor facilities in PFHA, the ordinance does not extend to the PFHA Boardand management, the independence and autonomy considered necessary to operate the harboron commercial lines (see paras. 41, 49, and 58).

IV. PROJECT RESULTS

A. Operational Performance

36. Investment in the construction of the harbor complex with landing andreplenishment facilities (water and fuel) was expected to raise annual fish landings from 72,000 tto 96,000 t. Actual total fish catches in 1994 were 116,000 t of which about 70,000 t werelanded in Pasni and 46,000 t transferred at sea to Karachi merchants. The number of motorizedvessels over the Project area increased from 2,000 to 3,000. The number of large fishing vesselsberthing at Pasni increased from around 20 to 185.

37. The completed harbor provides fishermen with protected berthing and withfacilities for the replenishment of water, fuel, and ice. The improved landing facilities significantlyreduced the turnaround time for fishing vessels and enabled fishermen to operate regardless oftide and weather conditions. The cargo jetty, which provides for easier loading/unloading,stimulated an increase in the transfer of traded goods to and from nearby coastal communities.The harbor also provides a slipway and maintenance facilities for vessel repairs.

The Project area was defined to include all of the Balochistan coast, including the fishing communities atJiwani, Gwadar, Pasni, Ormara, and Sonmiani.

9

38. The private ice plants, constructed within the bounds of Pasni harbor, supply over16,000 t of ice annually to fishing vessels. Reflecting the increased supply of ice, iced fish sentto Karachi and the hinterland increased from some 30,200 t in 1991 to 39,900 t in 1994.

39. Under the Project, technical support in the form of marine engines, fishing gear,and training was intended to increase the individual catches of fishermen from the Balochistancoastline by over one third. Although the purchase of marine engines and fishing gear, usingBank funds, was small (18 engines compared with the 700 targeted at appraisal), PEM isnevertheless satisfied that the appraisal target was met with funding from nonproject sources.1Appendix 3 provides a summary of the actual achievements under the Project and theexpectations at appraisal.

B. Institutional Development

40. The responsibilities of PFHA remain as envisaged at appraisal and theorganizational structure is appropriate with three departments (operations, finance, andadministration), each headed by a manager, working under a General Manager. The operationalprocedures manual prepared by the harbor management expert, although now outdated, servedas a bench reference for adaptation and modification. Project management in PFHA has largelybeen retained, with the exception of the General Manager for which there have been sixappointments since 1985. Changes at the top executive level have in part been political and notalways in the interests of PFHA. There is a need to protect PFHA and its operations fromappointments that carry vested political interests and run counterto maintaining financial viability.

41. PFHA's staff strength has increased from a planned 54 at appraisal to 141, about16 of whom are seconded to the Quetta offices of the provincial government, unrelated to PFHA.Overstaffing is recognized, but is presently not totally within the control of management. Theadministration is without an accountant and maintains a single entry accounting system. Everyeffort should be made to rectify this situation. Associated with the need for an acceptableaccounting system is the need for an appropriate management information system andcomputerization. Computerization should include a network for data entry at the offices of theauction hall.

42. DOFB is headed by a Director who is under the administrative control of theSecretary of the Coastal Development and Fisheries Department of the provincial government.2At appraisal, DOFB's total staff of 86, including those in offices at Tiwani, Gwadar, Pasni, Ormara,and Sonmiani, were considered inadequate. The provincial government posted additional staff,and the total number is currently around 164.

43. Since the inception of the Project, DOFB has been involved with the preparationand execution of some 20 other projects, including one with funding support from Japan for thesupply of marine engines and fishing gear. Under these development projects, marine engines,

Inboard and outboard marine engines were installed during the period 1980-1985 under Japanese assistanceand an FAQ project for all but 10 percent of the total number of fishing vessels. After 1985, there was anincrease of some 600 inboard engines and 1,100 outboard engines for additional fishing vessels.At appraisal, DOFB operated under the Department of Livestock and Fisheries.

10

fishing gear, and training programs have been provided largely on a grant basis or heavilysubsidized. While these programs have been successful in encouraging local communities touse more productive methods for catching fish, they have also raised the expectation that theprovincial government will continue to provide equipment and facilities free of charge.

44. The future development plans of DOFB are tied in with the Government's EighthFive-Year Plan. DOFB gives emphasis to modernizing fleets (wfth winches, navigational andelectronic equipment), improving fish handling methods, and promoting investor interest inprocessing. Reinforcement of training and extension programs is also included as areimprovements in the marketing and distribution of fish. The need for support facilities inworkshops, spare parts, and urban infrastructure is also recognized.

45. Although the credit line extended to ADBP was only partly utilized (see para. 18),ADBP using its own funds nevertheless contributed to the attainment of the Project's objectives.ADBP opened an agency at Pasni and between 1985 and 1991 extended approximately $1.8million to fisheries for working capital, fishing boats (including secondhand boats), fishing gear,and engines. The agency also provided loans to the growing commercial sector.

46. The Project provided 12 fellowships for training courses covering fisheriesmanagement, marine engineering, boat-building, and port management. The courses attendedwere chosen from programs available in the Republic of Korea and the United Kingdom. Inaddition, formal training courses for fishermen and vessel operators were conducted by theconsultants at DOFB centers. The PEM was unable to obtain feedback from supervisors as tothe extent to which the Bank's training program had impacted on DOFB. However, three personswho attended the overseas fellowship and training courses reported favorably on the coursedesigns and knowledge gained. Training promoted through DOFB was reported to havecontributed significantly to the transfer of know-how to fishermen. Confirmation reports wereobtained by PEM from instructional material used at training workshops covering the benefits ofmotor power, improved fishing gear, and new methods of fishing. The visual change to motorpower and take-up of fishing gear was clearly evident.

C. Financial Performance

47. It was intended that PFHA would be responsible for operating and maintaining theharbor facilities and be self-sufficient in meeting operational expenses and maintenancedemands. To encourage fishermen to use the facilities, user charges were kept low. It wasrecognized that initially PFHA's revenues would not be sufficient to service the full financial costof the Project or to meet all operational and maintenance expenses. Although no time period wasstipulated before self-sufficiency could be achieved, it was recognized that it would take severalyears.

Under the Bank's loan agreement and subsidiary Balochistan Project Agreement, all the Project facilities wereto be constructed, managed, and operated by PFHA. The breakwater and four fisheries jetties were to bethe assets of the Balochistan government, and the jetty for general cargo handling, the ship repair facilities,and marketing facilities were to be owned by PFHA.

11

48. Since commissioning, operational revenues have increased from PRsO.1 millionfor FY1990 to PRs6.1 million for FY1994, and impressive progress in privatizing marketingfacilities has been achieved. The principal sources of revenue include auction fees, developmentcharges, and the sale of water and electricity. Smaller, but significant revenues are obtained fromcargo berthing fees, crane and launch hire, fuel, and shop rentals. While expenditures haveexceeded revenues every year, there was a significant reduction in the deficit for the first tenmonths of 1995 (see Table 1 and Appendix 4) associated with changes in management and anemphasis on reducing expenditures on nonharbor operations.

Table 1: PFHA: Revenues and Expenditures Since Commissioning(PRs million)

Item 1990 1991 1992 1993 1994 1995

Revenues 0.10 0.61

2.73

4.16 6.05 6.54

Expenditures 1.70

2.81

6.48

8.89 10.99 7.88

Deficit 1 .60

2.20

3.75

4.73 4.94 1.34

Ten months

49. The operating deficit is caused partly by high expenditures on wages, reflectingstaff numbers grossly in excess of the requirements. PFHA is aware of the problem (but doesnot have complete management autonomy) and is pursuing avenues to curb unnecessaryexpenditures. PFHA is also conscious of the need to increase revenues further to ensure theviability and sustainability of benefits.

50. Reflecting the benefits of the harbor, improved catching techniques, and vesselcapacity, full-time fishermen were earning an average of PRs6O,000/year and an operatingcaptain PRs1 20,000. At appraisal, the average annual income of full-time fishermen at Pasni wasPRs6,960 and PRs1 3,920 for an operating captain.

D. Economic Reevaluation

51. The PEM's reestimate of the EIRR for the Project, based on actual investmentcosts and the induced benefits accruing to fishing vessel operators, is 15 percent. The AppraisalReport had estimates of 13 percent for investment in the harbor component and 28 percent forthe entire Project. Because of data limitations relating to cargo transfers and port usage and thelow take-up of credit for fish carriers, marine engines, and fishing gear, the PEM's reestimate ofthe ELRR is effectively reduced to measuring that for the harbor component. As such the PEM'sex-post result is similar to that projected at appraisal (for the harbor component) and attests tothe economic viability of the Project. The reestimate is robust and insensitive to changes inassumptions (see Appendixes 5 and 6).

12

E. Socioeconomic and Sociocultural Results

52. The socioeconomic impact of the Project has been sizeable, particularly in thePasni area. The population of Pasni town has grown from around 8,000 at appraisal, to about35,000, and the number of retail shops increased from about 20 to over 200. Over the sameperiod, the annual real incomes of Pasni fishermen have more than doubled and totalemployment, including part-time, on fishing vessels has increased from about 15,000 to over25,000. The improved incomes of fishermen and the increase in employment opportunitiespartly explain the strong increase in Pasni's population. At the same time, while beneficial in adevelopment sense, the urban growth has created a shortfall in basic infrastructure such aspower, communications, water supply, education, transportatiort,and medical and social services.

F. Women in Development

53. The appraisal design did not specifically address women's issues. In Pakistan, theemployment and involvement of women are dictated by custom and an individual's social status.The PEM observed that while very few women are gainfully employed either in the fishing sectoror with the EAs, the employment for women in rural areas is a matter of priority concern in thecountry.

G. Environmental Impacts and Control

54. Overall, the Project's environmental impact appears negligible. Erosion of the northshoreline was foreseen as a natural consequence of the harbor's design and construction andno undesirable impact was anticipated. However, erosion has occurred faster and more thanexpected and could adversely impact on future harbor operations. While the PEM was not ableto quantify the impact of waste disposal and oil leaks from fishing vessels, undesirable effectswere not visually evident.

55. Associated with the attraction of the harbor, there has been a substantial increasein the population of Pasni, which has created a garbage disposal problem and is straining socialservices in the area. Coastal development programs that provide for education, health, and wastedisposal and sewerage systems are strongly recommended.

56. The main fishing technique is gillnethng, which poses a limited danger only toprotected species. While fishermen reported reduced catches in terms of shrimp size, all otherspecies appeared to be in plentiful supply and, overall, catch yields were being sustained. Thetotal annual fish catch remains substantially below the estimated maximum sustainable yield ofthe Balochistan coastal waters.

H. Gestation and Sustainability

57. While the Project provides significant financial benefits to fishermen, sustainabilityof these benefits depends on nature, the durability of engineering design, and attention tooperational management and maintenance. The shifting sand has reduced the harbor's intended

The coast of Balochistan is a desert area with limited freshwater supplies, virtually no agriculture or livestockactivity, and almost no industry except that related to fisheries. The expansion of fish production that resultedfrom the Project has been the primary stimulus for urban growth.

13

operating depth and further buildup could limit the size of vessels and operating hours for theharbor. Further erosion of the north shoreline threatens to contaminate Pasni's freshwater supply.There is a clear future need for dredging, engineering review, further protection works, andpreventive maintenance. Getting this done is dependent on the quality of management,autonomy, and finances available to PFHA. Assuming that the matters identified are responsiblyaddressed, the benefits generated by the Project are considered sustainable.

V. KEY ISSUES FOR THE FUTURE

A. PFHA Autonomy

58. PFHA was intended to be a statutory body with responsibility for (i) maintainingthe harbor facilities in accordance with an ordinance to undertake the efficient operation, repair,and maintenance of facilities; and (ii) bearing all administrative, operational, and maintenancecosts. The noncompliance with a management agreement between the provincial governmentof Balochistan and PFHA, which provides PFHA with management autonomy to fully carry outits responsibilities, raises concerns over the sustainability of benefits. Given the history ofinterventions in PFHA's operations, there is a need to further protect management autonomy toensure that operating efficiencies are not impaired and the deployment of expenditures is forharbor operations. The need for the preparation of accounts using the *doubleentry system isalso evident, if only to provide the right signals to management on the financial status of thePFHA.

B. Credit Design

59. The arrangements for credit lines agreed upon at appraisal called for an extensionof ADBP's responsibilities to cover procurement, storage, and distribution and for an increasedrisk exposure to unknown borrowers who, in most instances, have insufficient collateral. In effect,by extending the credit lines the Bank exposed ADBP to an increased risk of default by subloanrecipients and substantially increased ADBP's overhead costs. The design of Bank-financedcredit lines should take into account the banking practices of domestic financing institutions andthe socioeconomic status of prospective borrowers. Credit design should be flexible and extendto covering requirements for secondhand equipment.

VI. CONCLUSIONS

A. Overall Assessment

60. The Project's goal of assisting marine fisheries production in Balochistan wasachieved. Given the harsh climatic conditions and the isolated location of Pasni, construction andcivil works for the Project proceeded remarkably well and as quickly as could be reasonablyexpected. The benefits of engaging an experienced contractor were particularly evident.

61. Significant gains in production and income were achieved for fishermen and therewas a sizeable socioeconomic impact on the Pasni town area. Although relative costconsiderations made fishermen and private investors unwilling to take up credit under theProject, the availability of alternative sources of credit ensured that the Project was completedessentially as envisaged. The value of technology transfer from training was significant. DOFB

14

increased its institutional capacity to run continuing programs in extension, and theadministration of PFHA was strengthened through overseas fellowships to training courses. Theharbor operations are soundly managed, and further privatization and development ofoperational facilities are planned. However, the revenue-generating side of the Project has alsomade it a victim of higher order interventions, which raises concerns over PFHA's ability tomaintain operational efficiencies and to meet all future maintenance requirements. Appropriateresponses to these concerns will ensure that the benefits to fisheries are sustainable. The overallProject EIRR is reestimated at 15 percent and the Project is rated generally successful.

B. Lessons Learned

62. Lessons derived from this Project's experience point to the need for more carefulattention to ensuring (I) that the planned implementation of components is feasible and does notcompete with alternative programs and organizations offering cheaper participation and cheapercredit arrangements; (ii) that proposals are planned with more effective management autonomy;and (iii) that the requirements for steering/coordinating committees to meet regularly are practicalin terms of distance and time contraints. The successful implementation of the Project isattributable in large measure to engaging an engineering contractor with proven experience.Engineering and construction of the harbor proved a model of what can be accomplishedagainst imposing natural elements.

C. Follow-up Actions

63. The government of Balochistan is encouraged to review the provisions ofOrdinance No. 8, 1983 under which PFHA was established and to allow compliance, by PFHA,with the preparation of 'proper accounts" and the appointment of auditors. Consideration shouldalso be given to strengthening the provisions for the autonomy of PFHA to control revenues andexpenditures.

64. The government of Balochistan is encouraged to undertake studies to determinethe feasibility of a Balochistan coastal area development project including investment in (i) fishingport facilities at Damb and/or other coastal Balochistan locations; (ii) regular passenger andcargo transport service along the Balochistan coast; and (iii) town planning and towninfrastructure including roads, telecommunications, water supplies, sewage, solid wastemanagement, public health programs, and schools. Such complementary investments are likelyto promote the framework for further private sector expansion of fishing and fish processingalong the coast.

65. PFHA, in consultation with the government of Balochistan, is encouraged to makean engineering review as soon as possible to address (i) the need for dredging; and (ii) theconcerns over the contamination of Pasni's freshwater supply with further tidal erosion.

15

APPENDIXES

Number Title Page Cited On(page,para.)

1 Development Assistance for the FisheriesSector in Balochistan 16 4,18

2 Project Costs 17 7,29

3 Project Achievements 19 9,39

4 Financial Statements 21 11,48

5 Economic Analysis Estimates 22 11,51

6 Sector Trends and Statistics 26 11,51

DEVELOPMENT ASSISTANCE FOR THE FISHERIES SECTOR IN BALOCHISTAN

Country/ AmountAgençy _______ - Project Period__ (million)

A. Overseas Loans

Japan Procurements 1979/80 PRs2.896 For supply at cost of fishing gear

Agricultural Development - 1980/81 PRs1 .00 For supply of 200 small enginesBank of Pakistan

FAOIUNDP Balochistan Coast Fisheries 1978-1983 PRs15.35 For improvement of fishing gear and trainingDeveloent

The Bank Balochistan Fisheries 1984-1990 PRs562.70 Principally for a fisheries harbor and training -Development

0)

B. Overseas Grants

Japan Procurements 1980-1982 Y200.00 To purchase engines and fishing gear

FAO/Japan Procurements 1980-1983 na. To establish marine engine repair /lacilities at GwadarPasni, Jiwani, Gaddani, Damb and Ormara

Japan Procurements 1994 Y414.00 To purchase marine engines, support facilities,and fishing gear

The Bank Advisory and Operational 1982 $0.25 Balochistan Fisheries Development

C. Government Funding

Over 20 Projects Provided under 1984— 1994 PRs96,000 ' For breakwaters, patrol boats, offices, mendingAnnual Development Plans sheds, workshops, fishing nets, and marine

________ _______ ____ engine spaprts. ____x

na. = not available.a Excludes Government funding support associated with overseas development projects.

17Appendix 2, page 1

PROJECT COSTS

Table 1: Comparison of Actual and Appraisal Costs ($ million)

Appraisal ActualItem FX LC Total FX LC Total

A. Project Cost

1. Pasni Fisheries Harbor2. Marketing/Transport Facilities3. Marine Engines/Fishing Gear4. Training and Extension5. Working Capita!

Project Base Cost

Physical ContingencyPrice Contingency

Total Project Cost

B. Project Financing

1. The Bank- Loan2. Federal Government3. Agricultural Dev. Bank of Pakistan - Loans4. Eqtiity Contributions of Subborrowers

Total Prolect Cost

11.26 5.47 16.74

1 .93 0.68 2.60

4.94 - 4.94

1.32 0.38 1.70- 0.90 0.90

19.45 7,43 26.88

2.92 0.98 3.90

6.13 5.49 11.62

28.50 13.90 42.40

28.50 6.90 35.40- 4.50 4.50- 2.00 2.00- 0.50 0.50

28.50 13.90 42.40

16.19 13.07 29.25

0.11 0.00 0.11

0.23 0.00 0.23

1.03 0.60 1.63

17.56 13.66 31.22

17.56 13.66 31.22

17.56 4.13 21.69- 9.53 9.53

17.56 13.66 31.22

FX = Foreign currency LC = Local currency- = magnitude zero.

Excluding $1 1 .0 million, which was reallocated to finance the foreign exchangecost of fuel. Approved 18 June 1991 as Special Assistance Loan, Board Paper No. R76 -91.Including provision for consulting services of $1 .802 milhon.Including provision for consulting services of $0604 mifon.

Table 2: Project Costs: Disbursements By Year

_________ 1984 1985 1986 1987 1988 1989 1990 1991

MUV Index (1990 = 100) ' 6806 68.61 80.91 88.72 95.32 95.01 100.00 102.23

GDP Deflator (1981 = 100) b 126.30 132.00 136.30 142.50 156.20 169.60 180.50 204.10

Exchange Rate (PRs = $1.00) 14.046 15.928 16.648 17.399 18.003 20.541 21.707 23.801

Project Costs at Nominal Prices ($ million)

ForeignCurrencyCosts 0.072 0.261 0.454 4.544 6.518 4.894 0.517 0.302'

Local Currency Costs d 0.056 0.203 0.353 3.535 5.070 3.807 0.402 0.235

Total Nominal Capital Costs 0.128 0.464 0.607 8.079 11.588 8.700 0.919 0.537

1995 TOTALS

108.95

306.10

31.000

17.56 1

13.661

31.222

-S

0,

Project Costs at 1995 Prices (PRs million)

Foreign Currency Costs 3.584 12.856 18.936 172.982 230.942 173.959 17.449 9.979

Local Currency Costs 1.913 7.504 13.194 132.112 178.879 141.130 14.794 8.387

Total Real Capital Costs 5.497 20.359 32.130 305.094 409.821 315.089 32.243 18.367

World Bank Manufacturers Unit Value (MUV) Index.Pakistan Gross Domestic Product deflator (GDP) Index.Excludes disbursement for special loan assistance of $11.0 million.Allocated in proportion to Bank loan disbursements.

640.688

497.912

1138.600

0-UCD

0.x1')

(aCD

1\)

19Appendix 3, page 1

PROJECT ACHIEVEMENTS

Table 1: Comparison of Operational Targets at Appraisal and As Achieved

Indicator

Fish Landings (000 tons)

Iced Fish Sent In land (000 tons)

Iced Fish Sent to Karachi (000 tons)

Exports of Dry Salted Fish ('000 tons)

Fishing Vessels Above 25 tons (no.)

Full—time Fishermen (no.)

Average Income. Full —time Fishermen(PR5 per annum)

Economic Internal Rate of Return (%)

- Harbor

Actual Projected at

1982 Appraisal

72.1 96.0

1.3 5.0

12.6 45.6

13.3 6.6

21 n.e.

13,120 16,100

7,052 15,170

n.e. 13

As Achieved1994

116.5

11.1

26.8

8.1

59

19.862

64,106

15 a

n.e. = not estimated.

Includes entire harbor and general cargo facilities.

Appendix 3, page 2

Table 2: Comparison of Physical Targets at Appraisal and As Achieved

Indicator Appraisal As Achieved

Comment

A. Pasni Fisheries Harbor and Complex

1. Breakwater (meters)2. Jetties3. Repair Shop Facilities4. Fish Handling Center5. Storage Depot6. Fuel Installation Facilities7. Administration Building8. Staff Housing Colony (units)

B. Marketing and Transport Facilities

1. Ice-making Plantsa. Pasnib. Turbat

2. Ice Stores @ 25 tons in Pasni3. Chilled Storage Rooms @ 50 tons4. Equipment for Two Fishmeal Plants

a. Pasnib. Gwadar

5. Engines for Four Fish Carriers6. Insulated Trucks7. Jeeps8. Repair Shops and Equipment

C. Marine Engines and Fishing Gear

1. Inboard Engines (5-45HP)2. Fishing Gear (Sets)

0. Institutional Support (Training and Extension)

1. Fellowships (person-months)a. Directorate of Fisheries Field Staffb. Pasni Fisheries Harbor Authority Staff

E. Consulting Services

1. Pasni Fisheries Harbor (person-months). Civil & Port Engineering

b. Harbor Master2. Training and Extension

a. Master Fishermanb. Marine Engineer

600

600

4

41

1

6

4

4

}0

5

0

}4

0

}0

}

0

}4

0

}2

0

5

0

}5

0

}

700

18 Another 14 remain in stock

1560

730 Coil ropes, 2,000 floats

102 71.5

12 45

130 228

24 24

24 24

24 24

a Financing for these items was to be made through Agricultural Development Bard' of Pakistan. Except for the ice-making plants, investor interestwas not forthcoming. For the marine engines and fishing gear, funding from nonproject sources was preferred.

4,451.2302.2

5.1755.5

15.9221.973.861.0

1,792.96.5

193.07,879.0

(1,335.4)

21Appendix 4

FINANCIAL STATEMENTSPFHA Revenue and Expenditure, 1 July 1994 to 30 April 1 995 a

Item

A. Revenues

1. Auction Fees (@ 2.5%)2. Berthing Fees3. Cargo Handling Charges4, Sale of Land/Development Charges5. ToU Tax6. Hire of Crane/Launch7. Enlistment/Registration fees8. Rent on Fuel Installations9. House Rental10. Shops Rental11. Sale of Freshwater12. Electricity Connections13. Others

B. Expenditures

1. Pay and Allowances2. Travel Allowance/Daily Allowance3. Purchase of Durable Goods4. Repair and Maintenance5. Advertising6. Fuel7. Communications (Postal/Telephone)8. Printing/Stationery9. Electricity10 Gas11 Others

Overall Deficit (10 months)

a Accounts include revenue and expenditure items of a capital nature.

Source: Pasni Fisheries Harbor Authority (unaudited records).

PRs '000

1,360.3325.6

23.31,241.2

47.569.983.6

300.0156.6170.5649.9

1,974.5140.9

6,543.6

22

Appendix 5, Page 1

ECONOMIC ANALYSIS

A. Methodology of the Appraisal Report

1. The Appraisal Report adopted the methodology used by the consultants in theTechnical Assistance study completed during 1981. Each Project component was evaluated forthe incremental costs and revenues expected to be derived from investment.

2. Improvements in fishing efficiency were based on the incremental fishing catchexpected with improved nets, better fishing techniques, and motorization. The benefits ofintroducing ice plants and trucks for the transportation of fresh fish to Turbat were evaluated onhandling capacity and the expected additional revenues derived. The fishmeal plants wereevaluated on capacity considerations and the amount of additional raw materials resulting fromthe increased fish catches. The added value of operating four fish carriers for the transfer of fishto Karachi was also estimated. The economic analysis for the Pasni Fisheries Harbor measuredthe additional benefits expected to accrue to 538 fishing boats as a result of reducing theaverage turnaround time from seven hours to five hours and extending the number of fishinghours in a year. In addition, it was assumed that the availability of chiller rooms would improvefish quality and raise the real price of fish by 10 percent. Savings in fuel transport costs wereestimated as a benefit arising from the availability of fuel storage facilities. Other benefitsevaluated as a consequence of harbor development included savings in cargo freight andexpected savings in cargo losses/damages.

B. Approach and Methodology of the Project Performance Audit Report

3. Limitations on the myriad assumptions underlying the appraisal approach and thelimited take-up of credit (under the Project) made it impractical for the PEM to follow exactly thesame approach. The PEM confirmed that, in the absence of utiUzation of the Bank's credit line,improvements in fishing efficiency nevertheless occurred as a result of (I) the existence of theharbor, which accelerated the transfer to motor power and fishermen's need for larger vessels;and (ii) training programs that promoted the introduction of new fishing techniques with improvedfishing gear and the use of marine engines.

4. Two types of Project benefits are evaluated:

(i) benefits in the form of increased fishing revenues, as represented by thedifference between columns C and F in Table 2 resulting from theexpansion of the Pasni harbor-based diesel-powered vessel fleet; and

(ii) benefits that accrue to Balochistan's non-Pasni harbor-based diesel-powered vessels resulting from the Project's training and extensioncomponents, (Column E, Table 2).

5. Benefits resulting from more efficient cargo handling were not evaluated becausedata relating to annual cargo throughput, carriage, and freight charges were insufficient. Benefitsthat accrue to the small outboard-powered Pasni harbor-based fishing vessels in the form ofimproved revenue mainly from shrimp catches were not estimated because of the very small

23

Appendix 5, Page 2

number of engines (18) actually introduced under the Project. Also no benefits were attributedto the ice plants constructed within the harbor.1

C. Major Assumptions

6. The major assumptions underlying the reestimation of the economic internal rateof return (EIRR) are as follows:

(i) All Project capital costs are converted into constant 1995 prices, using theWorld Bank's MUV index to convert foreign currency expenditures and thePakistan GDP deflator to convert local currency expenditures.

(ii) All Project benefits are calculated in 1995 rupees.

(iii) The economic life of the Project is assumed to be 25 years, with theProject generating incremental benefits from 1989.

(iv) Fishing vessel crew labor is shadow priced at PRs3,000/month, this beingthe alternative wage rate in the Pasni area.

(v) Local currency operating costs are adjusted using an adjustment factor of0.9.

(vi) Landed prices of shrimp (see Appendix 6, Table 2) are assumed to haveincreased by PRs2O/kg.

(vii) Fifty percent, representing 8,000 tons, of incremental production from non-Pasni locations is attributed to the Project's training and extensioncomponent, and the additional catch is estimated to have benefited froman average improved price of PRs1 2/kg.

7. The general operating assumptions for the two common vessel types using thePasni harbor on which projections for the annual fishing revenues and fish operating costs arebased are shown in Table 1.

D. EIRR and Sensitivity to Changes in Assumptions

8. The benefit/cost streams derived on the basis of these assumptions are shownin Table 2. The estimated EIRR of 15 percent for investment in the Project is insensitive tochanges in the assumptions for the projected number of fishing vessels, harbor operating costs,added value from non-Pasni fish operations, and fish operating costs. The most sensitiveassumption relates to the projected number of fishing boats expected to use the harbor. A 10percent reduction would reduce the number of fishing operators to less than for 1993 and reducethe EIRR reestimate from 15.0 percent to 14.3 percent.

The ice plants are operating at unusually low prices and with excess capacity. The economic profit isconsidered to be negligible and to have been largely transferred to the fishing fleet.

24

Appendix 5, Page 3

Table 1: Operating Assumptions for Fishing Vessels at Pasni

10-ton 25-tonItem Vessel Vessel

Days Per TripTrips Per YearMarket for FishCatch Per TripAverage Landed PriceAnnual RevenueCapital Cost of Vessel

(Fitted-out)Operating Life of VesselAnnual Operating CostsCrew/Share (PRs '000)Economic Operating CostsCrew/Share at the ShadowPrice of Labor (PRs '000)

1020

Pasni4 tons

PRs1 6,000/tonPRs1 .28 million

PRsO.8 million8 years

PRsO.868 million529.0

PRsO.627 million

288.0

2010

Karachi12 tonsPRs20,000/tonPRs2.4 million

PRs1 .6 million8 years

PRs1 .63 million908.7

PRs1 .082 million

360.0

19841985198619871988198919901991199219931994199519961997199819992000200120022003

2015

Table 2: Benefit/Cost Streams For Project EIRR (PRs '000)

WITH PROJECT WITHOUT PROJECTCapital Harbor Fishing Revenue Fishing Added Fishing Revenue Fishing

Year Investment Operating Operators From Operating Value Operators From OperatingCost' Costs At Pasni b Fishing C Costs d Non-Pasni e At Pasni ' Fishing C Costs d

A B No. C D E No. F G

NETBenefits'

81.0158.0158.0165.0175.0185.0185.0185.0185.0185.0185.0185.0185.0185.0185.0

54.056.058.061.064.067.070.070.070.070,070.070.070.070.070.0

5,496.520,359.332,130.0

305,094.1409,821 .4315088.832,243.318,366.6

3,068.24,758.59,712.49,535.89,339.97,405.86,500.0 g6,500.06,500.06,500.06,500.06,500.06,500.06,500.06,500.0

139,968.0273,024.0281,872.0294,360.0322,000.0340,400.0340,400.0340,400.0340,400.0340,400.0340,400.0340,400.0340,400.0340,400.0340,400.0

65,542.0127,847.3131,444.9137,268.5149,572.5158,119.5158,119.5158,119.5158,119.5158,119.5158,119.5158,119.5158,119.5158,119.5158,119.5

38,400.076,800.086,400.091,200,095,040.096,000.096,000.096,000.096,000.096000.096,000.096,000.096,000.096,000.096,000.0

93,312.096,768.0

100,224.0105,408.0110,592.0115776.0120,960.0120,960.0120,960.0120,960.0120,960,0120,960.0120,960.0120,960.0120,960.0

43,694.645,313.046,931.349,358.851,786.254,213,756,641.256,641.256,641.256,641.256,641,256,641.256,641,256,641.256,641.2

(5,496.5)(20,359.3)(32,130.0)

(305,094.1)(409,821.4)(255,029.4)133,361.9155,297.4182,541.5199,146.8209,127.4207,276.7207,276.7207,276.7207,276.7207,276.7207,276.7207,276.7207,276.7207,276.7

r'.)(n

6,500.0 185,0 340,400.0 158,119.5 96,000.0 70.0 120,960.0 56,641.2 207,276.7

EIRR = 15.0%

a See derivation Appendix 2, Table 2.b Total number of fish operators using 10 ton and 25 ton vessels.

Annual revenue from 10 ton and 25 ton vessels (see Table 1), with initial vessel mix 60:40.d See Table 1, for the economic fish operating costs of a 10 ton and 25 ton fishing vessel.C Incremental production from non -Pasni locations, representing approximately 8,000 tons In 1994.

Equals (C+E+G) - (A+8+D+F).g Reltects reduction in staff numbers and expenditures on non-harbor operations.

CD

a.x(11

00'

CoCD

SECTOR TRENDS AND STATISTICS

Table 1: Marine Fisheries on Balochistan Coast

Item

1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 Annualized______________________________________ ___________ Growth (%)

Fish Production (000 tons)- Total- Iced Fish Sent to Karachi- Iced Fish Sent Inland

Number of Full-time Fishermen

Number of Fishing Vessels- With Inboard Engines- With Outboard Engines- Total (Including Sail)

Source: Department of Fisheries.

75.4 89.6 82.3 83.5 95.3 91.1 101.7 102.0 106.9 114.0 116.5 4.4

14.1 18.7 16.9 23.6 25.8 - 23.4 22.5 23,3 27.9 26.8 7.4

6,7 7.3 4.8 6.7 9.8 - 7.1 7.7 8.0 9.7 11.1 5.2

13,989 15,057 15,293 14,562 16,513 16,100 - - 17,322 18,859 19,882 3,6

136 189 208 302 325 438 593 633 689 758 834

63.4

2,163 2,206 2,294 2,477 2,579 2,803 3,122 3,090 3,239 3,526 3,552

5.1

2,642 2,728 2,81 I 3,055 3,222 3,449 3,872 3,878 4,090 4,568 4,501

5.5

C)

-CD

a

xC)

-D9)

CDCD-s

Fish Species

ShrimpsLobster

Average Weighting

White Pomf retKing MackerelSilverbar (Silago)SnapperTunaBarracudaButterfishLeatherjacketsMackerel

Average Weighting

Flatfish -SoleCroakersGruntersSea BreamCatfishSharkSkates, Rays, and SwordfishGrouper

Average Weighting

Other 2nd Grade FishAverage Weighting

3rd Grade FishAverage Weighting

Overall Weighted Average

27Appendix 6, page 2

Table 2: Landed Fish Prices in Balochistan a

At Appraisal Year 1995 Real 1995 Implied% of Price % of Price Price Real Increase

catch b (PR5/kg) Catchb__(PRs/kg)_C (PRs/kg) din Prices

21.9 240 93.7

13.1 225 87.82.4 20.5 1.2 235 91.8 4.5 times

1.9 120 46.8

3.5 50 19.5

1.2 40 15.6

2.7 25 9.8

1.8 30 11.7

2.4 10 3.9

1.8 5 2.0

2.4 50 19.5

2.6 30 11.730.2 2.4 19.3 40 15.7 6.6 times

0.5 30 11.7

2.3 10 3.9

2.3 30 11.7

2.0 30 11.7

0.8 10 3.9

1.4 17 6.6

1.1 10 3.9

1.0 50 19.5 ______37.3 1.6 37.9 18 6.9 4.4 times

1.8 _____ ______ _____________9.7 1.8 24.0 18 b 7.0 4.0 times

0 . 5 _____ 3 1.2 _____________20.3 0.5 17.6 3 1.2 2.2 times

100.0 2.1 100.0 22 8.4 4.1 times

a Price equivalents. Fish are more commonly sold by the piece.b Based on the recorded statistics of DOF for fish landings.

Current prices obtained from fishermen at the Pasni Fish Harbor.d Current 1995 fish prices deflated by the GDP deflator for Pakistan.