The World BankFOR OFFICIAL USE ONLY

CPS. "/~ ) SwW

Report No. 6097-SO

STAFF APPRAISAL REPORT

SOMALI DEMOCRATIC REPUBLIC

PORT MODERNIZATION PROJECT

April 30, 1986

Eastern and Southern Africa RegionTransportation tDivision

This documen: has a restricted distribution and may be used by recipients only in the performanceof their official duties. Its contents may not otherwise be disclosed without World Rank authorizatin.

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CURRENCY AND EQUIVALENTS

Currency Unit Somali Shilling (So.Sh 1 )US$ 1.00 So.Sh. 62.50 (Official rate

April 1, 1986)US$ 1.00 So.Sh. 83.60 (Market rate

September 1985, used forappraisal)

NOTE: There are also two other recognised rate. A rate which is usedfor levying import duties, for tourists and other smallertransactions. The other is the free market rate determined bythe average of foreign exchange transactions between externalaccount holders in the CSBS. On April 1, 1986, these rates wereSo. Sh 85 and 140 respectively.

WEIGHTS AND MEASURES

1 meter (m) = 3.28 feet (ft)I kilometer (km) 5 0.62 mile (mi)1 sq. kilometer (km2) 0.386 square miles (sq mi)I hectare (ha) 2.47 acres (ac)I metric ton (m ton) = 2,204 pounds (lbs)

ABBREVIATIONS

CSBS Commercial and Savings Bank of SomaliaDANIDA 3 Danish Internationel Development AgencyEDF European Development FundGRT Gross Registered TonnageGTZ = Duetsche Gesellschaft fur Technische

ZusammenarbeitIDA = International Development AssociationKfW Kreditanstalt fur Wied.aufbauMPW = Ministry of Public WorksMPMT - Ministry of Ports and Marine TransportMLAT Ministry of Land and Air TransportNTA National Transport AgencyMOA Magistrate of AccountsPIP Public Investment ProgramRo-Ro Roll on, Roll offSIDA = Swedish International De elopment AgencySIDAM = Somali Institute of Development

Administration and ManagementSPA * Somali Ports AuthoritySSAL = Somali Shipping Agency and LineTEU 5 Twenty feet equivalent unit (of container)UAS Uniform Accounting SystemUNDP United Nations Development ProgramUNCTAD United Nations Conference on Trade and

DevelopmentUSAID United States Agency for International

Development

FISCAL YEAR

January 1 - December 31

FORt OFFICIAL USE ONLY

STAFF APPRISAXL REPORT

SOKAL.IA DEMOCRATIC REPUBLIC

PORT N ODERNIZTION PROJTCT

TABLE 0 COWTEmT

CuAmIS PAGR

I. "a TRANSPORT SCTOR

A. Economic Background ....................... 1B. The Transport Sy stem 4C. Transport Policy, Planning and Coordination.......6........6D. Past Bank Group Involvement in Sector. 8

B. Rationale for Bank Group Involvement**.e*****...**....e......10

II. TEW SOKALI PORTS AUV ORITY

B. Organization, Management and Staff ...........................12C riig ...* 13D. Operations ......d.... . 15E. Maintenance .....F. Past and Present Tafc1G. Port Planning and Development Strategy..e.o........e.........17H, Budgets, Accounts, Audit and Insurance.1g

tII. TOR PROJECT

A., Objectives ....... 21B. Project ...................... , .. 21C* Cost Estimates 25

E. Implementation and Procurement ................................28F. Disburaements ......Go Project Monitoring and Reporting Requirements.............. . 29He EnvironAental Impact.... 30

IV. ECOMII IC EVALUATION

A. Future Traffic ......................... ., -. 'B. Project Beneft.s .33

C. Sensitivity Analysis .35D .Project Risks tOt

ThW dbsumnt ha a stikud disttibution and mxybe usedby "sipients only in the perfomauSof tftir ocial duties. Its contents maY not otherwisebe dickFd without Woddl Bank authodeufbn.

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T. FlnANCIAL EVALUATION

A. Historic Financial Performance ..... .................. 37B. Financial Objectives..........................38C. Projections of Financial Performance.....................39

VI. AGRrBfIIITS BRACUED AND .BC...A. D.TIONS S5

AUMS

1. Past Bank Group Financed Transport Projects2.1 Port Facilities2.2 Staffing Establishment, 19852.3 Training of SPA Personnel 1980-842.4 Gang Composition (Conventional Cargo Handling)3.1 Composition of Operational Experts3.2 Operational Experts - Terms of Reference3.3 Training Requirements3.4 Basic Training Curriculum for SPA Staff3.5 Project Cost Tables3.6 Estimated Schedule of Disbursements3.7 Progress Reporting System3.8 Transport Study - Terms of Reference4.1 Individual Traffic Forecast4.2 Investment Cost4.3 Current Productivity and Future Productivity4.4 Berth Utilization and Ship Waiting Time4.5 Representative Ship Cost Per Day5.1 Historic Operating Statement5.2 Historic Cash Flow5.3 Projected Income Statement5.4 Projected Balance Sheets5.5 Projected Cash Flow5.6 Comparative Ship Charges5.7 Projected Foreign Currency Revenue and Expenditure6.0 Selected Documents and Data Available in the Project File

Chart I Organisation ChartChart II - Implementation Schedule

MAPS

Map 1 - SomaliaMap 2 - Port of MogadishuMap 3 - Port of Berbera.Map 4 - Port of Kismayo

-This report is based on the findings of a Bank mission which visitedSomalia in September 1985, comprising Messrs. K.C. Chung, (Port OperationsSpecialist, Mission Leader), M. Konishi (Economist) and Y. Crookes(Financial Analyst). Mrs. Hulda Hunter assisted in processing the report.

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SOMLIA

PORT t(ODERNIZATION PROJECT

CREDIT AND PROJECT SUUARY

Borrower: Somali Democratic Republic

Anount: SDR 19.9 million (US$22.6 million equivalent)

Term: Standard IDA terms

Re-jeading Term: The credit will be on-lent to the Somali Ports Authority(SPA) for a period of 15 years including five yearsgrace, at an interest rate of 12%. SPA will bear theforeign exchange risk.

ProjectDescription: The Project's main objective is to assist SPA to meet

the changes in cargo handling brought about by newshipping technology and to maximize the utilization ofexisting facilities. To this end the Project would (i)upgrade existing facilities to handle containers andro-ro traffic; (ii) rectify the subsidence of thebreakwater in Mogadishu; (iii) construct containerfreight stations; (iv) procure cargo handling, palletsand other equipment; (v) construct and equip workshopsfor the proper maintenance of equipment; (vi) constructa Port Training School; and (vii) provide technicalassistance and training.

roect Benefitsand Risks: The main benefits would be a reduction in ship waiting

time and improved port performance. The improvement inproductivity will allow SPA to defer heavy investmentsin additional berths until the year 2010. The mainrisks are that the modest growth in traffic as forecastor the increase in productivity targetted for theProject will not materialize. These risks have beentaken into account in the sensitivity analysis.

1stluated o.-t* Wcal Foeti Total ForeglaUS* illioo-ns

1. Rquipment 0.01 5.54 5.55 24.52. Civil Works 0.91 4.07 4.98 18.13. Rectification of Breakwater 0.27 2.67 2.94 11.8

4. Training and TechnicalAssistance 0.02 1.55 1.57 6.9

5. Consulting Services 1.44 1.44 6.4Total Base Cost 1.21 15.27 16.48 67.7

6. Contingencies(a) Physical 0.14 1.80 1.94 8.0(b) Price 0.50 5.48 5.98 24.3

Total Cost 1.85 22.55 24.40 100.0

Financing Plan:

Local Foreign Total--U Sd1lions-

Proposed IDA Credit - 22.6 22.6Somalia Ports Aut.¶ority 1.8 - 1.8

1.8 22.6 24.4

Eatiuated IDA Disbursonents:

FY87 FY88 FY89 FY90 FY91 FY92 FY93 FY94- - - - -~ ~~~~~~~-------~~~US$ Millions…-------

Annual .74 2.96 4.23 4.48 3.83 2.88 2.19 1.24Cumlative .74 3.70 7.93 12.41 16.24 19.12 21.31 22.55

Economic Rate of Return - 32X

*. TU, TRABS?0I? SETR

1.01. Somalia (637,000 km2) lies on the northeastern corner of Africa,beroeen Ethiopia and Kenya on the west and south, and the Gulf of Aden andthe Indian Ocean on the north and east (Map IBRD 19505). Although Somaliahas one of the longest coastlines on the continent (3,200 km), there arefew natural harbors. The terrain is mostly plateau and steppe lands, and,apart from some escarpments in the north, does not pose seriousdifficulties for land transport. The arid and semi-arid climaticconditions, however, make road construction and maintenance quite costly.The areas more favored with rainfall, and therefore of most agriculturalpotential, are the northwest and the south. There are only two rivers ofany significance, the Shebele and the Juba, both of which rise in Ethiopiaand flow through the south. Neither is navigable and the Shebele onlyflows about eight months of the year on average.

1.02 The population estimated at 5.6 million is unevenly distributed,with the highest concentration (about 500,000) in the southern regioncentered in the capital, Mogadishu, and in the basins of the Juba andShebele Rivers. In the northern region, the main population concentrationsare in Hargeisa (the northern regional capital) and Berbera (Somalia'ssecond leading port). Approximately 46% of the population are nomads, 291settled farmers and 25% urban dwellers.

1.03 Animal husbandry is the main occupation of the rural population,and livestock accounts for about 35X of GDP. Exports of live animals andanimal products are the chief earners of foreign exchange. Bananas, theonly other major export, are grown near the southern coast. Totalagricultural production has accounted for about 10% of GDP in recentyears. Livestock and agriculture will continue to dominate Somalia'seconomy, and the areas of greatest potential are the Bay region aroundBaidoa, the Juba valley and the northwestern region.

1.04 During the 19709 the Somali economy experienced stagnation inproduction and a decline in per capita income. Only the services sectorgrew during the period, by 3.5 percent per year and the growth ingovernment services, at an annual rate of about 7 percent, was particularlystriking. Beginning in 1981, the economy witnessed a reversal of the pasttrend, with real GDP in 1981-82 growing on average by 6.4 percent per yearnotwithstanding some decline in the services sector.

1.05 Following a border conflict with Ethiopia in 1977/78, there was agreat surge in Government expenditures which resulted in widened deficitsin both the budget and the balance of payments. During 1978-80, theGovernment's financial situation deteriorated ra,£dly, mainly because ofthe sizeable expansion in expenditures consequent upon the border conflict,the cost of maintaining large numbers of refugees, and the wage billassociated with the Government's policy of guaranteeing employment forsecondary school leavers. At the same time, official foreign aid

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declined. This resulted in Government recourse to deficit financing. With

further deterioration in the budgetary situation in 1979 the Government'srecourse to the Central Bank rose to record levels (about 13 percent ofGDP). This, in turn, led to rapid inflation, from 10 percent in 1978 to 60perceat in 1980.

1.06 Official data on Somalia's balance of payments are incomplete,but it seemed that the country had a reasonably comfortable overall balance

of payments position up to the beginning of 1979. The stagnation inexports and surge in imports since 1979 resulted in a widening of both thecurrent and overall balance of payments deficits. The current accountdeficit during 1980-83 averaged $290 million, as, compared to $110 millionin the years 1977-78. Total international reserves, which rose steadily inthe 1970s to $158 million in March 1979, dropped to $15 million at the end

of December 1980, and have since dwindled to nearly zero.

1.07 Somalia's external debt burden has grown rapidly in recent yea_sand amounted to about $1.4 billion at end 1984. The structure and terms ofborrowing have also hardened. The debt service ratio in terms ofobligations rose from 7 percent in 1979 to nearly 50 percent in 1983 and is

projected at about 100 percent in 1986. The country also has accumulateddebt service arrears. The problem of arrears has not been fully resolvedby the debt rescheduling at the Paris Club in March 1985.

1.08 As the financial crisis deepened through 1978-1980, theGovernment became convinced of the need to take remedial action and

embarked on a course of moving towards a more market-oriented economy.Beginning in early 1981, the Government successfully implemented twosuccessive stabilization programs supported by IMF standby arrangements.The measures taken under these programs included adjustment of the exchange

rate, fiscal and monetary restraint, and significant liberalization ofagricultural marketing. Under the first standby program, a dual exchangerate was introduced, producer prices for agricultural crops were increased,and banana growers received the full benefit of devaluation. This program

also involved a substantial reduction in Government recourse to the bankingsystem and increased interest rates.

1.09 Following the completion of the 1981/82 program, a newstabilization program was adopted in mid-1982. The dual exchange rate wasunified on July 1, 1982, the Somali shilling was again devalued, interestrates were raised, and fiscal and monetary expansion was restricted. In

mid-1983, a more flexible exchange rate system was introduced whereby theSomali shilling was pegged to the SDR adjusted by the relative rates ofinflation between Somalia and the five countries in the SDR basket.

1.10 The policy reforms introduced by the Government from 1981-83 hada positive impact on the economy. Reductions were effected in the rate of

growth of the money supply, in Government recourse to the banking system,and in the rate of inflation. There was also some increase in commodityproduction and exports. These measures represented the first stage in theformulation and implementation of a policy agenda directed at restoringfinancial equilibrium, rehabilitating and making fuller use of existingagricultural and industrial productive capacity, and establishing thefoundations for long-term growth.

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1.11 In March 1983 the Government requested the Bank to organize afirst Consultative Group meeting for Somalia. It prepared a Medium TermRecovery Program (MTRP) for the Consultative Group meeting, cons 4 .s.ing of(i) a program of phased policy measures aimed at restoring the balance ofpayments and public finances and at rationalizing the pricing and incentivestructure; and (ii) a resource-constralned Public Investment Program (PIP)for the period 1984-86. The formulation of this recovery programrepresented a major accomplishment.

1.12 Despite the remedial policy measures taken by the Government ofexisting facilities and the substantial adjustments made by the Governmentin the size and composition of the investment program at the ConsultativeGroup Meeting in October 1983, the progress in financial stabilization andeconomic recovery suffered a major setback in 1984 due to the ban on Somalicattle export, the drought of 1983 as well as the Government's failure tosustain the stabilization efforts and to make further policy reforms.Exports plummeted, inflation reached a record high and debt service arrearsincreased further in 1984.

1.13 Faced with mounting external and internal imbalances in 1984, theGovernment embarked in early 1985 on a comprehensive economic and financialprogram supported by a new IMF Stand-by Arrangement (and compensatoryfinancial facility) for a total amount equivalent to SDR 54.7 million. Theprogram was a bold and ambitious undertaking aimed at stabilizing theeconomy and raising the rate of economic growth by fostering a moremarket-oriented economy.

1.14 During the first three quarters of 1985, the Government adhearedclosely to the agreed terms of the program by dismantling all pricecontrols, adopting more liberal marketing policies, removing allrestrictions with respect to foreign trade, undertaking a major devaluationof the official exchange rate, introducing a freely floating exchange ratefor mont private transactions, providing export incentives throughincreased acceptance of the free exchange market, and pursuing a tightmonetary and fiscal policy. These measures combined with favorable weatherconditions led to iacreased agricultural production, a reduced inflationrate, and the expansion cf livestock and banana exports.

1.15 This performance, however was overshadowed by a substantial andgrowing deficit in the official foreign exchange budget which stemmed fromsome slippages in the implementation of program measures, a considerabledelay in the release of previously agreed external assistance to financethe balance of payments gap for 1985, and shortfalls in the level offoreign exchange receipts, particularly from workers' remittances whichshrank because of the more difficult employment conditions in the gulfStates. The acute shortage of foreign exchange resultked in substantialshortfalls from the target level of imports-and the emergence of newexternal payment arrears, including to the IMF. These arrears., in turn,led to the inability of Somalia to draw on all resources negotirted underthe stand-by arrangement and to reduced drawings on loans from variousinternational organizations and governments, thereby compounding thebalance of payments financing problems and causing a halt to manydevelopment projects.

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B. The Transport Sstem

General

1.16 Somalia's transport infrastructure is limited, consisting of some21,600 km of roads (only 3,600 km of which are all-weather), threeprincipal ports and four airports with paved runways. There are norailways, pipelines or internal waterways, and coastal shipping isnegligible. Road transport ts by far the principal means of moderntransport. Camels and donkeys are important, camels for long distancetransport (carrying 100 kg loads over average distances of 30 km per day)and donkeys for snall loads within cities and their environs.

1.17 Of the total road network 3,000 km are paved, 600 km aregravelled and the rest are earth roads and tracks. The share of graveland paved roads has increased significantly since 1976 from 1,800 km to3,600 km in 1985. The coverage of the network, despite its density beingbelow the Eastern African average, is adequate for the country's presentneeds. The main problem, however, is the standard and condition of theroads which are far from satisfactory. Despite considerable road upgradingin recent years, low road standards prevail in 85S of the network withconsequent high vehicle operating costs. The arid to semi-arid conditionsmake road construction and maintenance relatively costly (longer distancesto carry water and crushed stone material for construction) and in the caseof gravel roads, the surface deterioratinn is faster than normal due to theharsh winds and extremely dry condition hhich prevail in certain parts ofthe country.

1.18 All public roads in the country are suffering from lack of propermaintenance. Inadequate organizational setup, shortages of skilled andsemi-skilled maintenance staff to carry out routine or periodicmaintenance, and the low availability rate of road maintenance equipmentcombined with the fact that such resources are often diverted to otheractivities, are all contributing factors to the low level of roadmaintenance. Funding of road maintenance operations falls far below whatwould normally be required. However, the capacity of the Civil EngineeringDepartment (CED) is such that even the small amounts being allocated toroad maintenance are seldom fully utilized. Technical assistance andtraining programs for the Civil Engineering Department of the Ministry ofPublic Works (MPW) have been financed through the Bank's Third and FourthHighway Projects. The net impact of this assistance on improving roadmaintenance, organization and execution has been less than could have beenexpected. Under the Fourth Hlghway Project, the Bank has financed a roadmaintenance study which recommends certain changes that should enablegovernment to improve road maintenance operations and thereby the qualityof roads waintenance in general. The Bank has also recently initiateddonor meetings in the country to seek better coordination of externalassistance in the road maintenance sector in Somalia.

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Road Trgasport Industry

1.19 No systematic records have been kept of road usage and thenation's vehicular fleet and there is a shortage of available Information.Available data on fleet composition, age and condltlon indicate that therewere about 15,600 privately owned vehicles along with about 3,000Government owned vehicles in 1980 when the first systematicdata collection was made. of the total vehicular fleet of 18,600, about 25percent were medium to heavy trucks including bui,es, 40 percent pick-upsand vans and the balance (35 percent) passenger cars including taxis. Withno rail service in the country, road vehicles cater to the majority offreight movement in the country although animal powered transport (withdonkeys and camels) also provide an important mans of transport. Freighttransport is carried by private truckers and by the National TransportAgency (NTA), a parastatal company established In 1978 to provide freighttransport services. There are no specific regulatory barriers to entryinto the freight transport industry, and although official tariffs exist,these are not enforced and the market appears reasonably competitive.However, the lack of vigorous private sector actilities, the poor roadcondition, shortage of spare parts and fuel, and seasonality of demand forfreight transport have -rndered the profitability of the industry low.Furthermore, due to the lack of foreign exchange, replacement of thetrucking fleet has been slow. The majority of the newly imported truckshave either been for food aid transport or for aid financed constructionprojects. The average age of the vehicular fleet is estimated to bebetween 8 to 10 years old.

1.20 The road transport industry is dominated by the private sectorwhich owns about 4,000 trucks (light and heavy) and handles over 75 percentof the demand for the internal movement of goods. The balance of thedemand is met by NTA with its fleet of about 290 trucks. NTA has incurredlosses since its inception in 1978 and is dependent on Government subsidiesfor fleet expansion and replacement. Since an alternative transport systemdoes not exist to handle the internal freight transport demand it is bothstrategically and economically imperative that the growth of the roadtransport industry be fostered. Further investigations of the status ofthe industry and its need for assistance should be undertaken in the nearfuture.

Ports See Chapter II for details.

Civil Aviation

1.21 The air transport system in Somalia serves ten scattered regionalcenters with Mogadishu as the focal point. Only the airports atMogadishu, Berbera, Kismayo and Hargeisa have paved runways. Investmentsin civil aviation have been an insignificant part of the Public SectorInvestment Program (PIP) thus far. They will continue to be so under therevised 1986-88 PIP. Somali Airlines, established in *964, operates oneFokker F27 aircraft and two Cessnas on its domestic routes and two Boeing707 aircrafts on its international routes waich connect Mogadishu withRome, Frankfurt, Cairo, Nairobi, Djibouti, Seychelles and various points onthe Arabian Peninsula. Somali Airlines if. an autonomous parastatal underthe Department of Civil Aviation of the Miniw :y of Land and AirTransport.

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Technical and management assistance is provided by Lufthansa. A few

foreign airlines link Somalia with other African countries and Europe.

C. Transport FolicyK Plnning and Coordlnation

1.22 The role of the transport sector in the development of the Somalieconomy is to open up centers of mainstream economic activities and tointegrate those areas which are geographically isolated. Road transport,thus far, has been the main transport subsector which ha% contributed totIis goal. Coastal shipping with dhows whi.h once contributedsubstantially to trade with the neighbouring Arab countries, as well as tolink the economically active coastal cities of Somalia, has essentiallyceased. The road transport system (both roads and vehicles), which has alarge share of foreign costs, is expensive for the general Somali public,and other means of transport must be given serious thought in order toimprove the provision of transport services to the Somali economy (para3.09)-

1.23 The Government of Somalia recognizes the vital role that adequatetransport facilities and services play in the deveiopment of the nation'seconomy. Its objectives in transport are to ensure a regular supply offuel, spare parts and vehicles, reliable transport services and improveroad maintenance to reduce transport costs and protect its assets.However, it is well recognized that Government faces pressing macroeconomic issues which are formidable to overcome in many areas (e.g.inflation, balance of payments, foreign exchange earnings, efficiency ofproductive sector etc.). In light of this priority, the role of thetransport sector will be to maximize the provision of transport serviceswith minimum foreign exchange availability; i.e., to (i) reduce costlyreconstruction of its paved road network through improved maintenance; (ii)achieve more efficient use of road vehicles through improved maintenanceand losd factor (most likely through greater private sector involvement);;iii) maintain the foreign exchange earning capacity of the major ports;(iv) improve the efficiency of port operations to avoid undue delays; and(v) reduce transport costs in the distribution of goods through promotingthe use of traditional dhows and expanding coastal shipping.

1.24 The four ministries wlhich are concerned with the transport sectorare: (i) the Ministry of Public Works (MPW) which, through its CivilEngineering Department, is responsible for highway maintenance and forplanning and construction of highways, ports and airports: (ii) theMinistry of Land and Air Transport which is responsible for road transportregulations including vehicle registration and control and for civilaviation through its Civil Aviation Department; (iii) the Ministry ofPortseand Marine Transport which, through the Somali Ports Authority (SPA),is responsible for port operations, and through the Somali Shipping Agencyand Line, is responsible for marine transport; and (iv) the Ministry ofInterior which is responsible for highway traffic control. Coordination isprovided by the State Planning Commission.

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Sector laymatmata

Tab 1.1

I tmats in X Sector: 1974-1988

(So. Sh. ML11)(Us$ M.ll)1/

Fte Year Plan Thee Year Plan Tee Year Pm Three wPgSub-Sectors 1974-1978 1979-1981 1982-1984 198648

HI*ways 758 485 624 31.4Pots d wMim

Traiupor 189 390 72D 52.7Civi AhiatIon 46 137 224 5.4

Total Tnp.Sectxor 993 1,012 1,568 89.5

Fgures not availble in Sosll SbillUp.

1.25 Under the 1974-78 development plan, transport investmentsaccounted for about 20 percent of total planned public investment.However, due to cost overruns caused by implementation delays andinflation, a number of projects were carried over to the next developmentplan period. Investments in roads accounted for 76 percent of sectorinvestments, and ports and aviation accounted for 19 and 5 percentrespectively. The investment plan for transport generally followedrecommendations made by consultants in their 1966 Transport Survey and wasbasically well conceived. Overall, the plan was only partially successfulin meeting the implementation targets in the sector. In the nextdevelopment plan (1979-81), transport investments made up 25 percent of thetotal public investments. Investments in roads accounted for 48 percent oftransport sector Investments; and ports and civil aviation accounting for39 percent and 13 percent respectively. However, only 76 percent ofplanned investments actually materialized during these years; the shortfallin the planned targets occurred due to the overall economic crises andshortage of funds and was particularly pronounced in the ports and civilaviation subsectors.

1.26 During the 1982-84 plan period, the allocation for the transportsector fell to 13 percent of the investment plan. However, the absoluteamount invested in the transport sector rose by 50 percent. The majoraccomplishments during this period was the completion of Berth 6 atMogadishu Port and the initiation of a major development andrehabilitationof Berbera Port. Many of the road works during this periodwere either delayed or terminated in the midst of construction work due tothe curtailment of bilateral financing forced by mounting arrears of loanrepayments by the Government.

1.27 In the proposed 1986-88 plan period, the sector allocation hasfallen to 9% of total PIP, and subsector composition has shifted towardgreater emphasis on port investment rather than in highways. The reductionin sector allocation vis-a-vis the total PIP is an acceptable trend giventhe need for Somalia to concentrate on rejuvenating the productive sector.

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The shift in subsector emphasis to ports is due mainly to the urgentlyrequired Kismayo port rehe'ilitation works which commenced recently withUSAID financing. In the highway subsector, the Government haM followed it.stated strategy of emphasizing road maintenance and rehabilitation byallocating 70X of subsector investment to maintenance. The port's PIP, ingeneral, is acceptable and follows the strategy set out by the Government.Civil aviation has severely cut its program and 95% of the subsectorallocation is for technical assistance. This strategy is satisfactory.

1.28 The main transport sector issues, as outlined briefly inpars. 1.23, is how to provide transport services given tremendousconstraints in resources, both in terms of foreign exchange availabilityand the lack of manpower resources. The first priority is to maintaindonor interest in providing resources for highway maintenance andrehabilitation. The second priority is to improve the institutionalcapacity for maintenance of existing assets, be it the highways, ports orroad transport subsector. Improvements in institutional capacity will beslow at best, but external assistance is crucial. Relative to otherinstitutions, the ports subsector has the manpower to carry out itsoperations efficiently if proper coordinated assistance is provided (one ofthe main objectives of this Project). The highway subsector is lessendowed in terms of manpower and is hampered particularly by thedecentralized structure of road administration. Continued training andtechnical assistance are required to avoid a collapse of the road network.The third priority is to rejuvenate coastal shipping. Due to the widegeorgraphical area of the country, the use of road transport as well asconstructing and maintaining a large road network is costly. Better use ofcoastal shipping can reduce the cost of goods and stimulate economicactivities which otherwise would not materialize. Further investigatior. isrequired (see para. 3.09 for a proposed study).

D. Past Bank Group Involvemat in Sector

1.29 The World Bank group has been extensively involved in thedevelopment of the transport sector in Somalia through the provision of IDAcredits for four highways and four port projects. The first involvement,consisting of an initial credit (74-SO) approved in 1964 and asupplementary credit (123-S0) in 1968 which totalled US$8.5 million, wasused along with co-financing funds primarily to construct the 216 kmAfgoi-Baidoa Road and to organize and improve the Civil EngineeringDepartment in MPW. The road construction was completed successfully in1971 although a dispute developed between the Government and the contractorwhich went to arbitration and was only recently settled. Notwithstandingthis problem, the project has had beneficial effects on the area served bythe road and on the nation generally. An economic re-evaluation in 1978 byBank staff in connection with a project completion audit confirmed thesoundness of the project.

1.30 The Second Highway Project, financed by a US$9.6 million IDAcredit (295-SO) in 1972 and by funds from the African Development Bank, wasconcerned largely with construction of the 158 km Hargeisa-Berbera Road.Completed in 1975, the road has greatly facilitated the movement oflivestock from Hargeisa to the port of Berbera. A Bank staff economic

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re-evaluation of the project in 1978 revealed a 36% economic return. AThird Highway project provided a US$7.0 million IDA credit (699-SO) in 1977primarily to assist in extending the above road 132 km westward fromHargeisa to Borama and Tug Wajale. Construction began in January 1978.Due to hostilities in the area, the original contract was terminated; a newreduced contract was awarded and 70 km. from Hargeisa to Nabadid werecompleted in January 1985, 4-1/2 years later than the original estimate.The project was cofinanced by the Arab Fund for Social and EconomicDevelopment, the Islamic Development Bank and the African DevelopmentBank. A Bank staff economic re-evaluation of the project (December 1985)showed a rate of return of 11% as compared to 24Z estimated at appraisal.The main reasons forthe reduced ERR are: (i) 82% increase in per kmconstruction cost; and (ii) lower than expected traffic due to the drought(lower livestock traffic) and lower economic activity in the area. Thetraining and technical assistance program was unsuccessful in achieving itstargets due mainly to: (a) no financial incentive for the local counterpartstaff; (b) transfer of staff; and (c) certain cases of unsatisfactoryperformance by the consulting firms.

1.31 A Fourth Highway Project, financed by IDA (US$23 million), theArab Fund (US$16.3 million) and Government (US$4.2 million), was signed in1983. The major civil works component involving reconstruction of theAfgoi-Baidoa road was completed in October 1985, although reduced in scopedue to the suspension of the loan from the Arab Fund following Government'sinability to meet the debt service obligation on other outstanding loans.The technical assistance component and the urgent maintenance component arestill on-going. The project closing date is set for September 1987.

1.32 Port project financing began in 1964 with a technical assistancegrant of US$311,000 followed in 1969 by a credit (55-SO) of US$550,000 forengineering and accounting consultancy services. Although the MogadishuPort Project was first identified in 1964 it took nine years to put theproject together because of lack of donor funds and the occurrence of apolitical revolution in the country. In 1973, these preparations resultedin a US$12.9 million IDA Credit (359-SO) which, together with an EDF grantof US$12.5 million, financed the construction of the sheltered deep-waterharbor of Mogadishu, consisting of a breakwater, two general cargo berths,a livestock berth and a banana berth, sheds and other facilities. In 1975,during execution of this project, a Third IDA Credit (586-SO) for US$5.2million was approved for an additional general cargo berth andcorresponding extension of the breakwater. The original Mogadishu PortProject and its extension Credit (586-SO) were completed in 1977, about sixmonths behind schedule. The physical execution of the project was plaguedwith contractor disputes arising from the numerous claims advanced by thecontractor. These claims were eventually settled without resort toarbitration. The breakwater, however, experienced subsidence problems(para. 3.06). A Bank staff economic re-evaluation in 1979 indicated aneconomic return of 17% which is slightly higher than that derived duringreappraisal in connection with the project extension.

1.33 The Fourth Port Project, approved by IDA in July 1978 for aUS$5.5 million credit, consisted of construction of a tanker pier andrelated facilities for handling crude oil tankers and small productstankers. Bids were received on November 21, 1979. However, the lowest bid

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was substantially higher than the appraisal estimate, and a decision wasmade to extend the banana berth and construct a ro-ro ramp instead. Theproject was completed -n July 1983. A Project Completion Report preparedin December 1985 showed that: (i) ERR was re-evaluated at 342 compared to21% estimated at appraisal; and (ii) financially, SPA showed much betterresults than were projected, enabling SPA to pay large dividends to theGovernment. The favorable performance of the project was due mainly tohigher throughput than forecasted, 30% lower contract price for civil worksand readjustment of tariffs in 1983. During execution of the project,however, it became evident that there were fundamental weaknesses in SPAsuch as the scarcity of skilled staff and the poor use made of then, andthat, to overcome these defficiencies, substantial additional efforts ininstitutional development and training were required in future projects.

B. Rationale for Bank 6roup Involvemt

1.34 Assistance provided to the Somali Ports Authority (SPA) thus far,including the four port projects financed by the Bank, have concentratedpredominantly on infrastructural development at the three major ports ofMogadishu, Berbera and Kismayo. Limited assistance in cargo handlingequipment was provided from time to time by various donors and technicalassistance, including training, were provided on an ad hoc basis. Theproposed Project is the first of its kind to provide a coordinated andcomprehensive port modernization program for the Somali Ports Authority.The main objective of this assistance is to enable SPA to progress into anera of modern port management and operations through a phased mechanizationprogram as well as comprehensive training for all levels of port staff.The ProJect is based on the Somali Ports Master Plan Study initiated underthe Fourth Port Project with financing from the Danish InternationalDevelopment Agency (DANIDA). The study, finished in 1985, reviewed theinfrastructure requirements of the three major ports for the next 20 yearsand recommended a phased mechanization program along with a comprehensivetraining and technical assistance program. The Project also providesoperational experts in on-line management positions in SPA. This is a newendeavor in Somalia and is aimed at the transfer of modern port managementand operation know-how to SPA in a short span of time.

II. TIM SOfALI PORTS ArRORIITY

A. Background

2.01 The Government of Somalia recognizes the important role thecountry's ports play in the economic development of the country and since1962, the year in which it established the Somali-Ports Authority, hasactively pursued a policy of developing port facilities which will serviceits international trade efficiently. Prior to 1962 deep water portfacil ties were practically non-existent and cargo handling services wereloosely rendered by numerous contractors using lighters. With the

Iestablishment of the Somali Ports Authority, lighterage operations wereihased out and replaced with cargo handling operations alongside berths.

2.02 The initial thrust was in infrastructural development. Since1968, three major harbors have been commissioned: Kismayo in the extremesouth-east of the country serving the Juba Valley (1968); Berbera, on theGulf of Aden, serving Hargeisa and the northern region (1969); andMogadishu, inaugurated at the end of 1977, serving the Shabelle Valley andthe eastern part of the Juba-Shabelle inter-river area.

2.03 Whilst the Government's goal of developing modern deep-water portfacilities has been achieved, its expectation of effectively operatingthese facilities is as yet unrealized. The shortage of funds did notpermit the Government to invest in mechanical cargo handling equipmentwhich would complement the infrastructural development of its terminalfacilities. Being a relatively young organization with no experience andhistory in port management and port operation, compounded by its inabilityto attract and retain experienced and qualified personnel because of thehigh wages offered by the neighboring oil rich countries, SPA has not gonefar enough in introducing the necessary systems and procedures in cargohandling in line with the transformation of cargo handling operations fromlighterage to alongside berth. Its initial emphasis on infrastructuraldevelopment has prevented it from giving sufficient attention toinstitutional development.

2.04 As SPA has not had the capability to undertake long-term portplanning and engineering studies, a Master Plan Study by consultants wascommissioned in 1984 to provide guidance to SPA for the planning anddevelopment of the ports under its jurisdiction in the short to medium term(1985-1990) and to act as a planning guide for possible infrastructuralinvestment in the medium to long term (1990-2000). The study was financedby DANIDA with the terms of reference discussed with IDA. Therecommendations of the Master Plan Study formed the basis upon which the Government of Somalia is embarking on its next port development program.

2.05 Somalia has numerous ports due to its long coastline. Most ofthem are small (Mait, Las Khoreh, Bosasso, Kandala and Alula) and are usedonly for the shipment of livestock and a very small quantity of generalcargo carried by local craft. A few (Zeila and Boolimoog) are used onlyfor fishery. Traffic at these minor ports is negligible and for allintents and purposes, SPA has little need to exercise any form ofadministration or control.

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2.06 The ports of significance are Mogadishu, Berbera and Kismayo.Merca, with facilities for the loading of export bananas via lighters, isno longer in use. Its proximlty to Mogadishu (approximately 100 km) andthe difficult conditions under which vessels were loaded in the anchorageled to the diversion of banana export through Mogadishu. The attention ofSPA is focussed on the three sheltered deep-water ports of Mogadishu,Berbera and Kismayo.

2.07 Port facilities at Mogadishu consist primarily of six berths witha total length of 1,000 a. Maximim draft alongside is 12 m. Berbera andKismayo each has four berths with a total length of 640 m and a maxinumdraft of 9.5 a. Pilotage and tug assistance are compulsory for all vesselsabove 200 net registered tons. For a detailed listing of port facilities,$please see Annex 2.1.

5. Oru nuaFtiom, Mur"lanapnt and Staff

2.08 The Somali Ports Authority (SPA) which is responsible for theadministration, operation and maintenance of the country's ports wascreated in 1962 and reconstituted under Law No. 70 of December 1970 and LawNo. 17 of January 1973. Planning for the expansion and development of theports as well as the execution of the ports' infrastructural developmentsis the responsibility of the Ministry of Public Works while provision forthe financing of these projects is incorporated in the Government'sCentralised Capital Investment Budgets. Completed projects are handed overto SPA ownership for the conduct of port operations.

2.09 SPA falls under the jurisdiction of the Ministry of Ports andMarine Transport (MPMT). Although there are certain restrictions imposedby the Government (priaarily pertaining to employment and transfers ofstaff, salaries and terms and conditions of service, financial managementand the distribution of operating surpluses) SPA has sufficient powers todischarge its responsibilities except in the financial area (para. 5.12)including its ability to obtain foreign exchange.

2.10 SPA is managed by a President with a General Manager as its chiefoperating officer. SPA's functional activities are organised under fourdepartments: Planning, Finance, Personnel and Engineering with day to dayoperations at each port under a Port Manager who reports directly to theGeneral Manager. Each port has its own operating, maintenance,administrative and accounting divisions. See Chart II for the organizationchart of SPA.

2.11 SPA is facing a shortage of skilled and semi-skilled manpowerbecause of the exodus in large numbers of educated Somalis to theneighbouring oil producing countries. Although the manpower drain hashalted because of the drop in oil earnings in the neighbouring countries,it is unlikely that the public sector will be able to attract back intoservice those who had left for higher salaries. This exodus has resultedin numerous positions in the organization being either unfilled or filledwith inexperienced personnel. Out of a total regular employment of 802,only 24 form the managerial and professional group (Annex 2.2). Theresult is that effective supervision is lacking and this is reflected in

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the day to day operations at the ports. Cargo is haphazardly handled andstored and there are frequent disputes over quantities, marks and conditionof the cargo.

2.12 As in operations at the ports, management at SPA is weak in suchareas as planning, information systems and accounting and financialmanagement, There is a need to inject sound management techniques andpractices in controlling and directing SPA's activities.

2,13 SPA provides employment to about 3,300 people of which 802 areregular employees whilst the rest are engaged as temporary workers throughlabour co-operatives. The current system of casual engagement has anundesirable effect. Because of the uncertainty in employment and the lowpay, labour registered-for casual employment tends -to first look elsewherefor work, turning up at the ports only when other work is not available.Thus while the labor registries at the various ports have large laborpools, in reality the ports are often confronted with a shortage of skilledlabor. Very often,therefore, dock labor engaged to work for the dayconsists of the untrained and what is available after better paying jobsfor the day have been met. This has created an inherent tendency for SPAto have a large number of labour in a gang to make up for the shortage ofskills. A training school to train dock workers is necessary so that theports can draw from a larger pool of trained dockers.

C. Training

2.14 With very few exceptionslftraining provided to SPA's staff inthe past has been ad hoc, consisting of senior officials attending shortcourses and seminars provided mainly by UNCTAD. These courses and seminarsdealt with the general aspects of port management, operations andstatistics. In the last five years, such training totalled 36 man months(Annex 2.3). Although technical assistance provided under previous IDACredits included training elements, the basic need for continuous traininghas not yet been met in a satisfactory manner due in part to the inabilityto find suitable instructors. The lack of suitable training facilitiescontributed to this situation which has been improved with the completionof the Somali Institute of Development Administration and Management(SIDAM). The Industrial Vocational Training Center at Mogadishu,established by GTZ, also has the capability to carry out tailor-madecourses for machine operators, mechanics, fitters and electricians. Thetraining facilities under the proposed Project have been determined on thebasis that some of the required training will be undertaken by SIDAM andthe Industrial Vocational Training Center.

D. Operations

2.15 All cargo operations, except for the delivery and receipt ofcargo at storage areas, are undertaken by SPA at all three ports using

1/ One engineer was sent for training with a U.K. consulting firm andtwo officers are pursuing a degree in maritime law in Sweden.

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workers obtained from labour co-operatives. Cargo is loaded or dischargedusing ships' gears. Delivery of cargo at storage areas is undertaken byimporters and exporters using labour from another co-operative. Cargohandling is labour intensive (Annex 2.4). The size of a gang variesdepending on the type of commodities. A gang handling bagged cargo is madeup of 26 men (12 stevedores, 2 winchmen, 10 longshoremen and 2 foremen).For break bulk general cargo, the gang is made up of 34 memi (17 stevedores,2 winchmen, 13 longshoremen and 2 foremen). A working uni: for ro-ro cargohas 10 men. Dock labourers who are engaged on a contract basis participate-in an oversimplified productivity scheme which requires each gang to loador discharge a specific quantity of cargo within an eight hour shift. Thisover-simplified productivity scheme does not provide adequate incentive.Labour productivity per man, based on the productivity norms for baggedcargo (100 tons per gang per shift) and break bulk general cargo (50 tonsper gang per shift) is low. Representative handling rates per ship workingday are 280 tons for general cargo, 530 tons for bagged cargo, 250-400 tonsfor bananas and 1340 tons for ro-ro traffic.

2.16 The low labour productivity is the result of the lack ofmechanical handling equipment and the shortage of skilled cargo handlers.The majority of the available equipment is old and dilapidated and in manyinstances structurally unsafe. The lack of equipment has resulted in twoshipping lines providing their own equipment to handle their containers andro-ro traffic. This equipment is lent to SPA when it is not in use by theowners to handle containers of other shipping lines.

Table 2.1

Cargo HadlAng EMi#ESt Availability

'|>dishu Berbera KBZEY TOWtNo~~~~~~1 of Units)-

In port q_es tl In Port O p3dion In Port iow In Port 9NE!!L&

Fork Lift Truds 3 1 8 4 2 2 13 7Mobile Cram 4 2 4 2 2 1 10 5Trctors 7 7 5 4 2 2 14 13Trailers 56 261/ 16 11 5 2 77 39

I1 ly si"xet 10 tan and ten 20-tm trailers are operatioal bit they are in vary poor ooxditixn andrequire eKmtsive repairs. Thirty 20-ton trailers carut be ued as dwir coplding is nDt ompatiblewith available tractors.

E. Maintenance

2.17 The standard of niaintenance of port facilities and equipment islow. Workshop facilities are inadequate, improperly equipped and inMogadishu and Kismayo are wrongly located being approximately 3 km awayfrom the ports. Except for a very few, SPA "engineering" and "technical'maintenance staff have no formal technical training. They acquired their

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knowledge and skill through on-the-job training. Such training is notplanned and supervised and the employee is left very much on his own tolearn what he can. Another constraint is the inability to secure spareparts due to SPA's difficulty in obtaining foreign exchange. Given theselimitations, maintenance staff do attempt to keep the few pieces ofequipment working, in some instances fabricating their own parts. However,no planned or preventive maintenance of equipmert exists.

2.18 There is a sufficient number of staff to undertake allmaintenance work. The technical competency and organizational ability ofthe staff, however, leave much to be desired. In order that the technicalsections at the three ports can perform at a reasonably competent level,departments/sections with responsibility for maintenance have to bere-organised and tasks explicitly allocated, workshops properly equippedand staff adequately trained. All these constraints are being addressed inthe proposed Project.

F. Past and Present Traffic

2.19 Total import and export traffic through SPA ports fluctuatedconsiderably during the period 1978 to 1984, increasing from 0.9 million in1978 to its historical high of 1.3 million tons in 1980 and declining to0.9 million tons in 1983. The traffic recovered to 1.1 million tons in1984. Despite these fluctuations, there has been a gneral upward trend intraffic throughput, averaging 3.5 percent per annum for the 1978-1984period and 2.8 percent per annum since 1973. (See table 2.2). Dry cargothroughput (i.e. excluding petroleum) increased at an average annual growthrate of 3.2 X with imports growing at 71 per annum and exports declining at83 per annum. The rapid import growth reflects the significant volume offood aid imports and the aid-assisted infrastructure development program.The precipitous decline of the dry cargo exports, (which constitutes only202 of dry cargo traffic), was led by a major decline in the exports ofbananas (largely due to the impact of Government price controls anddrought) and livestock (impact of drought and ban on Somali livestock bySaudi Arabia). As for petroleum products, the total throughput hasfluctuated around 200,000 tons depending on the foreign exchangeavailability and commodity aid from oil exporting countries.

2.20 Of the total throughp't of SPA ports, on average, 72% of the porttraffic passes through the port of Mogadishu with 22% and 6% passingthrough the ports of Berbera and Kismayo respectively. This compositionreflects the relative importance of the capital city as the main economicand population center of the country. The main imports are bagged cement,grains and petroleum products, and main exports are livestock, petroleumproduct reexports, and bananas.

feport TIraffic

2.21 Somalia exports bananas, livestock, hide and skins, canned meatand fish. The tonnages of hides and skins, meat and fish are insignificantas far as demand on port capacity is concerned. Banana and livestock

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traffic, on the other hand, has a much greater demand on port capacity,constituting about 15% of the total dry cargo traffic of 820,000 tons.Banana traffic reached its peak in 1972 at 134,000 tons but declinedprecipitously to 30,000 tons in 1979. Since then price controls have beenrecoved and steady recovery is underway (50,000 tons in 1984). The mainproduction areas are located in the southern region below Mogadishu, andboth Mogadishu and Kismayo ports have been used for exports.

2.22 Livestock trafflc is concentrated in Berbera. Practically allsheep and goats and about 90% of the camel are exported throigh this port.Although Berbera will remain the export port for most livesrock, Kismayo isexpected to increased its-exports since cattle production and exports areexpected to grow faster than in the north.

Import Traffic

2.23 Cement is the single largest category of dry cargo imports atabout 18% of the total dry cargo throughput. Cement imports have increasedat an annual average of 14.51 since 1978. Over 70% is imported throughMogadishu. Other bagged cargo, including cereals, flour, food grain andsugar, has been growing at 19% per annum, and consists largely of foodgrain and food aid imports for refugees. Though at a lower rate, foodimports are expected to remain important traffic for the ports.

2.24 Somalia presently imports both crude and refined products throughMogadishu. Crude oil is re6ined at Mogadislau and redistributed to Berberaand Kismayo. Importation of crude oil is estimated to stabilize at thecurrent level of 150,000 - 200,000 tons per annum and the balance of thedemand will be fulfilled by importation of refined products.

2.25 Container traffic at the port of Mogdishu has increased rapidlyafter the commencement of regular container liner services by Messina Linesin 1982. The container traffic has increased from 4,700 TEU in 1982 to12,800 THU in 1984. In keeping with the shipping characteristics ofEastern Africa, this trend is expected to continue. The traffic breakdowns for each port and for each major comodity are given in Table 2.2.

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Mabe 2.2

1978 1980 2 1984

B K M TIL B K M TILf B K 1 TM B K M TEL

CIenat - 27 37 64 6 6 60 72 D 2 92 138 27 6 1111Oher Bagged Cargo 26 14 91 131 48 4 280 332 91 8 240 339 81 7 278 366Genral Cawgo 86 15 167 268 105 14 208 327 18 10 124 38 6 136 180

212 56 295 463 159 24 548 731 129 44 428 601 146 19 525 6!XPetrolaMI Products 12 27 166 205 2 26 277 305 14 25 251 290 31 15 168 214

Total lports 124 83 461 668. 161 50 825 1036 143 69 679 891 177 34 693 904

Gerral Cargo 1 5 47 53 18 1 45 64 -21 8 29 15 8 7 3BeUed Cemet - - - - - - - - - - - - -

Bananas - 28 61 89 - 38 - 38 - 24 32 56 - 20 29 49Livestock 47 7 20 74 56 9 4 69 44 20 15 79 51 1 1 53

4B-o TX M8 216 - 4-8 4-9 -22 -7 W -65~i 5-5 rg 66 29 37 132Petrolej Products - - - - 51 51 - - 24 24 - - 53 53

IbtalImports 48 40 128 216 74 48100222 44 65 79188 66 29 90185

ITUAL 1IW1JGHPur 172 123 589 884 235 98 925 1258 187 134 758 1079 243 63 783 1089

B - Berbera

K - Kltuo

M =2 mgAislu

C. Port Planning and Devel,opnet Strate8y

2.26 In view of the lack of sheltered locations for ports along thecoast of Somalia and the high cost of providing breakwater protection forports, port development in the foreseable future should concentrate onMogadishu, Berbera and Kismyo. These three ports are well located to servethe needs of the population centers of Somalia. The role of the smallerports is essentially to serve the needs of the fishing industry and localtrade. Unless the import/export trade at any of these ports grows to besufficiently large it wouAd not be justifiable to have sizeable investmentsin the form of port facilities for the conduct of international trade andshipping through these ports. Provided that the ports are properly managedand operated and the berths achieve a throughput within their means thereshould be no physical limitation to the capacity of the three ports tohandle forecasted national traffic up to the year 2010. In the interest of

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assuring soundly based future development of ports, it was agreed duringcredit negotiations that additional investments in the commercial ports subsector will be made only after their economic and financial justificationhave been demonstrated on the basis of criteria acceptable to theAssociation (para. 5.17).

2.27 While the ports' physical facilities in the form of berths arewell designed and developed, their current berth throughput is iow. Thislow productivity is the result of the: (I) shortage of suitable cargohandling equipment; (ii) poorly trained and motivated staff; and (iii)inadequate systems, procedures and methods of handling cargo. Planningat, and development of, Somalia's ports should therefore be to: (i)complement previous infrastructural developments with needed mechanicalcargo handling equipment; and (ii) provide technical assistance andtraining for SPA staff.

2.28 In overcoming manpower and institutional constraints attentionshould not be focussed only at the ports. The management and operation oforganizations and trade practices which have an impact on the operation ofthe ports should also be addressed. Operations of peripheral portorganizations such as customs, shipping agents and forwarding agents andtrade practices and documentation which inhibit the development of tradeand the distribution of cargo out of the port will have to be improved,up-dated and made compatible with current international shipping, tradingand transport practices and requirements. The shipping agency is a case inpoint. Shipping agency work is being carried out in the country solely bythe Somali Shipping Agency and Line (SSAL). This monopolistic positionbreeds certain inefficiencies which could be overcome if shipping agency isopen to competition. Various recommendations to improve the efficiency ofshipping agency work have been made by the Bank and by experts provided bythe Government of West Germany and these recommendations are being studiedby the Government through a high level committee. These recommendationsinclude, inter alia, (i) the opening up of shipping agency work to privateinterests; and (ii) allowing joint ventures of foreign and local interestsin establishing shipping agencies in Somalia. As a condition of CreditEffectiveness, Government will submit to the Association for review andapproval a plan of action for improving the efficiency of SSAL includingallowing private individuals and companies including joint ventures offoreign and local interests to engage in shipping agency work andthereafter implement the agreed upon plan of action in accordance with atimetable acceptable to the Association (6.01 (i) (d)) and (6.01 (ii)(n).

2.29 Due to the inadequate transportation network of roads in thecountry as well as the relatively high cost of road transport, prima facie,the distribution of goods along the coast by sea would appear desirable andpracticable. To utilize the comparative time advantage of coastalshipping, the ports of Mogadishu and Berbera, and to a lesser extent,Kismayo will need to be developed into major transshipment centers for thecountry with feeder coastal services feeding into the various minor ports.A road distribution network centered around each of the ports will allowthe ports to serve their hinterlands. This direction in the development ofports in Somalia will require the institution of systems, procedures andpractises to facilitate a speedy transfer of cargo, the promotion of

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inter-modal transportation of goods and the development of throughtransportation. The Government has requested the Bank to analyze thepossibility and the extent to which coastal sh pping can be a costeffective alternatlve mode and a financially viable sector. These issueswould be examined In a study on the transport and distribution system ofthe country to be funded by the Project (para. 3.09). The terms ofreference for the study were agreed upon during negotiations (Annex 3.8).

Bu. ets, Accounts, Audit and Iosurance

Budgets

2.30 Before the start of each fiscal year SPA prepares an annualbudget of operating revenues and expenses and an annual investment budgtfor submission to the Ministry of Ports and Marine Transport and theMinistry of Finance. The investment budget consists of equipment additionsand replacements and minor civil works. Major port investments areexcluded since planning and financing of these are the responsibility ofthe Ministry of Public Works and Ministry of Planning. The investmentbudget provides the basis, in principle, for Ministry of Financeallocations of foreign exchange to SPA. The operating budget is inprinciple a tool for evaluation of port operations by the Ministry of Portsand Marine Transport, the Ministry of Finance and SPA senior management.However, it is compiled in manner that limits its usefulness as a tool forplanning of operations and ultimately also as a tool for evaluation of theefficiency with which ports' resources are used. As part of the program oftechnical assistance in financial management and accounting in the proposedProject, assistance will be provided SPA to develop a more rigorousbudgetary framework to serve both the needs of senior management and theresponsible ministries.

Accounts

2.31 Between 1978 and 1983, SPA operated a commercial chart ofaccounts designed by consultants under the Second Port Project(Credit 359-SO). The system is decentralized with individual portsmaintaining their own sets of accounts and SPA headquarters responsible formonthly consolidations. The system was designed as an integratedfinancial-management accounting system with provision for fixed assetsaccounting inccrporating periodic asset revaluations. However, due toshortages of trained accountants and bookkeepers in the country togetherwith the low salaries that SPA has been able to pay to staff, SPA has notbeen able to recruit sufficiently able or motivated staff to operate thesystem. As a result only a basic financial accounting system has beenoperated.

2.32 Since 1983, SPA has been obligated to operate the UniformAccounting System (UAS). This system consists of a much more extensivechart of accounts than the one SPA had hitherto operated. AllGovernment-owned enterprises are required to adopt the system in order tofacilitate consistent statistical compilations by central government.

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Given its limited accounting staff, SPA has encountered considerabledifficulties in operating the UAS as well as producing its own finalaccounts on a timely basis. In fact, SPA has only, thus far, modified itsold chart of account on a very adhoc basis to comply on a minimal basiswith the requirement to adopt the UAS.

2.33 To strengthen SPA's accounting capability, 2 man years oftechnical assistance will be provided under the proposed Project to help

rationalize the existing system, selectively introduce cost accountingprocedures, and introduce simplified procedures for fixed asset revaluationand accounting. This will be in addition to helping develop coursematerial to train junior staff and in developing sound budgetary procedures(para. 3.07 and 3.08).

2.36 Maintenance of the UAS will be inconsistent with SPA provision ofaudited accounts on a timely basis to IDA given the likely continuedshortage in SPA of skilled accounting personnel in the next few years.Accordingly, during negotiations, Government agreed to permit fullintroduction of the UAS to SPA on a phased basis over a period of time tobe determined taking into account the need for the development of SPA'saccounting capabilities.

2.35 The annual accounts of Government-owned enterprises including SPAare required to be audited by a separate unit established for this purposein the office of the Magistrate of Accounts (MOA). This arrangement isacceptable to IDA.

2.36 Because of shortcomings in SPA's accounting department and-ashortage of staff at MOA, completion of SPA's audited accounts have in thepast been frequently subject to delays.

2.37 SPA was required under the previous IDA-funded Fourth PortProJect (Credit 838-SO) to furnish audited accounts to IDA within 6 monthsof the close of its financial year. SPA had difficulties in complying withthis requirement. In view of the difficulties in preparing final accountsand weaknesses in the auditing organisation outlined above (paras2.34-2.38) it is recommended that SPA be required to submit to IDA itsaudited accounts within 9 months of the close of its financial year for thefinancial years 1987 and 1988 and within 7 months after the end of itsfinancial years thereafter (para. 6.01 (ii) (p)). SPA agreed to thisarrangement during negotiations.

Insurance

2.38 Under previous port credits, IDA has,stipulated that SPA takesout insurance against risks such as fire, damage and loss of property. SPAhas, accordingly, obtained the necessary coverage.

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III. THE PBQJOCT

A. Oblectives

3.01 The main objective of the proposed Project is to help improvecargo handling capacity and performance at the three major ports ofWogadishu, Berbera and Kismayo by introducing appropriate systems andprocedures in cargo handling and port management, and by providingnecessary cargo handling equipment to meet the current needs of shipping.The phased mechanization program will enable SPA to handle increasingvolume and types (e.g. containers) of cargo without undue congestion orlarge investments for additional berths; the technical assistance andtraining will enable SPA to maximize the use of the new equipment toimprove its operational efficiency.

- BU. Yroiect DescriRtion

3.02 The Project consists of:

(a) Procurement of cargo handling (including pallets), office,training and workshop equipment, refurbishing of oldequipment and docking of tugs;

(b) Port improvement (civil) works:

(i) Paving of the container yard at Mogadishu;

(ii) Provision of fenders for wharves at Mogadishu;

(iii) Construction of container freight stations atMogadishu and Berbera;

(iv) Construction of a ro-ro ramp at Mogadishu;

(v) Construction of workshops and stores at Mogadishuand Kismayo; and

(vi) Construction of the port training school at Mogadishu;

(c) Rectification of breakwater subsidence at Mogadishu;

(d) Training and technical assistance for SPA;

(e) Consultant services for:

(i) supervision, including assistance in equipmentprocurement, of (a), (b) and (c); aud

(ii) study on transport development including the roleof coastal shipping and the minor ports.

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(a) Caro l andling, Office, Trainiug and Workshop Kquip.ent

3.03 Port operations have remained labor intensive although the changein cargo mix towards the need to use mechanical cargo handling (e.g.containerization) has been steadily increasing. Gontainers and ro-rotraffic now constitute approximately 50% of the general cargo tonnage inMogadishu and this form of cirgo handling is anticipated to increasefurther. Non-containerized general cargo is also gradually moving inpre-palletised or unit loads which require the use of mechanical cargohandling equipment. The provision of the equipment recommended for theIroject will not only allow SPA to cope with the form in which cargo isincreasingly being handled (containers, ro-ro, pre-palletised unit loads)but will also result in the reduction in the general cargo gang size by 33%(from 30 men to 21 men) (para. 6.01 (ii) (k)).- This will enable SPA to -reduce the number of workers from the labour co-operatives. However, inrespect of container and ro-ro operations, the project provides SPA withcargo handling equipment-that can only cater for part of the traffic. Therest of the traffic will be handled by private sector interests which willprovide their own equipment, personnel and supervisors. As SPA has to gothrough a learning process with regard to the more sophisticated cargohandling systems and procedures, the Association during appraisalrecommended to the Government and SPA to encourage private sectorparticipation in container/ro-ro terminal operations by formalizingarrangements with selected major shipping lines to undertakecontainer/ro-ro operations within a defined area set aside for this purposein the port in Mogadishu. During negotiations, Government advised theAssociation that specific areas have been assigned to two private sectorinterests to undertake container/ro-ro operations at the port of Mogadishuand that negotiations between SPA and such interests on the terms for thelease of the areas were in progress. The entering into arrangements by SPAwith private sector interests to participate in such operations will be acondition of Credit effectiveness. (pars. 6.01 (i)(c)).

3.04 The project will finance the purchase of 26 forklift trucks, 10cranes, 2 front-end loaders, 3 tractors, 6 trailers, 5000 pallets andmiscellaneous cargo handling gears and equipment; refurbishing of oldequipment; dry docking of tugs for overhaul and maintenance to comply withrequired safety and performance standards and workshop equipment. Thesecomponents were determined on the basis of operational targets which wereagreed with SPA at appraisal and are shown below (para. 6.01 (ii)(o)):

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WMbfto ettiti (tonS e MA km)"1:

MogadishufBerbera KismayoCurrent8/ Target Current"/ Target

General Cargo 6 10 5.3 8Bagged Cargo 11 16 9 13Bananas 11 16 9 13Container (TEU) 6.5/3.3b/ 10 3.3 6.5Ro-ro (unit loads) 6.5/3.3W/ 12 - 6.5

a/ Based on current average performance level.

b/ Berbera*

1/ To determine productivity per berth per day, each berth will be assumedto work an average of 16 hours (two shifts); vesselsloading/discharging bananas, general and bagged cargo work an averageof 2.5 gangs per shift and container and ro-ro vessels are assumed toaverage 2 working points per shift.

The performance shall be 80% of the agreed targets 1 year afterdelivery of cargo handling equipment provided under the Project, 90% after2 years and 100% after 3 years.

Cargo HandliLg quipment Availability: 75Z

Averase Annual Ship Waiting Time: 2 days, 2 years after delivery ofcargo-handling equipment provided for under the project; 1 day, 3 yearsafter such delivery.

(b) Port Improvement (Civil) Works:

3.05 In view of the complete lack of basic facilities for containerhandling in all three ports, the project provides for paving of a containeryard (31 400 i2) at Mogadishu; construction of container freight stationsat Mogadlshu (6750 m2) and Berbera (1260 m2); construction of ro-ro ramp atBerth 4, Mogadishu; construction of workshops and stores at Mogadishu (1060m2) and Kismayo (310 m2) and provision of fenders for the wharves atMogadishu. In addition, a port training school will be constructed atMogadishu.

(c) Rectification of Breakwater Subsidence at Ibeadishu:

3.06 The breakwater at Mogadishu Port was constructed during 1975 and1976 under the Second Port Project with financing from the EDP and sincethen some 68 separate subsidences have occured over the 770m length of thebreakwater adjacent to the storage area behind the quay. Subsidences werefirst observed during the construction period in 1975 and despite repairsand changes in the design, the subsidence persisted. Consultants who

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undertook a study on the causes of the subsidence between September 1981and January 1983 pointed out that a collapse of the filter layers isunpredictable and recommended two alternative solutions for earlyimplementation: (i) drive an interlocking steel sheet-pile through thecore at an appropriate distance from the concrete superstructure and withimproved ventilation to reduce the build-up of entrapped air pressure; or(ii) install an adequate protective filter of synthetic filter cloth forthe length of the breakwater. Due to the non-availability of funds, theGovernment of Somalia/SPA have not yet been able to execute the remedialworks. The steel sheet-pile alternative is considered to be the mostpraetical and economical solution and will be adopted for the Project.

(4) Tr*inin and Technical Assistance

3.07 The transformation of port operations from lighterage toalongside berth has not been followed by appropriate and systematic changesin cargo handling systems and procedures. The provision of operationalexperts in key positions will enable SPA to introduce proper systems andprocedures in port operation, maintenance of equipment and improvedfinancial management. The Project will also provide for training expertswhose major task will be to train and develop local instructors. TheProject provides for a total of 162 man-months of technical assistance ofwhich 126 man-months will be for the provision of operational experts inon-line management positions and 36 man-months for training experts. Thecomposition of the proposed technical assistance package is detailed inAnnex 3.1. The technical assistance staff will be provided by a consultingfirm; the draft outline terms of reference are given in Annex 3.2. Theterms of reference were discussed and agreed with Government atnegotiations. The training requirements of SPA staff agreed duringnegotiations are shown in Annex 3.3.

3.08 Apart from the new port training school to be built under theProject (para. 3.02 (b)), arrangements will be made for training of Somaliport personnel at: (i) Bandari College in Mombasa; (ii) the VocationalTraining Institute at Mogadishu which was developed with the assistance ofGTZ; and (iii) the Somali Institute for Development, Administration andManagement (SIDAM). As agreed during appraisal, SPA has appointed aTraining Steering Committee to assist management in the determination ofcourses to be conducted by the various institutes, class selection, coursescheduling and the identification of potential instructors to be trained.Port training material developed by UNCTAD will be extensively used. Toensure that the training effort started by the Project will be sustained,SPA will establish and thereafter maintain a Training Fund by setting asidea portion of its revenue (by April I of each year) to finance the annualtraining budget equivalent to 0.5% of the previous year's gross revenue forfiscal year 1987, 1% for fiscal year 1988 and 1.5% for fiscal year 1989 andthereafter (para. 6.01 (ii) (1)). Establishment of such a Fund will be acondition of Credit effectiveness (para. 6.01 (i)(a)).

(e) Consultant Services

3.09 - Consultants will be engaged for the purpose of supervising portimprovement (civil) works and rectification of breakwater subsidence, aswell as equipment procurement (para. 3.02 (e)). Consultants will also befunded to undertake a study on future transport development which willexamine the transport network and distribution pattern of the country, therole of coastal shipping and the minor ports and the institutional and

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legal framework relating to international trade, shipping and

transportation with a view to instlituting appropriate changes and reforms(para. 2.29.). The terms of reference for the study (Annex 3.8) werediscussed and agreed with Government during negotiations.

C. Cost Estimtes

3.10 The total estimated cost of the project, including contingencyallowances, is estimated at So.Sh. 3,406 million or US$24.4 million net oftaxes and duties (Table 3.1). The foreign exchange component of totalcosts is estimated at US$22.6 million. SPA is exempt from local duties andtaxes on imports.

3.11 Project base costs are in May 1986 prices. Physical contingenciesto cover unforeseen quantity increases are calculated at 10% of base costs

for all items except the rectification of the breakwater subsidence where a20% provision has been made. Price escalation for local and foreign costs

are based on projected increases in international US-dollar prices of 7.22p.a. in 1986; 6.8% p.a. in 1987 and 1988; 7.0% in 1989; 7.1% in 1990 and 4%p.a. in 1991 through 1994. It is assumed that any difference betweendomestic and international price inflation will be offset by adjustments in

the foreign exchange rate.

3.12 The length of the implementation period is based on pastexperience in port projects as reflected in the relevant standard profile(Para 3.15). It is, however, possible that if tie project is implementedmore efficiently and with fewer delays, the implementation period could bereduced to 3 1/2 years. This would result in project costs being reducedby about 12%, from US$ 24.4 million to US$21.5 million.

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Table 3.1

LProject CoatForeign

US$ (milli) ComonentLocAl L Total I

A. *

(1) Cargo hadming equipat 0.010 4.667 4.677 20.7(it) Office, training & wo*shop equipunt - 0.300 0.300 1.3

(iii) Refurbishing of old equipment 0.001 0.074 0.075 .3(Iv) DocIdg of tugs -. 0.5 Q.500 2.3Sub-total 0-1 5.541 O.5O52 14.6

B. civil Works

(i) MogadisbuContainer Freight Station 0.290 1.160 1.450 5.1Workshop 0.050 0.200 0.250 .9Spare Parts Stores 0.018 0.072 0.090 .3Fenders - 0.260 0.260 1.2Rardstanding (Container Yard) 0.220 0.880 1.100 3.9Training School 0.198 0.792 0.990 3.5Ro-Ro Ramp 0.040 0.360 0.400 1.6

(ii) BerberaContainer Freight Station 0.067 0.268 0.335 1.2

(iii) KisuayoWorkshop/Store 0.021 0.084 0.105 .4

Sub-total :.9i 4.076 4.980 18.1

C. Rectification of Brekwater Subsiece 0.267 2.670 2.937 11.8

D. Training and Technical Assistance 0.018 1.552 1.570 6.9

S. Consultant Services

(i) SupervLison of (A), (B) and (C) - 1.140 1.140 5.1(ii) Transport Study - 0.300 0.300 1.3Sub-total - 1.-440 1.440 6.4Base cost sub-total A-E 1.19 15.280 16.479 67.8

F. Contingenriei

(i) Physical 1/ 0.140 1.790 1.930 7.9(ii) Price 2/ on all items, including 0.500 5.480 5.980 24.3

phyilcal contingenciesSubtotal 0.640 7.270 7.910 32.2

Total Project Cast(net of taxes) 1.839 22.550 24.389 100

1/ 10% on all items except rectification of breakwater subsidence where a provisionof 201 for physical contingency has been _ade.

2/ Expected price increases (1) 1986 1987 1988 1989 1990 1991-94Local and Foreign 72 6T. 6.8 - ri70 7.1 4.0

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3.13 The base costs are estimated as of Nay 1986 and have been derivedas follows:

(a) Cargo-handling, office, training and workshop equipment,refurbishing of old equipment and dockingof tugs: aedon SPA/appraisal mission estimates and recent quotations by

suppliers, and have been found reasonable.

(b) Port improvement (civil) works: Based on quantitiesderived from preliminary engineering studiescarried out by consultants who did the Master PlanStudy, and unit costs on recent contrLcts in portconstruction (Berbera and Kismayo). Detailedengineering studies undertaken by consultants withfinancing from DANIDA are expected to be completedby October 1986.

(c) Rectification of breakwater subsidence at Mogadishu:Based on quantities and unit costs developed byconsultants who undertook the study on the causes ofthe subsidence; the cost has been appropriatelyadjusted to current values based on recent portconstruction works.

(d) Training and technical assistance: Based on averageman-month costs comparable to the average cost offoreign port personnel undertaking similar tasks inan IDA financed project in a neighboring country.

(e) Consulting services: The consultant services forsupervision of civil works and equipment procure-ment have been estimated at 126 man-months, with atotal cost of US$1.14 million. Consulting servicesfor the study on transport development includingthe role of coastal shipping and minor ports havebeen estimated at 33 man-months with a total costof US$300,000.

D. Finencing

3.14 The total project cost is estimated at US$ 24.4 million (net oftaxes and duties), with a foreign exchange component of US$22.6 million.The proposed IDA Credit of US$ 22.6 million will finance the total foreignexchange component of the project. The credit will be on-lent to SPA for aperiod of 15 years including 5 years of grace at an interest rate of12X p.a. SPA will bear the foreign exchange risk. The execution of asubsidiary loan agreement between the Government and SPA, acceptable to theAssociation and incorporating these terms will be a condition ofeffectiveness. Local cost of the project,estimated at US$ 1.8 million,will be met by SPA.

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B. Iale _tation aed Procurmat

3.15 Implementation of the civil works component of the Project willbe the responsibility of the Ministry of Public Works assisted by SPA whichhas set up a Project Planning Unit for the purpose. Procurement of goodsand services, other than civil works, will be the responsibility of SPAaided by consultants (paras. 3.02(e)). The implementation period for theproject is estimated at 8 years based on past experience with Bank/IDAfinanced projects in the regional port sub sector as reflected in thestandard profile. However, under normal conditions, a project of thisnature and scope would be expected to take about 3 1/2 years. A targetimplementation schedule is presented in Chart II. This was agreed withGovernment during negotiations.

3.16 The procurement of cargo handling equipment will be timed so thatthey are delivered at about the time that the workshops are expected to becompleted. The services of operational experts will be obtained as soon asthe Credit becomes effective and training experts when the Port TrainingSchool is completed.

3.17 The new cargo handling, office, training and workshop equipmentwill be procured on the basis of international competitive bidding inaccordance with Bank Guidelines with seperate contracts for each type orgroup of similar types of equipment. Refurbishing of old equipment anddocking of tugs will be procured following limited international biddingprocedures. Port improvement (civil) works and the rectification ofbreakwater subsidence will be procured under unit price contracts underseparate contractsfollowing international competitive bidding in accordancewith Bank Guidelines with eligible domestic bidders being awarded a pricepreference of 7.5%. The consultants for construction supervision,equipment procurement and technical assistance will be employed inaccordance with the Bank Guidelines for the use of consultants. All IDAfinanced contracts will be subject to prior review.

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Table 3.2

Procurement Methods and Costs

(US$ million)

TotalProject Element ICB LIB Other Cost

1. Cargo handling, office, training 6.78 - - 6.78and workshop equipment (6.78) (6.78)

2. Refurbishing of old equipment 0.10 - 0.10(0.10) (0.10)

3. Docking of tugs 0.72 - 0.72(0.72) (0.72)

4. Port improvement (civil) works 7.32 7.32(5.99) (5.99)

5. Rectification of break water 5.26 5.26subsidence (4.78) (4.78)

6. Consultant services 4.20 4.20________ (4.18) (4.18)

Total 19.36 0.82 4.20 24.38(17.55) (0.82) (4.18) (22.55)

Figures in parentheses are the amounts financed by IDA.

F. Disburseints

3.18 All requests for disbursement shall be fully documented, exceptthat statement of expenses will be used for contracts costing less thanUS$10,000. Disbursements would be against 10OZ of foreign expenditures oncargo handling, office, training and workshop equipment, refurbishing ofold equipment and docking of tugs and consultancy services, 822 of totalexpenditures on port improvement civil works and 90% of total expenditureson the rectification of the breakwater subsidence. An estimated scheduleof disbursement is shown in Annex 3.6.

3.19 To expedite and facilitate disbursement, a special account wouldbe established in a foreign commercial bank with an initial deposit ofUS$400,000 representing an approximate average of four monthsexpenditures. Assurances were given during negotiations that appropriatefinancial staff will be available to manage the account.

G. Project Monitoring and Reporting Reqi&semnts

3*20 The Ministry of Public Works (MPW) assisted by SPA will beresponsible for submitting to the Association quarterly progress reports

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containing information needed to monitor project implementation on thecivil works components. SPA will be responsible for submission of thequarterly reports on the procurement of goods and services and progress onimplementation in respect of all other Project components. The reportsshould include detailed project expenditures and should highlight anycircumstances that may adversely affect the schedule of construction, dateof completion or project costs. SPA would be responsible for submitting tothe Association quarterly reports containing information needed to reviewtraffic trends, effectiveness of training, performance of expatriateadvisors, cargo handling productivity, ship waiting time, port revenues andexpenses, capital expenditure for ports other than the Project andefficiency of maintenance operations. During credit negotiations agreementwas reached with the Government on the format and frequency of the abovereports (Annex 3.7).

3.21 During negotiations agreement was also reached with theGovernment that it will submit to the ALsociation a project completionreport within six months of the credit closing date. The report will: (i)comment on project timing, execution and cost; (ii) performance ofcoitractors, supervision consultants and advisors; (iii) benefits obtainedfrom the Project during an initial period of operation; and (iv) updatedforecasts of port operations. The report will also comment on theperformance of the MPW and the SPA in fulfilling their respectiveobligations under the Credit Agreement and on the degree of accomplishmentof the Project objectives.

H. Environmental Impact

3.22 The project will not have any adverse efiect on the present portenvironment and will not pose a hazard to human well-being in the ports.

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IV. EGONOIIC EVALMUTION

A. Future Trafflc

4.01 The future level of port traffic will largely be a function ofshe economic recovery of Somalia, particularly the exports of livestock andbananas and the availability of foreign exchange, donor assistance andcommodity aid to help fund the national investment program. Due toSomalia's difficulty in earning sufficient foreign exchange to meet itsimport requirements, the volume of imports will be determined to asignificant extent by the level of international aid for Sotalia.

4.02 Traffic projections based upon a recently completed study by SPAconsultants are detailed in Annex 4.1.-- Underlying assumptions for eachcommodity growth rate (for each port) are given below.

4.03 In aggregate the total SPA traffic is forecasted to increase at aiodest rate of 2% per annum with individual port throughput for Mogadishu,Berbera and Kismayo increasing at 2%, 4% and 4% respectively (seeTable 4.1). While the growth rate for Mogadishu and Berbera is half of therate experienced in the past 7 years, Kismayo is expected to recoverrapidly through its livestock, bananas and molasses exports. The areasurrounding Kismayo is the most fertile in the country and Government'sagricultural program emphasizes developing this region. The Juba Valleydam/irrigation development program, which has been under review by theGovernment for many years, has not been taken into consideration in the-analysis period. If the Juba Valley project is implemented, the associatedconstruction materials and other traffic generated by the project will mostlikely pass through the port of Kismayo, significantly increasing itstraffic (Kismayo Port is not equiped to handle this increase both in termsof management and operational capacity).

Table 4.1

Traffic Forecast for SPA('000 tons)

Average AnnualGrowth Rate

1985 1988 1989 1990 1995 2000 1985-2000 1/

Mogadishu 823 873 889 914 966 1,034 2%Berbera 242 367 378 391 413 426 4%Kismayo 108 136 140 146 171 193 4%

TOTAL SPA 1,173 1,376 1,407 1,451 1,550 1,653 2%

1/ Figures rounded to nearest one percent.

4.04 General Cargo: The growth rate of general cargo imports throughMogadishu has been assumed to equal the expected growth rate of GDP whichis 4 percent. For Berbera and Kismayo, a lower figure of 2.5 percent was

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applied due to a lower past growth rate. It has also been assumed that ahigher proportion of general cargo will be containerized in keeping withthe shipping trend in Eastern-Africa. Thus containerization has beenassumed to increase from the current level of 50% to over 75% of totalgeneral cargo traffic by year 2000 for Mogadishu and from 3% to 55% forBerbera and from 2% to 55% for Kismayc for the same period. General cargoexports (i.e. general cargo plus container traffic) for all three portshave been assumed to be stable at the current level.

4.05 Gamut: Cement imports (mostly from Kenya) are the largestimported comiodity after food grain and have been increasing at a rate of8.5% per annum for the past five years. The total annual consumptioncurrently is about 180,000 tons. With the opening of the Berbera cementfactory in 1986, a-large proportion of the demand for cement will be metlocally. However, the tonnage of cement handled at the ports will notchange significantly; what is altered is merely the flow pattern. Insteadof each port receiving individual shipments from Kenya, it will receiveshipments from Berbera which then becomes a major distribution center forSomalia's cement demand. The Berbera factory has a production capacity of180,000 tons per aninum. The annual growth rate for cement demand isassumed to be 4% per annum or half of the growth rate for the past fiveyears. Output of the Berbera cement factory has been assumed at 135,000tons per annum or 75% of the capacity.

4.06 Food Grain: Importation of bagged foodstuff consists mainly ofgrain and flour, imported commercially and as food aid (for localconsumption and for refugees). Grain production has been increasing at arate of about 5 percent per annum since 1975. For the purpose of thisanalysis, it is assumed that the domestic production will increase at about4 percent which is equivalent to future expected population growth and percapita consumption growth. In terms of food grain import, it is assumedthat for Mogadishu and Kismayo, which are surrounded by relatively richagricultural areas, the current level of traffic will be maintained. ForBerbera, less endowed with agricultural activities and closer to many ofthe refugee camps, it has been assumed to increase at 2 percent per annum.These assumptions are predicated on the basis that the current level offood aid will remain and that domestic grain production will expand at therate of increase of population.

4.07 Crude Oil and Oil Products: Crude oil imports to the Mogadishurefinery have been assumed to be constant at the current level of 150,000tons per annum. The increase in demand in Mogadishu for petrol and diesel(assumed at 3% per annum) will be met by reducing the reexport of :heeefined products from the current level of 55,000 tons to 10,000 tons byyear 2000. Demand for other fuel, such as jet fuel, is assumed to grow at2% per annum from the current level of 30,000 tons. For Berbera andKismayo, the fuel oil traffic is assumed to grow at 3% per annum which islower than the planned rate of economic growth. Berbera, however, willneed to import 25,000 tons of fuel oil per annum more than the currentlevel of consumption to meet the fuel oil requirement for the Berberacement factory.

4.08 Livestock: Livestock will continue to be the single mostimportant export commodity for Somali% during the analysis period. After

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a two year ban on cattle exports to Saudi Arabia (1983-1985), the exportprospects have returned to normal. Within the parameters of the carrryingcapacity of the land for the expanding herd, domestic demand increases andfuture prospects for demand for Somalia livestock, the forecast oflivestock exports is arrived at on the basis of: (i) a 2% per annum growthrate at Berbera and Kismayo, peaking at 75,000 tons and 13,000 tons perannum respectively; and (ii) Mogadishu recovering to its. 1982 level of15,000 tons per annum. The total livestock export on this basis isforecasted to increase at less than 2 percent per annum for the analysisperiod.

4.09 Baanas: As in the case for domestic food grain production,banana production has been recovering steadily since the liberalization ofthe agricultural pricing policy by the Government. Banana exports havenearly doubled in the past five years. The export is exclusively fromKismayo and Mogadishu. The forecast assumes that banana exports atMogadishu will level off at 33,000 tons per annum while Kismayo will have a8% per annum growth rate.

B. Projeets Benefits

4.10 Three main benefits can be discerned from the Project. First,the berth utilization rate in Mogadishu is currently 74% and any furthertraffic growth will translate into ship waiting time exposing Somalia tothe possible imposition of surcharges. The modest mechanization program,particularly for general and bagged cargo, will avoid the surcharges aswell as the immediate need for the construction of another berth. Theconstruction of another berth will not have to be considered until the year2010 if the productivity targets set for the Project are achieved. Second,containerization is rapidly increasing in Somalia, and given the costadvantage, bagged cargo as well as general cargo is being containerized.Without the mechanical cargo handling equipment proposed for the Project,SPA will not be able to cope with this form of cargo handling. Indeed, theprocurement of container handling equipment is likely to increase the rateof containerization leading to a more cost effective shipping service forSomalia. Third, the increased productivity expected from the Project willreduce ship's waiting time and consequently ship's turn around-time inport. Thus, in general, the benefit of the Project is derived from theimprovement in the operational efficiency of cargo handling in each port inturn, this will reduce the ship waiting and service time.

4.11 In analyzing the net economic benefits of the operationalimprovements, investments relating to container/ro-ro traffic have beendistinguished from those relating to general/bagged cargo for each port.Each investment package (by handling mode for each port) is therefore-considered on its own. Table 4.2 (column 1) summarizes the investmentcosts of each package (the breakdown of each package into equipment, civilworks and training is detailed in annex 4.2). The quantifiable benefits onthe other hand, consists of cost savings due to reduced ship waiting timeas a result of improvements in cargo handling operation. In order torealize these benefits SPA has agreed to set performance targets which willimprove its cargo handling productivity by:

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(1) 65% for general cargo; (ii) 45% for bagged cargo, and (iii) 50% forcontainers (details of current and future productivities for ship outputper berth per day Is given on Annex 4.3). Estimates of reduction in shipwaiting time due to these improvements is given in Annex 4.4. Theestimates were derived based on the analytical relationships between cargohandling productivity, berth occupancy factors and ship waiting timedeveloped by UNCTAD. Quantification of the benefits derived from reductionin ship waiting time was computed using the average ship cost per dayranging from US$ 5800-7000 for general cargo ships and US$8,600-12,000 forro-ro and container vessels (see Annex 4.5 for details).

4.12 In calculating the economic rate of return, half of the benefitsfrom reduced ship waiting time have been taken into account. There areother benefits resulting from improved cargo handling operations such asreduced damages and wastage but for lack of data these have not beenestimated. Table 4.2 below summarizes the investment costs and estimatedbenefits for each investment package.

Table 4.2

Net Project Benefits /

(US$ 000tyr)

1987 1988 1995Investment

Cost 2/ Project Benefits

MOGADISHU - General/Bagged Cargo 5,440 1,777 3,415Container 5 560 935 1,451

BERBERA - General/Bagged Cargo 1,510 420 652Container 1,540 164 500

KISMAYO - Combined 760 174 401

1/ 50 percent of total ship waiting time benefits less annual maintenanceand fuel cost.

2/ Refer to Annex 4.2 for breakdown of investmenv components.

4.13 For the purpose of calculating the economic rate of return, totalproject costs have been adjusted by excluding price contingencies; trainingand technical assistance costs have been allocated to various portinvestments proportionate to their respective traffic throughput; cargohandling equipment is assumed to have a life of 7 years, and the cost ofreplacement and annual maintenance and fuel costs have been included.

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4.14 Based on the above benefits and costs, and assuming a 20 yearlife, on a best estimate basis, the project yields a quantifiable economicrate of return of 21% to 46% on the various investment packages with anoverall rate of return of 32%. The estimates show that the rate of returnfor container handling operations is appreciably lower than the generalcargo operations. This is due to the larger civil work's investmentrequired to establish the container operations (i.e. construction ofcontainer stacking area and container freight station). Similarinvestmenzs required for general cargo operations (i.e. construction ofwarehouses), have already been made and only minor works is required underthis project.

Table 4.3

Economic Rate of Return

MOGADISHU BERBERA KISMAYO

GC/BC CONT GC/BC CONT GC/BC/CONT

0 Best Estimate 46 21 28 22 36ii) +50% Costs 36 15 20 17 26iii) Zero Traffic Growth 33 16 25 15 20iv) Combination of (ii) & (iii) 21 10 16 10 12

GC = General CargoBC = Bagged CargoCONT - Container

4.15 Apart from the investments necessary to improve the cargohandling operation, the Project includes a component to rectify thesubsidence of the Mogadishu breakwater. The rectification is needed tocorrect a shortcoming in the design of the breakwater which was constructedunder a previous Project for which a justification was made at the time theProject was approved (para. 3.06). Without the rectification, the filterlayers of the breakwater could collapse with a catastrophic impact onexisting facilities and investments. The benefit of the rectification isthe saving of the investments in the existing facilities which would belost if the breakwater collapses. These consequential losses are so large(estimated US$38.63 million in 1986 prices) vis a vis the investmentrequired to rectify the problem-(US$3.52 million in 1986 prices includingphysical contingency) that an economic rate of return analysis was notcarried out.

C. *Sensitiviety A y18

4.16 A sensitivity analysis was conducted on the project, based on thefollowing scenarios:

(i) best estimate using 50% of the benefits derived from areduction in ship waiting and service time and traffic

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growth of 2%, 4% and 4% for Mogadishu, Berbera and Kismayorespectively;

(ii) investment cost increases by 50%;

(iii) no traffic growth; and

(iv) combination of (ii) and (iii) of above.

4.17 The result of the sensitivity analysis is shown in Table 4.3.The sensitivity analysis shows that the project, under the worst scenarioof a cost increase of 50% and no growth in traffic will yield a rate ofreturn ranging from 10 to 21% for the various investment packages. Theinvestments are therefore considered well justified.

D. Project Risks

4.18 The first risk is that the even modest growth in traffic forecastwill not materialize. This, however, has been taken into considerationthrough the 'no traffic growth' scenario in the sensitivity analysis. Thesecond risk is a cost increase. Although the possibility of a costincrease exists, the probability of costs substantially exceeding theestimates is not likely in this Project. All three ports have had majorconstruction works in recent periods and have good cost data and these formthe basis upon which the costs of civil works under the Project areestimated. The third risk is that the increase in productivity targettedfor the project as a result of the investments in cargo handling equipmentand institutional development will not materialize even at the modest rateprojected. This possibility is being minimized by the Project'scomprehensive training program with heavy reliance on courses and materialsdeveloped by institutions with proven track records in training (e.g.UNCTAD, SIDAN and the GTZ sponsored Industrial Vocational Training Centerin Mogadishu).

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V. FINANCIAL IVALUATION

A. Historic inianial Performance

5.01 The recent financial performance of SPA is detailed in Annex 5.1and 5.2 and highlights and key operating ratios are illustrated inTable 5.1 below.

Table S 1 SPA - ESum Of Recent Fiuancial Performance

1979 1980 1981 1982 1983 1984

Revenues 123.7 130.8 133.5 152.4 181.3 266.4

Working Profit 76.0 82.0 82.6 90.1 108.0 180.3

Pretax Profit 63.2 70.1 64.2 74.1 92.0 164.5

Working Ratio (Z) 48.9 46.4 51.9 51.4 49.2 38.2

5.02 The financial performance of SPA as disclosed in its annualaccounts for the period 1979 to 1984 appears very satisfactory. Theworking ratio was broadly maintained at a satisfactory level between 1979and 1983 and improved substantially in 1984 as a result of the combinedeffect of a tariff increase implemented in 1983 and the recovery of cargothroughput from the depressed levels of 1983. SPA's liquidity remainedgood throughout the period with the current ratio improving from 1.5 in1979 to 1.9 in 1984 despite cumulative remittances of So.Sh. 455 millionsin corporate taxes and dividends to the Government out of cumulative cashgeneration of SoSh 619 million between 1979 and 1984.

5.03 This apparently satisfactory performance, however, masks theserious deterioration in SPA's financial performance in real terms over theperiod. The apparently good financial performance together with inadequateaccounting capabilities within SPA inhibited the revision of tariffs inline with domestic inflation over the period. Tariffs have been revisedonly three times between 1977 and early 19851/ and have only partiallyoffset underlying increases in operating and"capital costs. By 1985,shipside tariffs2/, payable wholly in US dollars, had declined by 46% indollar terms on the 1977 levels (an increase of only 158Z in So. Sh. termscompared to cumulative domestic inflation of about 900% over the period).

1/ In 1977 when the tariff structure was established; in December 1982;and in January 1985.

2/ Comparisons are based on Mogadishu port tariffs; however, tariffincreases have been based on proportionate-increases which are uniformfor the 3 major ports.

- 38 -

Shore handling charges payable in domestic currency increaoed by only 60X

over the period. Only stevedoring charges, payable partly in domesticcurrency, have been largely maintained in US dollar terms and even thisrepresents a significant erosion in real terms in domestic currency (seeAnnex 5.6 for comparative tariff levels analysis). Against thisbackground, the real return on net fixed assets declined from around 16% in1979 to zero in 19843/ as compared to the nominal return in 1984 of 48%.Importantly, the respectable working ratios were achieved largely at thecost of severe compression in real wages and salaries with attendantadverse consequences for labour productivity and morale.

5.04 Moreover, despite the significant erosion in shore handlingcharges, SPA has had to devote a significant and increasing proportion of

its free cash flow to financing the indebtedness of other state agenciesand civil service departments to it on account of shore handling services.As a result, debtors as a proportion of turnover increased from a high 411in 1979 to 62% in each of the years 1980, 1981 and 1982 and declinedthereafter to 53% in 1983 and further to 42% in 1984 only because theDecember 1982 tariff increases were heavily weighted towards prompt payingvessel owners and their agents.

5.05 Finally, despite its status as one of the country's major foreignexchange earners, SPA has experienced increasing difficulties in acquiringforeign currency to meet its routine capital expenditure and sparesrequirements because of the country's severe foreign exchange shortage andthe Government's strict rationing of available foreign exchange.This has severely affected equipment availability and led to concommitantdeclines in overall port productivity.

B. Financial ObJectives

5.06 The SPA's financial objectives are: (1) to ensure throughappropriate pricing and cost control measures the efficient utilization ofthe fixed assets and cther resources vested in it; (ii) to generateadequate returns for the Government on its investment in the ports; and(iii) to generate a sufficiently high level of free cashflow to cover itsroutine recurrent and capital expenditures. In pursuit of these objectivesthe SPA has been subject to some constraints. The most important of theseconstraints have been: (a) statutorily defined distribution obligations toGovernment including the proportion of profits SPA can retain; (b)restrictions on SPA's ability to pay its workforce as it deems appropriate;(c) restrictions on the abi-lity of SPA to revise tariffs; and (d)constraints on the SPA's access to its foreign currency requirements.

5.07 The broad financial objectives are considered appropriate duringthe proposed Project period. Some of the constraints, in particular thoseon tariff setting and access to foreign currency, have had a deleteriouseffect on the ports operating and financial performance (paras. 5.03 and5.05). These adverse effects have been exacerbated by SPA's inability to

3/ Based on the revaluation of fixed assets undertaken in December 1984as part of the Master Plan Study.

- 39 -

recognize the underlying deterioration in the ports' performance due to aninadequate information system and lack of skilled accounting staff tooperate the basic but adequate management and financial accounting systemdesigned for SPA by consultants in 1977 (para. 2.31). Under the proposedProject, specific changes in the existing institutional arrangementsgoverning tariff setting and the SPA's access to foreign currency will besought (para. 5.15). In addition, the proposed Project will seek tostrengthen the SPA's accounting, financial management and managementinformation system through a -program of technical assistance and training(para. 2.33).

C. P?oiections of Financial Performuce -

5.08 The financial projections for SPA for the period 1985 to 1994 aredetailed in Annexes 5.3 to 5.5 and summarized in Table 5.2. Theprojections, which are in current So.Sh. terms, are based on the trafficprojections detailed in Chapter IV. The detailed print-out of thefinancial models used is available in the Project file. The keyassumptions used are that: (i) US dollar and So.Sh. denominated tariffsare revised annually from 1986 and semi annually from 1989 to reflectrespectively the rate of foreign inflation (MUV index) and domesticinflation in the elapsed year; (ii) structural tariff increases of thefollowing magnitude are implemented in 1988: US dollar denominatedshipside tariffs other than for stevedoring + 85%; stevedoring fees + 35%;shore handling charges + 175%; (iii) fixed assets are revalued annuallyusing the domestic inflation rate as a proxy for changes in the specificprices of the ports' fixed assets; (iv) labour utilization in the portsfollows broadly the targets agreed with SPA and outlined in para. 3.04; inaddition wages and salaries are annually adjusted to reflect the prioryears rate of domestic inflation and the excess of wages paid per unit tonperformed over the contract payments is progressively reduced from 150% ofcontract payments in 1985 to 75% in 1988 and thereafter - this allows for asubstantial increase in the real wage of the casual work force; (v) thefree market exchange rate of the So. Sh. vis-a-vis the US dollar isdetermined on a (trade unweighted) purchasing power parity basis; thecurrent foreign exchange regime in which SPA has participated since October1985 and under which exporters are entitled to retain 65% of their foreigncurrency revenues and surrender %he balance at the official exchange rateis maintained through the projection period (the official rate isassumed equal to 50% of the market exchange rate). These assumptions areconsidered reasonable.

- 40 -

Table 5.2 SPA - Swmay of Finantal Pr etw^s(uiJlons So.Sh)

1985 1986 1987 1988 1989 199I 1991 1992 1993 1994 1995

Rewxues 272 489 603 1155 1402 1691 1947 2215 2528 2878 3175

*wklng Profit 173 349 387 834 1017 1416 1634 1861 2125 2421 2567

Pretax Profit (43.4) 86 73 377 372 568 689 482 687 885 251

Net Find Assetsa/ 5927 6870 8064 9562 11271 12389 14344 15333 16301 18684 20878

w*nltdg Ratio tX) 36.5 28.5 35.7 27.8 27.4 16.3 16.0 16.0 16.0 15.9 19.2

Rln on NetFiud Aeets (Z) bI (0.7) 1.2 0.9 4.4 4.2 5.9 6.2 5.4 6.4 6.7 3.9

Dabt ServiceO~ver ci - - 38.1 10.5 5.8 4.2 3.7 3.8 3.1 2.0 2.9

zciu4e cost of Berbera Fort quay extensim (1985) and projected ost of Kisuo port mhalitateit(epected COaPlet1x In 1988).

b 'f rat of eturn in 1988 and 1989 are depressed by the substantial (and min-reosrig) technia -stanc en dVd fullly in thse years; exedig the iqact of this factor, the rate of

retn would be, rectively, 5.4% and 5.2% in 1988 and 1989.

B( Based On tbs asswPtion tat the MA, credit will be on-le1t b the C,vrrm to SPA for 15 yeaswith 5 yeas gace peiod at 12% p.a.; SPA w aseam the forei o rLsk.

5.09 The projections indicate a material improvement in SPA's workingperformance. The working ratio improves from an estimated 38% in 1985 toan average of about 17% p.a. between 1990 and 1995. As a result, cashgeneration is st.rong with cumulative cash generated amounting toSo.Sh. 14,785 million over the projection period 1985 to 1995. Debtservice coverage is also satisfactory over the projection period whichincludes the first year after full Project implementation.

5.10 Notwithstanding this good working performance the rate of returnon SPA's net fixed assets, after excluding the cost of the recentlycompleted Berbera quay extension and the expected cost of therahabilitation of Kismayo port from the asset base, averages only 5.7%between 1990 and 1995. Inclusion of these costs in the asset base reducesthe projected rate of return to an average of 3.3% between 1990 and 1995.This low rate of return relative to the substantial degree of cashgeneration reflect mainly 3 factors: {i) the ports of Kismayo and Berberahave fixed (infrastructural) assets significantly in excess of the

- 41 -

requirements of their forecast levels of cargo throughput; (ii) the oldport of Mogadishu, which houses the SPA's headquarters, has substantialinfrastructural assets which either have alternative uses but aresubstantially underutilized or are effectively sunk investments with thedevelopment of the new port; and (iii) the development of Mogadishu's newport, which is not in a sheltered harbor, entailed substantial investmentsin construction of a breakwater (the breakwater represented, as of December1984, about 40% of the gross replacement cost of all fixed assets inMogadishu's new port and 16% of SPAs total fixed assets similarly valued).The rate of return on net fixed assets at Mogadishu's new port whereinfrastructural assets are well-sized for the prospective level of trafficis projected at about 7% p.a. between 1990 and 1995 (excluding the cost ofthe breakwater). Under this project IDA will seek assurances that any newinvestments (particularly infrastructural ones) in the commercial ports areboth economically and financially justified (para. 2.26).

5.11 The rates of return on net fixed assets, although relatively low,are however, consistent with the SPA being able to generate sufficientresources to meet its financial and operating objectives (para 5.06).Accordingly, it is recommended that under the proposed Project, agreementbe reached with the Government and SPA that SPA will set its tariffs so asto achieve a rate of return on its net fixed assets in use as annuallyrevalued of at least 5% p.a. from January 1989 (para. 6.01 (ii) (f)).Further, to facilitate attainment of such a return, agreement was reachedduring negotiations that SPA will provide to IDA by March 31, 1987 a planfor phased tariff increases to be implemented between July 1986 andDecember 1988; such increases will be of a magnitude to enable SPA toachieve the agreed rate of return; thereafter, tariffs will be reviewedsemi-annually and adjusted to meet the rate of return objective asnecessary (paras. 6.01 (ii) (g) and (h)).

5.12 The projections also indicate that remittances to the Governmentin the form of corporate taxes and dividends will be significantly reducedfrom the levels they would otherwise have been without adequate (inflationadjusted) depreciation provisions. The projected cumulative pay-out to theGovernment in dividends and corporate taxes over the period 1985 to 1995 isSo.Sh 3568 million out of cumulative cash generation over the same periodof So.Sh 14785 million. This represents 24% of cumulative cash generationas compared to 74% of cash generation paid out to the Government in theprevious 6 years. However, this increase in the proportion of cashgeneration retained by SPA carries little practical significance.Currently, the distinction between the SPA as an (autonomous) entity andthe Government's interest in SPA as a proprietor is at best a blurred one:the SPA is not endowed with autonomous cash management responsibilities andall but a small proportion of cash generation is either distributed toGovernment as dividends, paid in as corporate taxes or deposited with the

- 42 -

Ministry of Finance on an interest-free basis. Hence, the effectivedistribution to the Government will still be very high notwithstanding thelow dividend and tax payments. This high level of dlstribution does notmatter in principle so long as it is consistent with SPA being left withsufficient resources and autonomy to operate effeciently. This has notbeen the case in the past. However, the Government has indicated that theexisting institutional relationship between government and government-ownedenterprises (ineluding SPA) is under review and may be subject to change ina direction that will enhance the financial and operating autonomy of theseenterprises. In addition, during negotiations, the Aasociation wasinformed that: (i) measures have been taken to reduce the proportion ofSPA's retained cash currently devoted to financing involuntarily otherGovernment agencies indebtedness to SPA (para. 5.13); and that (ii)arrangements will be devised whereby SPA will effectively be able to useits retained cashflowto purchase equipment, spares and supplies requiredfor efficient operations from overseas (para. 5.15).

5.13 The projections are also based on the assumption that from 1986debtors at year-end will represent 16% of turnover (58 days). By decree,inter-Government-owned enterprises' indebtedness should not exceed 45days. However, outstanding indebtedness of other Government-ownedenterprises and Government departments to SPA has been runningsignificantly in excess of this (para 5.04). It is reco_mended that theprovision by SPA and the Government of a detailed plan for the phasedreduction of such overdue debts over a period of time acceptable to IDA bemade a condition for Credit effectiveness (para. 6.01 (i) (e)).

foeiegs Ecang RtentiLon

5.14 SPA's projected foreign currency revenues are detailed by servicesource in Annex 5.7. The projections are summarized, together with theamounts retainable by SPA and direct foreign currency expenses, in Table5.3 below.

- 43 -

Table 5.3 SPA - S omy of Foe nue ad ExWe

(US$00)

1986 1987 1988 1989 1990 1991 1992 1993 1994 1995

Foreip CurencyPevsemes 2,664 2,951 4,655 5,103 5,704 6,254 6,624 7,026 7,449 7,581

Foreip CurrencyPetentixs 1,731 1,918 3,026 3,317 3,708 4,065 4,306 4,567 4,842 4,928

Foreign CurencExene andCapital Expenditure a/ 640 699 767 834 925 989 1,044 1,102 1,164 1,230

Project EquipientReplacement b - - - - - - - -. 1,357 3,038

Net Forelg ExcaeRetainable c/ 1,091 1,219 2,259 2,483 2,783 3,076 3,262 3,465 2,320 660

a/ Capital epeitures Included are ca rutine item and are based on airent outlays xljusted forinflation.

b/ Based n assumd average euipet life of 7 years ard the projected Project imp atin schedule.

c/ Al foreign acrrercy revewes are cDUected by Soulia Shipping Agecy and Line passed an relativelyproptly after hips deparue; foreign airrency eqxnditur are msre largely with payments inadvance; thm this figur represets largely potential foreign currency holdings.

5.15 These projections indicate that SPA's net foreign currencyrevenues after foreign currency expenses and mandated foreign currencysurrenders will range from US$ 0.7 million to US$ 3.5 million p.a. over theprojection period. Under prevailing and expected balance of paymentsconditions over the projection period, there is little justification forSPA retention of this balance of foreign exchange earnings in foreigncurrency. However, since timely and certain access to foreign exchangewill be particularly important under the proposed Project which willconsiderably increase the capital intensity of port operations, theAssociation obtained the agreement of the Government during negotiationsthat SPA will maintain until the completion of the Project, a specialaccount in a commercial bank outside Somalia and shall deposit therein anamount in dollars sufficient to meet its annual needs for spare parts andequipment (paras. 6.01 (i) (b) and 6e01 (ii) (m)). The total amount to bedeposited in the account each year will be determined in advance based on 3yearly forecasts of foreign currency expenses to be provided each year bySPA to the Ministry of Finance and the Association for approval. Anyexcess of

- 44 -

retainable foreign currency over agreed amounts to be deposited in theexternal account in any year will be subject to surrender by SPA to theMinistry of Finance at the prevailing market rate of exchange.Establishment by SPA of an external account will be condition of crediteffectiveness (para. 6.01(i)(b).

5.16 Qverall, with agreements on: (i) returns on net fixed assets inuse (para. 5.11); (ii) settlement of overdue debts to SPA (para 5.13);(iii) access to foreign exchange (para 5.15); and (iv) the partialrestoration of 1977 real tariff levels and, based on the assumptions usedin the projections - which are considered reasonable - SPA should be ableto attain, in a satisfactory manner, its objectives (para. 5.06).

Other Pinancial Covenants

5.17 During negotiations agreement was reached with SPA that duringthe proposed Project implementation period: (a) no additional capitalexpenditure beyond the So.Sh. equivalent of US 0.5 million would beundertaken without IDA agreement; and (b) no additional debt would becontracted if the debt service obligation on such debt will result in thedebt service cover for all debt in any year falling below 4x (paras. 6.01(ii)(i) and (j)).

-45-

-- VI. AGRISNENTS REACHED AND IECOMUZNDATIONS

6.01 During negotiations, agreement was reached-with the Governmentthat:

(1) CON11itons of effectiveness

(a) SPA will establish a Training Fund to befinanced by annual appropriations on agraduated scale of percentages of SPA's ananualrevenues (para. 3.08);

(b) SPA will open an external foreign currencyaccount in which it will deposit a sufficientproportion of its foreign currency revenues tomeet its requirement for spare parts and otherforeign currency expenses (para. 5.15);

(c) SPA will enter into arrangements satisfactoryto the Association whereby selected majorinternational shipping lines may undertakecontainer/ro-ro operations within a definedarea set aside for this purpose in the port ofMogadishu (para 3.03);

(d) The Government will submit to the Associationfor review and approval a plan of action forimproving the efficiency of SSAL includingallowing private individuals and companiesincluding joint ventures of foreign and localinterests to engage in shipping agency work;(para 2.28);

(e) Government will provide a detailed planacceptable to the Association for thesettlement of overdue debts to SPA by otherGovernment agencies (para. 5.13);

(it) General Covenants

(f) SPA will set its tariffs to achieve a rate ofreturn of 5% per annum from 1989 on its netfixed assets in use as annually revalued(para. 5.11);

-46-

(g) SPA will provide plans for the phasedimplementation -of structural tariff increasesbetween July 1986 and December 1988 by March31, 1987 (para. 5.11);

(h) port tariffs will be reviewed semi-annuallyfrom 1989 and adjusted as necessary to meetthe financial objectives set out at (para.5.11.)

(i) during the project implementation period, noother capital expenditure beyond theequivalent of US$500,000 is to be undertakenby SPA without the concurrence of IDA(para. 5.17);

(j) during the project implementation period, noadditional debt is to be contracted by SPAif such debt will lead to the overall debtservice ratio falling below 4x (para. 5.17).

(k) not later than July 1, 1987 SPA will submit toIDA for review and comments its proposals forstandardizing gang composition for handlingconventional cargo and thereafter implementsuch proposals taking into account IDA'scomments and the availability of equipment tobe procured under the Project. (para. 3.03);

(1) by April 1 of each fiscal year, SPA willdeposit into the Training Fund a prdportion ofits gross revenue of the previous fiscal yearon the agreed scale (para. 3.08);

(m) SPA will maintain until the completion of theProject, a special account in a commercialbank outside Somalia and shall deposit thereinan amount in US dollars sufficient to meetits annual needs for spare parts and equipment(para. 5.15);

(n) Government will implement the plan of actionapproved by IDA to improve shipping agencywork (para. 2.28);

(o) SPA will undertake to achieve the performancetargets as set out in para. 3.04; and

-47-

(p) SPA will forward to the Association auditedfinancial accounts no later than 9 months fromthe end of each financial year in 1987 and1988 and no later than 7 months from such yearend in subsequent years (para 2.37).

6.02 Subject to the above conditions, the proposed Project is suitablefor a credit to the Government of Somalia in the amount of US$22.6 millionequivalent on standard IDA terms.

-48-

Port M*dexWltim Pr2ject

Past Baik rupFinced TRuport Projects

Credit maxlmtYear Namuber (IM$ LUivn) Status

1965 74-W 6.2 HiYay (Afgpii-&doa Road) Cxistruction cqpeted in1971.

1968 123-60 2.3 Htgway (Afgoi-Baidoa Road, nsttuction ompleted inSpplenentary) 1971.

1969 S5-0 0.5 Ports (bgadishu Pbrt ngneerig) bqmleted lIn 1970.

1972 295-0 9.6 H1iy (Hargisa-Berber, Road) Project MDpleted In 1975.

1973 359-0 12.9 Ports (bogdislu Ebrt) Qitruocn m ecepleted in1977.

1975 586-60 5.2 Pbrts (ogadisbu Port onsNtction completed InExtension) 1977.

1977 699-60 7.0 E}4*W (Hareisa-Boram Road) Completed up to Nibadid(1985).

1978 838-60 5.5 Ports (Banana Berth Exensio) Project capleted in 1983.

1983 1324-60 21.4 yII y (Afgoi-adoa Road) UIder aistruction.

-49-ANNEX 2.1

Port Modernization Project

Port Facilities

Mogad4 shu Berbera KisuPYo

1. Total Port Area 270,000 sq.m 40,030 sq.m 56,000 sq.m2. Total Quay length 1000 m 640 m 640 m3. Berth Total No. of which 6 4 4

(a) General Cargo 5 4 4(b) CoAtainer and ro-ro 1 _ _

4. Draft: (a) minimn 8 m 9.5 . 9.5 a(b) Maxim=n 12 m 9.5 m 9.5 m

5. Transit Sheds/Warehouses, No. of 3 1 1(a) Total Covered 15,000 sq.m 5,760 sq.m 610 sq.m(b) Total Open 160,000 sq.m 14,500 sq.m 3,000 sq.m

6. Cargo Handling Equipment, No. of(a) Fork Lift Trucks 3 8 2(b) Cranes 4 4 2(c) Tractors 7 5 2(d) Trailers 56 16 5

7. Marine Craft, No. of(a) Tugs 3 2 1(b) Pilot Boat 1 1 1

8. Weighbridge 1 1 1

-50-Annex 2.2

SOMALIA

PORT MODERNIZATION PROJECTSTAFFING ESTABLISHMENT, 1985

Professional/Higher Level Salary Range (SoSh) No. Z of Total

A3 1200 4A5 1150 6A6 1100 4A7 920 10-

Sub-total T4- 3.0

Supervisory

B- 920-1100 60 7.5

Technicians

F 600-1200 23 2.9

Clerical

c 350-800 223 27.8

Artisans

X 400-800 386 48.1

Messengers

D 250-450 86 10.7

Total 802 100.0_-

-51-

AWN 2.3

ITairng of SPA Pvwune1 1980-4

Comirse qm location lb. Atteoied

Civil lng eIn & Partners londc 1 12

Port I'fli_nt Mlnistry of fransxart, Tokyo 3 9Japan

PortMae UNDP/UAD/SM. Mu*sa 4 6

Trai8r L"PAMM/SIDA Cardiff 2 2

Port Unfied Systwen IMP/UA ID/S M 3 1 1/2of StatIsti8s

Port- ent lNP/t D/SmI Delft 1 1 1/2

Seminw/Study Tlorw N/W D/SIDA lenLngrad 1 1/2of Ports in USSR

Port Oprtion l SID New York 2 2

Seminr on Pbrt UNC=D QOessa 1 1/2Operation

Maritium tar RUAP/IEI maim 2 bdversdty

-52-

ANNEX 2.4

SOMALIA

Port Modernization Project

Gang Composition (Conventional Cargo Handling)

Recommended 2/Direct

Current 11 Ship to Storage Delivery

Foreman 2 2 2Stevedore (hatchman) 8 8 8Winchman 1 1 1Signalman 1 1 1Tally Clerk 1 I ILongshoreman (wharf) 6 2 8 3/Longshoreman (storage) 11 6 _

30 21 21

1/ An average gang size is 30. The actual size of a gang can varyaccording to the type of commodities handled.

2/ SPA has agreed to the reduction of the gang size to 21 where a forklift truck is part and parcel of the gang. Further reduction in gangsize can be made when more mechanized cargo handling equipment isavailable.

3/ Six longshoremen from the storage area will be moved to supplement thetwo longshoremen at the wharf when there is a direct delivery.

-53-Annex 3.1

SOMALIA

Port Modernization Project

Composition of Operational Experts

No. Man-months

1. Manpower Training, Planning and Development 1 242. Cargo Handling System and Procedures 1 183. Procurement and Inventory Control for

Spares and Supplies 1 124. Workshop and Maintenance Engineering 1 245. Financial and Accounting Procedures 1 246. Statistics and Management Information Systems 1 127. Customs Procedures and Documentation 1 12

Training Experts

1. Operation 1 122. Financial and Administration 1 123. Engineering 1 12

l

-54-

Annex 3.2page I of 5

SOMALIA

Port Modernization Proect

OPERATIONAL SEPETS

Term of Reference

1. Managerial and professional expertise and technical assistance isrequired to launch the Somali Ports Authority (SPA) into a phase of modernpokt operations in which there is a significant use of mechanised cargohandling equipment. Particular needs have been identified in the areas of:

(a) manpower training, planning and development;

(b) cargo handling systems and procedures;

(c) workshop and maintenance engineering;

(d) procurement and inventory control of spares andsupplies;

(e) port financial management and accountingprocedures;

(f) statistical compilation and managementinformation systems; and

(g) custom procedures and documentation.

2. To assist SPA in building and strengthening an appropriateresources base in these areas, a team of 7 operational experts will beplaced in key positions as deputies to the SPA managers and the customsdirector concerned with line management responsibility and authority.

3. Each expert will have three primary tasks:

(a) Formulate the required systems and procedures toimprove the operational efficiency of hisdepartment and implement them during his term ofoffice. In considering the systems andprocedures to be adopted, he shall as a matterof routine, explain to the SPA manager concernedand his assistants/subordinate staff the purposeof the exercise, the benefits he expects toobtain from the introduction of the proposedsystems and procedures (quantifying thesebenefits wherever possible), the techniques heuses and the basis by which he arrives at theconclusions and in the process turning it into ameaningful teaching exercise;

-55-

Annex 3.2page 2 of 5

(b) instruct officers concerned on the systems andprocedures adopted and compile them intoreference manuals. In this regard, it isexpected that the operational expert willallocate 25Z of his time during his term ofoffice as an instructor;

(c) assist the manager concerned in the day to daymanagement of his department. 'He shallundertake tasks assigned-to him by the SPAmanager. In a participatory managementenvironment, the SPA manager will be exposed to

--- - the skills, techniques and practises applied bythe operational expert in problem solving anddecision tiaking and the role of the operationalexpert is to transfer these managementtechniques and practises to the SPA manager andlocal staff as fully as possible.

4. A secondary task of the operational experts is to assist theoperational expert for manpower training, planning and development in theformulation of courses to be conducted in the Port Training School and thedetermination of course contents in their respective fields of expertise.

5. The operational experts, the duration of engagement and the areasof their responsibilities, are as follows:

(A) Manpower Training, Planning and Development - 24 manmonths. Deputy to Personnel Manager. Responsible for setting up the PortTraining School, manpower training, planning and development. He willassist the Personnel Manager to:

(i) estimate SPA's manpower requirement in themedium and long term in terms of number, typeand level of skills and plan for theiravailability;

(ii) compile a training manual to include typeandfrequency of courses to be conducted, determinethe syllabi and course contents, selectparticipants for the various training coursesand monitor and evaluate the effectiveness oftraining courses;

(iii) prepare career development plans for SPAofficers and staff.

Upon the expiry of his 2 year term of office his duties andresponsibilities will be assumed by a local officer and an Important taskof this operational expert is to ensure that the local counterpart is

-56-

Annex 1.2

~ -page 3 of 5

properly trained and -capable of taking over from him. As head of the teamof operational experts, he will coordinate and monitor the work andperformance of the operational experts. He will submit quarterly reportsto the General Manager, SPA who will forward them to IDA.

Qualification and experience: 15 years holding responsible positions in aport of which at least 5 years are in personnel management and or training.

(B) Cargo Handling Systems and Procedures - 18 man-months.Deputy to Port Manager, Mogadishu. Responsible for the proper utilizationof port and storage facilities, correct use of equipment and gears andcargo handling methods and the introduction of appropriate systems-andprocedures for the handling, storage and documentation of cargo. He shallassist the Port Manager, Mogadishu, in designing the lay-out of the newContainer Yard and in organising the management and operational structureof the Container Terminal and the introduction of container cargo handlingsystems and procedures.

Qulaification and experiences: 12 years experience in cargo handling(conventional as well as container) and port operation.

(C) Workshop and Maintenance Engineering - 24 man-monthsDeputy to the Head of the Engineering Department. Responsible for the'stablishment of modern workshops in the ports and for the repair andmaintenance of port and cargo handling equipment. He will assist the headof the Engineering Department to manage and operate the workshop inMogadishu and provide on the job training to workshop personnel. He willalso introduce a prevention maintenance program and draw up a schedule forequipment maintenanoe.

Qualification and experience: 12 years experience in workshop managementand the repair and maintenance of port equipment.

(D) Procurement and Inventory Control of Spares and Supplies -12 man months. Reports to head of Engineering Department. Responsible forsetting up a new Procurement/Supplies Section and, in conjunction with theoperational expert for workshop and maintenance engineering, establish asystem and procedure for the procurement of spares and supplies and theirinventory control.

Qualification and experience: 10 years experience in procurement andinventory control in a port.

(E) Financial Management and Accounting Procedures-24man-months. Deputy to Finance Director. Responsible for the introductionof cost accounting procedures, budgetary system and financial managementprocedures will assist in structured phase-in of UAS and be responsible forintroduction of simplified procedures for maintenance of- fixed assetregister and annual revaluation of fixed assets. Qualification andExperience: professionally qualified cost and management or financialaccountant with at least 10 years experience in port operations.

-57-

Annex 3.2page 4 of 5

(F) Statistics and Management Information Systems-- 12man-months. Deputy to Planning Manager. Responsible for the introductionof appropriate management information systems, traffic forecasts,statistical compilation and the monitoring of operating performances.

Qualification and experience: 10 years in port management informationsystems.

(G) Customs Procedures and Documentation - 12 man-months.Deputy to Director General, Customs. Assist the Director General in allfacets of customs work, streamline custom procedures with particularreference to the clearance of cargo from the ports, review currentprocedures and practices and submit a-detail report on measures required toimprove the general operational efficiency of the Customs Department.

Qualification and experience. 15 years experience as a senior customsofficer in a port.

6. Operational experts with responsibilities for the introduction ofnew or improved systems and procedures will submit comprehensive proposalsand recommendations for consideration of and approval by the GeneralManager prior to their implementation not later than 6 months after theyassume duty. Upon the approval of the Genr.ral manager, the implementationprocess will commence with the operational expert instructing local portofficials concerned on the application of these new systems andprocedures. Implementation of the new systems and procedures will be theresponsibility of the operational experts and their performances will beevaluated, inter alia, by the extent and the degree of compliance of thesenew systems and procedures. Operational experts are required t compiletheir newly introduced systems and procedures into manuals for universaladoption and application at all Somali ports. The ultimate success of thework of the operational experts in this regard will be the totalapplication of the new systems and procedures by all port staff in theirrespective fields. As the services of the operational experts and thepurpose of the introduction of the systems and procedures are to increasethe productivity and improve the performance of SPA, the performance of theoperational experts will be maasured against the following operationaltargets.

(a) Labour Productivity:

Ton per Tons per gang Tons Per BerthGang Hour Per Shift Per day

General Cargo 10 80 400Bagged Cargo 16 128 640Bananas 16 128 640Container (TEU) 10 80 320Ro-Ro (unit loads) 12 96 354

-58-

Annex 3.2Page 5 of 5

(b) Cargo Handling Equipment Availability: 75Z

(c) Average AnnualShipWaitngTime: I day

7. Operational experts should see their role as a transferor ofmanagement/professional techniques, skills and expertise and should ensurethat by the end of their terms of office, local counterparts will have themeans and the capacity to take over their duties and responsibilities.

-59- Annex 3.3

SOQjLIA

Lort Modernlzation Prgject

Training Reguirements

Categ2ry Xqov Training Program Location

Senior I4anagement 12 General Port Manhgement, ipp(UNCTAD)V/ SIDAM/Bandari College

Middle Management 49 Port Management andSimulation, IPP (UNCTAD) P.T.S2./

Operations 7 Port Operations Seminar P.T.SEngineering 13 Repair and Maintenance of

Equipment P.T.S/IVTC 3/Administration 16 Port Administration Seminar P.T.S/SIDAMFinance 13 Fort Finance Seminar P.T.S/SIDAM

Skill/Trade

Equipment Operators 80 Equipment Operation (UNCTAD) P.T.S.Tally Clerks 75 Cargo Tally P.T.S.Winchmen/Hatchmen 150 Operation of Winches and

Stevedoring P.T.S

Technicians 61 IPP (UNCTAD) P.T.S.Mechanical 40 Mechanical Repairs P.T.S/I.V.TCElectrical 16 ElectricalRepairs P.T.S/I.V.TCCivil 5 Kaintenance'of Civil Works P.T.S/I.V.TC

Supervision

Ship Foremen 25 IPP (UNCTAD) P.T.S.Berth Foremen 25 IPP (UNCTAD) P.T.S.Pier Supervisors 75 IPP (UNCTAD) P.T.S.

Others 30 Custom Procedures andDocumentation P.T.S.

1/ Improving Port Performance: Educational Material developed by UNCTAD.

2/ Port Training School.

Industrial Vocational Training Center, M4ogadishu

_ -60- Annex 3.4-60--

SOMALIA

PORT MODERNIZATION PROJECT

BASIC TRAINING CURRICULUM FOR SPA STAFF

Type of Course Duration (days)

General Port Management Seminar 7Port Management & Simulation 5Basic Course for Middle Management 12Repairs and Maintenance for Middle Management 9Port Operation for Middle Management 9Port Administration for Middle Management 12Port Financial Administration for Middle Management 12Basic Course for Superintendents and Foremen 22Intermediate Course for Superintendents and Foremen 18Mobile .dne Operation 60Fork Lift Truck Operation 35Tractor Operation 26Winch Operation 14Handling of Dangerous Cargo 18Unit Load Operation 18Maintenance of Mobile Equipment 18Improving Port Performance (UNCTAD) 18 courses/modules 60Container Operation 18Customs Procedures and Deoumentation 30

VW li Ii, I , ; I Ps -' 3

Ii ii il U us

;-m ;Im I 's' ;I m ia m IPsIm -;im l;J Ib*Pilo 1; Ila 1;p1m 1,81w Mt1; 1s I a lR |Ma|

P ta ;im- W;M him I;im. i;im i;im I

;IM III= dIM IPIM lti 'I Pr;l I Ps; PI 1,a Il;Im WIlm lWla I;R1 Isim I;im 0

IIa1 IM ;4 11;Im I;m W;M hoe;lM l1sa i;;; ;}; W il .6I ; M 1 1 61; I I s lim IPW 1m

Oai I;lGia l;loSt; I I ;= l iU ; I -f |§ I=°-1a; Iia= Wa1 |"S|m 181M1; I|M 11; I 0 ii

- iM It ; lr*G |s|sm 10lloW;o 1Is oplJ !i u| |i

-Vl lSPiM film itl lolo loim !Palmo ll!up ; iglm i t;iM 1W1 1;1;a v [e; I--; i||

Ma lil; 13il i tG iilo I Ilai IPW m|

311= 13;1;i Wl;lti 1; lil; t;II Ilioa Iloia:o *|

:lSIa lilm W Wa;; . li;t I;; jM Iilo lo; I mlW

l1;; Wa iMim Iiai3 lita; 1G;I Ilialo ; !

IlaS igil WI Woi ;lia Il1; ia, Wa; !

i;iStt;I= tXlC W il ji l;lii Itl;lia; wa II;'Ui} M Wo1; I I lia;;; 1;1G; Iliag ISl;;ia sI

61a III= 41;; Will lSi lm i 11 film W

s1= IslN 1;;: 1X1 ~~~;IMX; ;; I I; lG4 W

-19-.E XSUUY

41

a:-11 sw ~_0 ;;0 sO two woe woo ae Ng t.w a . W # 0.0 W sOs #U n W' _6 a )0" a W t ~o 40 nc 06 Lo s4 on In s0 VT 81 w- ;saw

""~~~~~~~~~~~g,S 'S' wo w. C Z'O ae ' W-u s taF*ts "£6 g; Mt 0:, ass u " 5-M1 no"* 6ug Al 0.0 t "O * I >

*_ *_ tes ccro Zo ero uset~~~~~~~~11 C iits trltU o -i i m s R us *oss no av oo ;ee* ete sococe00swzszanzm ssi r WDo- " ar W 40 II£ a°S &s :&X CS: uo5 te *iow M,*ee ° eO "° ¢e ° e> eo eo 0 W RAsff"l Ss

ZeW_s Zi ;Q_ _ e t 6 ;; -e e*O ccr ee- c e 0- e cr e oeo cr-M a- owz s;;-utMl WO-a U n_ WO- wsfl"s W* nW W*-aT asteiss s ST ;;:i, i us J

c-: #" V; e7 aV etv -' 10 e9 e*° -8t -°° g« -2 - 0 e0 ... - W;" S °4ng X ¢ ° ee

a "1 e n' W

|£ r t e e eSe S-° 3 t e ' e | £ S § *rt WE s #s "# CO v #:t X X s a'T ah S 2~~~~~~~~~~~~~~~~~~-a il, ., 0 . ei" ,* " C. 0=1101

9" = 97Zo s aT et ce te aro ai-o w eo e £ ir s a3 CeDo a-° ao so 2e- W- a; i-a ;-W ZTlt s° 0n ea# 0 g WW T- sW W s sl W=s

n_ bF ebo eye ere ee we ere et; cee eee ebo ero eao eee iDU iest eb a se_ eS eeo io io_ eee immil SO 1w 1, fSsIIs #-lp"S ill U c ' a ifi IID *l E D

*~~~~~~~~~~~~~~~~~~~~~~!_ 'Ir a, tr ev MO ee e Dee v eee to woee eoe - u6 G eo e0~~e --~~e~wI~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~t W ',oz _

le-0Wr V- a _ M'o e,0 to 0 w.ae _w o rW n o- rl sg e se e n ; t s_do~~~~~e, g

t m U

map m m

ON 4w Ws co Q,~~~~~4U mo a-

Xln r W -as . wa- aa ma e. m a tw CV ia-a me cin- in a l m .. Wain m i aa-jaw ma m Wa m l go Ain 51KA W WU K W a- i.iii

aim as a u-a in, s-a in-a in a a s~~~~~~sommo ina inaloi-a i- ina i- n aa- -"9". -sw ftwo aM sma i naaammrin-a logo uw-a MIn- m1eWI in-a a-a *a031 "- ina n- in- "N-a ow man mm in-allma ow 3: !:y -as *s-a ma% -aL iMa-a Wm, ~ m

Uses,-i ina - ina i- na ina i- aa i- - in- in- Ona i- na ~ i- aa maa m n as ina - a namain

awind - - again~~~~~~~udMM O

-63- Amuc 3.6

tetlvated Sdheule of Dis h t

ms O~~~~~~~wati.wFscal YewI Dsbirements at end

ivI Ai f Qi Q e of qaEr

1987J 1 --

23 0.30 0.304 0.44 0.74

1968 1 0.50 1.242 0.58 1.823 0.90 2.724 0.98 3.70

19" 1 1.00 4.702 1.00 5.703 1.05 6.754 1.18 7.93

1990 1 1.21 9.142 1.20 10.343 1.5 11.394 1.02 12.41

1991 1 0.94 13.352 0.95 14.303 0.95 15.254 0.99 16.24

1992 1 0.80 17.042 0.72 17.763 0.72 18.484 0.64 19.12

1993 1 0.68 19.802 0.61 20.413 0.50 20.914 0.40 21.31

1994 1 0.40 21.712 0.34 22.053 0.28 22.334 0.22 22.55

ANNEX 3.7-64- Page I of 3

SOMALIA

Port Modernization Project

PROGRESS REPORTING SYSTEM

1. Project Progress Reports:

1. Progress Reports should be submitted quarterly in triplicate, nolater than one calendar month after the end of each quarter. The first reportshould cover the quarter ending December 1986.

2. The Report should contain the following information:

a) General Information

i) the physical progress accomplished to date of report andduring the reporting period;

iI) actual or expected deviations from the project implementa-tion schedule;

iii) actual or expected difficulties or delays and their effecton the implementation schedule and the actual steps taken orplanned to overcome the difficulties and avoid delays:

iv) expected changes in the completion dates of the project;

v) key personnel changes in the staffs of the SPA consultantsand contractors;

vi) matters which may affect the project cost; and

vii) any development activity likely to affect the economicviability of the project components.

b) A bar-type progress chart, based on the project implementationschedule, showing the progress in each project component andincluding a planned and actual expenditure graph.

c) A financial statement in the attached form showing details ofthe expenditure incurred under the various components of theproject and the withdrawals from the credit and fromcofinanciers together with a separate statement showing:

-65-

ANNEX 3.7Page 2 of 3

I) original cost estimates;

ii) revised cost estimates8 if any, with reasons for changes;

iii) original estimated expenditure to date;

iv) reasons for variations of (Mi) above from actual expendi-ture; and

v) estimated expenditure for the remaining quarters of theyear.

d} Brief statement of the status of action in each of the covenantsof the Credit Agreement.

II. Project Completion Report

3. The Borrower will prepare a Project Completion Report (PCR), to besubmitted to the Association not later than six (6) months after the ClosingDate.

4. The primary objective of the PCR is to reinforce self-evaluation bythe Borrower and the Association's operating departments and to facilitatedissemination of lessons learned through the project. In particular, the PCRshould include an assessment of the following:

a) the performance by the Borrower and the Association of theirrespective obligations under the Credit Agreement and whetherthe Association could have been more helpful;

b) the results that can be expected from the project, as comparedwith expectations at appraisal, and whether the original expec-tations were realistic; and

c) whether in retrospect the project was worth doing or could havebeen done better.

5. For those components of the project for which a rate of return wasestimated during appraisal, the PCR should contain a new estimate of thereturn the project is now likely to yield and analyze the reasons for physicalor economic deviations. However, the new rate of return calculation should beas simple as possible under the circumstances and should absorb only a minorportion of the time devoted to the preparation of the PCR. An annex with therelevant information supporting this analysis should be Included.

6. The basic documents to be referred to are:

a) Credit Application;

b) Appraisal Report;

-66- AM3 3.7Pat* 3 of 3

c) Credit Agreement Documents, Supplementary Letters, *tc.;

d) Supervision Reports;

e) Quarterly Progress Reports;

f) Project Correspondence Files; and

g) Miscellaneous Evaluation Reports.

-67-

Annex 3.8

SOMALIA

PORT MODERNIZATION PROJECT

TRANSPORT STUDY - TERMS OF REFERENCE

INTRODUCTION

1. The improvement of transport system is a vital factor to theeconomic and social development of any nation. This Is in fact very truein developing countries like Somalia where transport facilities andservices are very limited and hence where there is urgent need for thedevelopment of the various modes of transportation, the institutions andthe practices of the trade.

2. The Ministries of Ports and Marine Transport (MPMT), Land and AirTransport (MLAT) and Public Works (MPW) are entrusted with among otherresponsibilities the task of planning, implementing and maintainingtransport infrastructure and facilities, licensing and regulating land, airand water transport services and organizations, providing transportservices and ensuring a coordinated and integrated development and4)peration of all modes of transport and other services.

OBJECTIVES OF THE STUDY

3. The primary objective of the study is to enable the Government ofSomalia to foster and undertake a rational development of its transportfacilities and services. In pursuant of this objective the study should:

a. provide a 10-year national transport sector plan (1987-1997) toserve the national economic plan/policies, and to promote optimaland balanced regional development;

b. recommend policies for effective coordination of the transportsector, for optimal inter modal-mix and for minimization ofresource costs including development of energy-efficient modes oftransport;

c. develop training programs with necessary facilities andinstitutional frameworks;

d. recommend measures and practices which facilitate thedistribution and transportation of goods in the country includingthe promotion of through transportation and the institutional

-68-

framework, documentattonal procedures and requirements for theimplementatlon of such measures and practices; and

*. consider and outline the development of minor ports into feederports for the distribution of cargo tn Somalia.

SCOPE O THE STUDY

4. The study consists of, but not limited to, the followingt

a. roview all existing data, studies, laws and regulations on thesector and conduct additional surveys and analysis necessary tofill crucial gaps, spot-check existing information and updatethem;

b. review the relevant conventions, practises, laws and regulations(both domestic and international) pertaining to thetransportation and carriage of goods;

C. assess the current capacity of the trucking industry and considermeasures which will enable it to achieve its potential;

d. assess the adequacy of existing capacities (infrastructure,facilities and syste_s), the level of their operating efficiency,the potential of non-transport options or substitutes, and thecomparative economic and operational advantages of each mode;

e. investigate the potential for development of additional services(e.g. bunkering, fisheries, etc.) to be provided by the port sub-sector;

f. outline strategy and policy guidelines that promote thedevelopment of optimal lntermodal-mix to adequately satisfytraffic demand;

g. prepare policy guidelines for optimal investment decisions andfor proper handling of user charges, pricing and subsidiaryissues;

h. analyse present sector responsibilities of EPW, MPMT and MLAT,their organization and staffing and prepare necessaryinstitutional change(s) which vill improve efficiency andpositively affect the sector management

L. study and review carefully the MMPT and HAT role in coordinatingand managing the sector and recommend major policy decisions forachieving their objectives. Specifically, recommend efficientmeasures on how to improve MPHT and MAT planning, coordinating

-69-

and technical capacity having in mind various entities in thetransport sector;

j. review the specific role of the transport organizations andentities, and provide specific proposals for necossaryinstitutional arrangements, for improvement of operationalpolicies and for establishing clear and fruitful inter-relationships among entities;

k. assess the financial conditions of transport organization andrecommend specific improvements a8 required such as bettercapital structure, improved accounting system, commercial pricing(fares, rates or tariff) policies, effective financialmanagement, insurance policies and cost control system;

1. study and recommend up-to-date and economical cargo handling,tariff management and physical distribution system Includingefficient facilitation, documentation, packing and unitizationtechniques both for domestic and foreign trade traffic and foroombined transport operators;

a. recommend measures for strengthening data base for the sector oftransport both at the ministerial and organizational level anddevelop the necessary technical, economic and other conditionsfor collecting, processing, storage, retrieval and use of theessential sectoral data at ministerial level for proper planning,coordination and operational efficiencyg

a. assess manpower needs at all levels of skills and lay down anoutline for a systematic and coordinated strategy for manpowerdevelopment in the sector;

o. review present training programs, facilities and institutions inall the transport modes, analyze their possible shortcomings, andon the basis of manpower needs assessed globally for each mode,propose a coherent strategy and plan to formulate programs andcurriculums, to improve facilities and establish or strengthentraining institutes;

p. prepare a manpower development plan consisting of appropriatetraining programs for the professional staff of MPNT and NLAT andagencies involved in the sector; and

q. develop from the above a 10-year transport sector plan whichconsists of a detailed investment program.

S. A particular focus of the investment program will be the analysisof the future role of the minor ports and coastal shipping on the one hand

-70-

and appropriate development of the road network on the other. The study onthe minor ports shall be carried out as an extension of the Master Plan forthe three major ports recently completed in 1985.

6. In the-focus-on the minor ports, the study will:

a. prepare forecasts of the most probable development of activitiesat each of the minor ports;

b. review existing facilities, recommend future developments andevaluate the site conditions for future development of thefacilities;

c. prepare layout plans and main construction principles for therequired facilities for the selected ports including preliminarycost estimates and calculations; and

d. recommend appropriate cargo handling and maintenance proceduresand the system and organization for the efficient operation andadministration of the ports.

DEVELOPMENT OF INTEGRATED TRANSPORT PLAN

7. Based on the above investigations, the consultant shall recommendan integrated transport plan taking Into consideration the following:

a. with close coordination with Ministry of National Planning, drawup an integrated road, maritime and aviation transportdevelopment plan with due consideration of socio-administrativeframework, economic potentials and resource availability;

b. assess carefully the extent of modal competetiveness andcomplementarity, recommend the development of complementarysystem and develop a program that promotes efficient system,balanced growth, and optimal modal interdependency;

c. recommend the required transportation projects, facilities andprograms based on a sound economic technical and financialevaluation of individual projects using a proper but simplemethodology; screen and list by mode and in order of priority.In addition to the estimated project cost, state and indicate inbrief the nature and major benefits to be derived from eachproject such as savings in transport costs and travel time andgeneral socio-economic impact of the project. For each proposedproject in the ten-year program prepare an indicative first yeareconomic rate of return;

-71-

d. carry out a study of the import-export traffic flows and relatedpossible competing transport services such as road transport andcoastal shipping. In preparing most appropriate solution theConsultant will be guided by criteria which vill pedmit optimaltraffic allocation, lowest transport costs, most efficienthandling of traffic and promotion of foreign trade.

8. In developing a detailed investment program and action plan forimplementation by mode the following aspects will have to be looked intoand addressed accordingly:

- repair, maintenance and rehabilitation of existing facilitiesand deteriorated infrastructure;

- comparing a modificationlextension of existing old facilitieswith new economically and technically superior capacities;

- improving capacity and efficiency of all modes of transportand in particular maritime (seaports) transport and roadtransport industry; and

- training, research and safety programs, data processing,project preparation and required facilities and institutionalframeworks.

IMPLEMENTATION OF THE STUDY

9. The Consultant shall:

a. develop and recommend guidelines for effective and efficientimplementation of this study in particular of institutional andmanpower development in the sector;

b. specifically, propose in a timely framework, ways and means onhow to Implement necessary strengthening of MPMT and M4ATcoordinating and planning functions as well as its increasingrole In the sector management;

d. elaborate on an appropriate timely schedule for carrying out theprogram included in the development plan for the ten-year periodtogether with appropriate methods of project implementation.

CO-OPERATION OF GOVERNMENT AND CONSULTSNT

10. The Consultant shall fully co-operate with Government assignedcounterparts who will be working with the Consultant's staff for purpose ofliason and training. The Government will provide free access to allavailable information, data and previous studies.

-72-

XI. REPORTING

Initiation of the study activities shall take place after asuitable mobilization period. An Inception Report, swunarizing Initialfindings shall be submitted 3 moxths after the signing of the contract forthe study. Preliminary recommendations shall be put forward in the form ofmemoranda for discussion with the authorities concerned, 4 months after thesubmission of the Inception Report. A draft Final Study Report shall besubmitted 2 months after the review of the preliminary recommendations. TheFinal Study Report (50 copies to the Government and 3 copies to IBRD) shallbe submitted within 2 months after receipt of the comments on the DraftFinal Report.

11. All reports shall be in the English language.

-73-

SOMALIA

PORT MODERNIZATION PROJECT

Iivttdual Traffk Forecast

('000 to"s)

1965 1988 19 1965 1968 1990 196S 196 1990

a_"d cmom* 117 135 149 27 - - 14 17 18otiurDowd go 250 250 250 64 74 82 12 12 12(wa1rgcup 83 75 60 55 45 35 11 8 8(antatue 96 128 160 1 is 33 - 3 6

548 S86 619 147 137 150 37 40 441etrolJanPro&its 180 191 199 30 59 61 18 19 mD

Toal iports 728 779 618 177 196 211 55 59 64

QWiu 1ro - - - 9 3 - 4 1 -hmd O,ut - - - - 101 100 - - --om- 33 33 33 - - - 28 .43 48Uvestodk 2 7 15 55 60 70 10 13 13Ctainus 5 5 5 1 7 10 3 4Molasses - - - - - - 11 17 17

:*-T 40 45 53 65 171 183 53 77 82PetraI&PnAzcts 55 49 43 - - - - -

hts1. qprts 95 94 96 65 171 18} 53 77 82

Wm L = WPr 823 873 914 242 367 391 106 136 146

-74-Ar= 4.2

(LSs '000)

Share ofTotal Traffic Gcmtimr/Po-Rp e Total

adishu m equipnt 1.65 2.07 3.72cii wurk 3.12 1.00 4.12traLrvw/A 72% 0.79 2.37 3.16

Sub&otal 5.56 5.44 11.00

Berbera eqipment 0.94 0.71 1.65civill wok 0.40 0.03 0.43trddrg/TA2/ 22% 0.20 0.77 0.97

Subtotal 1.54 1.51 3.05

Ksoyo m equipment 0.06 0.27 0.33dvil uorks 0.09 o.08 0.17tr9irwTfA.2/ 6. 0.06 0.20 0.26

Subtotal 0.21 0.55 0.76

Total SPA Iavestit 7.31 7.50 14.81

I/ 4mb1us 10% phystcal contiigency.

2/ allocted based on proporti ofatal traffic twa#jput of SPA.

-75-

Aimex 4.3

SOMALIA

POX?C MODENIZATION MJECT

Current Product-Lvity and Fbture Productivityl 1

Hogadishu/Berbera KlsmayCurrent 1988 -1990 Current 1988 1990

General Cargo 240 320 400 215 270 320Bagged CargotBananas 450 550 640 360 440 512Container (TsU) 214/1073/ 270 320 107 270 270Oil Products 4800 - NC NC 4000 NC NCLivestock 390/5603/ NC NC 450 NC NC

I/ Ship output per berth day (tons or TEU)

2/ NC = No change

3/ Berbera

-76-hAna 4.4

Berth UiUzatiu and Ship Waiting Te

Berberal/

1984 1988 2000 1984 1988 20O0 1964 Igo 20O0LA(m~V-cmTiiw) vammRE

Witbut- PLmvject

ultilzati (Z) 74 75 88 74 52 55 25 25 35SR (days) 417 503 999 458 84 104 30 5 15

With Prject

Utilization (%) - 61 63 - 45 44 - 2X 24Sr (days) - 155 173 - 39 32 - 2 2

i/ Forecsted utiliatim is lNr than actual (1984) due to the additim of a aw berthin 1965 (USfinanced constructioa).

2/ Th reass for the dlifferenoe bewen SWr 1984 (actul) and 1988 (forecast) Is do to de fat detthe recrnded wiaiti tine (atual) In unt casq has notbirg to do with berth oogption, bst iith fte rt avaiMlUility of cargo at the ttim of shipmnt, epalay for br Uwtock.

-77-

Annex 4.5

SOMALIA

PORT MODERNIZATION PROJECT

Representative Ship Cost Per Dsy 1/

General Cargo Container (RO/RO)

Mogadishu $7000 (GRT 8000) $12000 (GRT 6800)Berbera $5800 (GRT 4300) $8600 (GRT 2700)Klsuayo $6300 (GRT 5000) $8600 (GRT 2700)

1/ 1986 prices.

Annex 5.1

SOMALIA

PORT MODERNIZATION PROJECT

HISTORIC OPERATING STATEMENTS(SO SH '000)

1978 1979 1980 1981 1982 1983 1984

Operating Revenues:

Shil) dues 9,516 19,023 20,405 20,726 23,200 28,447 31.957

Stevedoring 6,451 8,742 1(,998 12,695 14,755 23,785 31,240

ltandling 32,192 40,621 47,469 47,925 70,045 61,398~ i1,022

Storage 37,202 35,573 27,618 25,872 44,251 2t,133 37,300

Mliscellaneouse 6,756 19,726 24,289 26,261 171 46,577 82,838-S

92,117 123,685 130,779 133,479 152,422 181,340 266,357

Working Expenses:

Wages. 11,632 13,837 20,554 24,301 25,157 27,538 18,147

Maintenance, MAinistratlon 35,291 33,864 28,248 26,575 37,173 45?819 47,909

46,923 47,701 48,802 50,876 62,330 73,3S7 86,056

Working Income 45,194 75,984 81,977 82,603 90,092 107,983 180,301

Vepreciation 11,119 12,788 11.852 18,408 15.99 15,936 154754

Operating Income 34,075 63,196 70,125 64,195 74,097 92,045 164,547 x_ X~~mn

Working ratio(:) 50.9 38.6 37.3 38.1 40.9 40.5 32.3

Operating ratio(Z) 63.0 48.9 51.9 51.9 51.4 49.2 38,2

-7 9- Annex 5.2

SOtALIA

PORT MODERNIZATION PROJECT

HISTORIC CASH FLOW

(SO-SR '000)

1980 1981 1982 1983 1984

Sources of tundsoperacing sarpius 81,977 82,603 90,092 l07,963 SD),301Deease in .'bn-Cash Working Capital - - - 5,353 S7, Q02

Total Sources 81,977 82,603 90,092 113,336 237,403

Uses of FundsCapitai Works 13,095 8,704 6,698 2,530 5,724

HousLtg AthdrawLs- - _ - 7,254

rit Rewards 683 2,421 1,361 1,977 1,984Dvidend Payable 56,100 51,356 59,277 73,636 13i,. 38increase in onCash rking Capita.l 12,924 15,180 24,014 - -

total Uses 86,802 77,661 91,350 78,143 146,600- - ~ ~ .

Exse of Sources Over Uses (2,825) 4,942 (1,258) 35,193 90,aSD

Openit Cash Balance 30,338 27,313 32,455 31,197 66,390

Closing Cash Biance 27,513 32,455 31,197 66,390 157,193* : . : -

P9T WIDDERI$ABl P93JEt

PAECrTED IWtIEO STATEMENT

t 'ISSD.tXtCtClttt,

_ oBs 1986 19 1780 m 90 If9i 1Q92 2793 I994 1995

PORT DUES 4735.07 12214.74 15293.58 35275.17 43478.74 52634.98 61017.43 6946770 7904509 90s4. 04 9S 9 I57sE£TRAICE FEES 156.32 39755.67 498B5.6s 61944.41 76742.91 93962.1t l060.00 1230.64 14031B-95 159513.46 173177.36PILOASE 47$2.75 U1977.38 1553.30 37204.72 47604.65 S5 23 7009.o66 79762.02 90723.28 103291.62 112024.00To/wORING 7610.50 1986S3.9 24736.8 5656.98 70026.45 a46369.2 97672.29 t1e09.13 126182.64 14330.57 15840.608E0TtN6 121243.84 34430.25 3940.56 75861 65553.66 94733.55 109459.26 124257.65 140946.29 159952.0 175709,39STEVEDMINA6 60509.63 1368465.5 172586.9 290266.00 35484.01 432120.28 501846V.5 573902.91 657U3.38 752936.04 626729.37001101AMADIlt6 61657.75 WWtI.Ij 129M1.06 38979.44 465364.18 574410.66 65479.2 74485.94 850247. 37 97802.05 2062062.06EQUIF.4270 396s.29 5035.13 607O.63 7314.96 B737.30 10421.70 11652.93 13441.01 120,41 17413.42 19026.11StDRZE 21029.81 27449.38 33028.63 39713.16 47354.52 56379.92 409.14 564. 'i 82799.03 93730.03 lo06-560KA*80 TA) 69921.5 103360.3o 12402.94 146352.04 176372.65 202216.35 23340.55 26441.0 300614.35 340310.60 6429.,5OpEeR 20O1E 3978.04 7554.42 9390.65 19740.63 24026.94 29)96.55 33593.53 38255.24 4365.15 4760.90 S4670.16

JOIAL 272802.9l 468035.98 602986.09 1155154.15 101746.61 1691240.29 19467)u.56 221556.41 252773.13 2176116.75 3175051.64

74LALRItS I was6 40615.71 53246.46 55763.19 s5898.73 67194.98 002.37 90745.70 10195.96 11495.73 129346.22 245711.01SPMSfSUPPLIES 22125.86 36050.70 45425.07 5652.07 69332.58 s52sB6 950.5 106766.S0 124606.54 1426".57 157110.91

9420 REPAIRS 13005.00 18182.68 21819.21 261s2.23 31418.35 33636.25 40786.98 45820.64 51476.24 579.97 48.29PUEUIUTILITIES 10510.03 13726.12 17298.36 25452.75 32198.28 38950.74 44970.07 51420.10 9394.29 67659.39 760m4.9

ECR.ASSIST. 0.00 0.00 54106.00 129296,78 154152.60 0.o.0 0.00 0.00 0.00DM EIP 1 E6 12973.99 P 8160.69 21045.42 25069.32 30021.61 35875.68 40734.50 4699.07 52571.22 9628.97 164036.59 0

TOTAL 99466.49 139396.3 215454.25 321494.69 384316.30 275046.91 312297.64 354192.90 4054.02 457155.42 bw575

40I60 PRfIT 17335.42 349249.15 307532.54 833459.26 2017428.30 126193.38 1634412.74 t18095.5 2124i9.II 24291.33 2$669.-9

9EPECIATt8I/ 2166.41 263619.49 312030.99 414812.02 548925.43 69045.06 748493.08 1039.. 72 1o79s23.s5 126023.60 IN15315.926888711143101

9996118 a11 -4323.00 85630.66 t6500.05 4C6847.25 4686U2.88 72545.32 885719.6 822962.79 1044B67.53 126W7.73 6133.07fltflfltfi*flfl

140ERESt 0.00 0.00 3351.17 4140.01 9975.65 156155.04 19o49.65 3s492.29 3502.35 38.66 5s328.7

P98IS P0It -43231.00 85630. 73)4.&6 MU773 S.4 72U637.23 56769.29 68870.01 4824.50 66675.17 59.07 059-.36

16147TI0 0.00 0.00 57774.67 18669.22 9631.1161 283845.14 344435.01 241234.75 3432.9 4274.5 1274.4

NET PROFI -43231.00 B5U30.6 155752el 28693.22 96328.61 2945.14 344435.91 241234.75 J45392.59 44234t.5 73527J4.8

ffSflSfiCflflX

a"1V. 0.00 51378.39 9225.01 113215.93 111791.17 270307.019 20"62.00 104740.85 20465n.55 286. 72 7510.61 ERS1 0.00 6563.24 1537.53 1889."70 1863223 2385.0 344.19 24123.96 mm39.5 4274.34 t2127.n ITOTAL 0.00 59941.6t 10762.54 132085.63 130423.40 198692.17 241105.19 168864.81 24075.50 5099.06 202.53

!TEUTlOtQtIs -43231.00 2589.03 4612.47 56607.59 55695.21 -5152.98 105329.81 723.9." 1030)7.0 1I219.47 3782.i5V

hSWIN U1TID2tV 36.46 28.53 573 27.63 27.42 16.26 16.04 5.9 IS.94 11.00 I9.iWAAl1US 6t0I18 115.85 62.46 67.31 63.74 66.57 57.06 54.50 62.89 88.66 -6.26 14.17

SOALIA. Mmi wsmA mu-. PORT MODERNIZATION PROJECT

.905 M6 11 1908 19" I990 IS91 1S92 19 M 199 1R* g *S8 c Sf5 Sf5 * 54 53 39 Z-

ClEUl S5ETScAIN 4 VI 228082.62 524740.25 73610.11 1317150.23 190104.35 2531566.94 3106522.95 401062.49 492113.84 50457." 1.UOEITRS 6016.42 1631.17 94477.78 164824.66 224279.46 270590.45 31IM4.6 35425.55 404 .4 444986.6 206004.20111t 1360.10 24431.0 1014S.30 57757.71 70067.33 14562.01 97335.53 110757.92 126.66 14354 16s5.58SUOTM t01139.12 t27353.f0 S12307.1S 1535932.60 21461.14 266747.42 3517332.17 475." 5452430.64 449.50 629392.6?

FIEt OSSETS IN UKE£1X110 856A416.25 t0301033.50 11424735.20 697.76 167053.31 1647196.63 253751.09 22342t.9 2444152.6 2701372. 30249S5.69PWJECT 0.00 0.00 106707.20 399842.33 790074.63 1419437.52 2601722.11 3216934.77 3605204.94 5167745.45 6151621.26SUtOt4L 85616.25 l0301033.50 11761442.40 143785.09 1797127.95 20047334.34 23325474.00 2556174.74 27149359.92 32245117.89 6462.95CWIAOEPI. 2641154. 30 3431051.06 3btt79.1 4S31.75 6329.53 7$78749.57 993058 1035259.45 1164 .25 * 313W9.3- 155 .93

NET FtlEl AEtS 527461.95 6069975.84 8063647.22 9562156.34 11270599.42 2236184.47 14344515.42 15332915.29 16300S04571 1662.4tE.61 20670394.02

PRECT 0. i pCOIST9.COOTS 0.00 0.00 74104.04 2140t7.36 498570.25 711079.49 169406.16 IS 5 77.87 97736.12 .0 0.00INT.D.COOSTR. 0.00 0.00 30.10 25300.52 11683.04 10431.59 33454.21 190053.59 3215W. 7 49066.31 0.0t@NLKT. 0.00 0.00 33125.41 59453.25 19641.62 141435.31 191134.43 314525.99 339424.93 tt7312.36 40.054DOTAL 0.00 0.00 11257.54 291139.13 676744.91 1032946.39 405394.82 1065451.44 W15721.6 6274.67 0.00

is11f632 0.00 0.00 0.00 0.00 0.00 0.00 0.00 1let1.76 1683.1U 1592.87 33644O

TOTA. ssIS 622921.06 7497329.64 96491.9 2l420930.0 14142304.47 10276.29 185,47242.42 2025.47 2.342646.13 26778.45 274130

Lt66L7t1ES MO E10IT1

£90311 LISBS.CRQ1110t9 3459.70 4646.24 5612.11 6Is. 3005.1b 9564.65 10042.53 12319.75 1o48."9 15901.04 177.16tD0I2IE1 0.00 51378.39 9225.01 113215.93 111791.17 170307.09 20"61.00 144740.65 20605.5 26140.72 75164.31MEN" 5023.00 42t1.62 746.71 9434.85 9316.12 14192.54 17222.09 12061.46 171$9.97 2213?,17 88.S11t06AL 642.70 60506.25 I25o4.8 129335.93 129113.05 2946. 234745.63 06122.56 237224.52 304.9 "IO."

L.T 1,t31820is

fLUO 8501.00 12782.62 33551.36 22984.23 32302.35 4S44.6 63716.99 75776.97 9M4.94 11506.11 121UN9,91

POECT eEaT 0.00 0.00 249786.99 601794.64 1607132.41 234611.59 3098344. 38t16210.69 41111.23 45672.24 472866

60VT.tN. 0.00 0.30 0.06 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00RETE3t116 56596.00 SSP 62203 6877.50 143505.09 099400.30 s 24553.26 307031.09 460253.03 53270.12 069.0 737756Mt.11NRE9LUOT 021SIt2iIPES 6155421.36 7341753.75 8722650.20 1032330.18 22174476.36 13434982.0 447625551.76 IS69o93.19 216124093.32 7 . 21505.179810DT1L Q21221.34 7424036.78 097. 70 1O63.21 .27414$.06 iS719SS.S33 151S0434.85 1634.23 1667343.44 20042.34 2234224.92

70TAL .IAILITIES I69 E£9I11 6229201.06 7977r29.4 906841.94 11420930.00 1414204.47 1406271.29 18547242.42 200925 U,47 2342446.13 5*715.65 2710131.30

:aEr_rwc 0

11E0 lmSSISI3 -0.73 1.25 .9S5 4.38 4.16 5U.6 6.17 5.36 S.41 6S-4 3.90

CW7I 610 35.57 10.37 56.46 12.0S 17.00 14.30 14.98 26.47 22.91 19.79 4340

6UT/EQi5ITTIP -.JO 0.00 2.84 7.66 12.9 17.12 20.45 22.69 23.0 22,74 2t.26

*S.t .. .... fl:tCf:lS l *t:s s0._1 s:1 C 0.01 0.01 o,l 0.01 0.01 g.0

M6W15 CM FLO

1W Ift 99 199% Am 199 1994 fUI

MET mm6 -43231.00 653.64 1537.01 1360693.22 1113L3.4 33045.14 344935.0 241M.364 34329.6 44213.5 ,2M454.dKIUIY lTIGE 21459.41 243418.09 31303.99 414912.02 5U315.43 49346.0 7409.06 1039665.7 1079321.5 110316.4 1112153.13119157 0.00 L.O 3351.17 414600.1 95925.63 15611540 39606.4 35949.29 N3.35 373410 5353.11

10T1. 17330.42 34024945 3295. 17 t040.04 131109.9 11324.24 197.73 161934.1 173123 197912679 14917174

"MTC PD31 0.O 0.00 249711.9 52294.04 712347.93 475142.15 10U453.0 4915.5 3774I456. 499525 0.0

101TA. SolfCl 373315.42 34924.15 57954.15 114192.70 5406p.60, 1907490.6 16511.74 2312474.2 211375A.57 204303.04 2631371.21 go

WPLIC00ZWIS

mu,tmu,

NW! 0.00 L.O 241035.34 42)321.33 611106.72 44IM26 64431.77 454100.0 m l74 MAN7.3 0.00Im 300.00 2000.010 2449.0 3501.00 340.00 4342.0 4649.00 am" 7270 ,* 4104 4U12*

i10I 16000.0 20000.00 231403.34 449921.33 0666.72 7291542 49097. 506930m 4556.74 %M13.9 86662.

am3 6101H. 0.00 0.00 0.00 0.00 0.40 0.00 0.0 15414.00 743442 12141.4 291219.5UI iU?61E 0.00 0.00 3351.17 43440.63 "695.4 153155.04 39649.45 3399129 35664 371906 5036.

aCWIT. 0.00 0.00 534.8 MOM.4 4637.53 M0A70.M 15422.4 739.73 Mm1104 301001.54 4.003J31TAL 0.00 0.00 301.2 41441.22 143216.3 20063.59 MO302.2 42996.04 54196.il 71192491 5451.9

ca oIC 42174. 19 27506.5 232495 154932.5 504430 5923.69 525.6 5495.4 434129 7149.45 MAW%.4

&IV"11 14012.0 0.00 51373. 922.41 £13285.9 11179z.17 170307.09 20444.00 847470.0. 3 5. 206 I 1046.7

35311 ~~~~0.00 502.00 401.62 766.77 9434.95 936.'12 34192.54 8722.4 1260.99 3754.97 22tv137

mm IMI 10074601 29467.64 26493.6 531470.12 533744.82 630492.41 Miss3.99 90227.73 910011.15. 41291.14 I"*"3.

Mu EAR 3.0 130.0 5.34 444 3.7 3.81 3.4 .N76

9TOnTIL 4PC13 17335.42 3424.5 S7934.1J .*1496 145057.00 10049.9 1995174n 211374.35 213955 202226 24421.21

-83-

Akx 5.6

1~ fOECTECARnTM SHIP CO

Taiff leveIs 2

Increase/DecreaseTarif f Cates", 1977 Schedule 1983 Schedule 1985 Scbde 1985/1977

Ship dues (SoSh) 2,000 3,000 10,250 412.5&~traie ( ' ) l10,000 10,000 41,000 310.0

borio ( " ) 1,500 2,000 3,280 118.7~Ocpmnay~ ( " ) 18,200 22,750 27,040 48.6Pllotqe ( " ) 3,290 7,900 17,550 433.4-ibuy ( - ) 8,000 10,000 12,300 .53.8Anchorage ( - ) 2,249 2,249 5,138 128.5

Sub-total:Fees ladied co shiVs

(SoSh) 45,239 57,899 116,558 157.6Fee levied x shps

(139$) 5,952 3,327 3,202 -46.2

Stevedoring (SoSh) 29,876 74,690 153,048 412.3Shore ( lig ) 117,370 149,380 187,792 60.0

Tota fees (excl. storag 3f): Total foes (exci. 192,485 281,969 457,398 137.6US$ 25,161 16,224 12,566 -50.1

!awhrqsM Rates (SoSh to U5$) 7.65 17.38 36.40

Sawia 100.00 384.20 1,007.40 907-.4nternationlal (UW I 75.90 103.60 10.50 32.0

/ Based on tariff sdiedulee for Mbptistu port.

21 Tariff levels are based on followig sh4p and port operatzg d-aracteristicA.a) Average GR: (i) 1977, 1982: 6,583 tons; (1i) 1985: 7,020 tons.b) Average WR: (i) 1977, 1982: 3,749 tons; (ii) 1985: 4,110 tons.c) Averaq 1O: 130 mitres.d) Avge days at beth: (i) 1977 and 19812: 7 des; (ii) MM65 4 day.e) Average shipload: 2,134 tons.

31 Storage fee were changed in 1985 effectively doubling the fees assuming umchmngd drg h11periods; storage fee levels are exxluded frmn analysis because of lack of recen cog dw-el timudate.

-84-

Am= 5.7

PRDECaI DEEID I CRR= REVENES AND -FEMnD WJS

(WB$'O00)

1e~iijee 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995

Port&des 140 156 321 355 400 437 462 489 517 529Fotranrce/kAchora 454 508 564 627 713 779 822 867 915 923Pilocag 137 158 339 389 460 502 531 561 593 597TaeM/horing 227 252 515 572 643 702 739 780 822 844Berthing 393 402 691 699 719 784 826 871 918 936

Subtotal 1,351 1,476 2,430 2,642 2,935 3,204 3,380 3,568 3,765 3,829Stevedoring 1,313 1,475 2,225 2,461 2,769 3,050 3,244 3,458 3,684 3,752

Total 2,664 2,951 4,655 5,103 5,704 6,254 6,624 7,026 1,449 7,581

Exenitres

Spares/Supplies 340 382 425 467 527 562 597 635 676 719Maintenance 109 116 125 134 144 153 160 167 175 184

Subtotal 449 498 550 601 671 715 757 802 851 903RoutineCapital Expenditure 191 201 217 233 259 274 287 300 314 327

640 699 767 834 930 989 1,044 1,102 1,165 1,230Project EquipmatReplacement - - - - - - - - 1,357 3,038

640 699 767 83 9T30 9989 1,044 1,102 2,522 4,268

Net Foreign ExhagG(neratiom 2,024 2,252 3,888 4,269 4,779 5,265 5,580 5,924 4,927 3,313

Allowable ForeignExchange Retentions1 ! 1,731 1,918 3,026 3,317 3,708 4,065 4,306 4,567 4,842 4,928

Net Foreign ExchangeBetentIcu2 / 1,091 1,219 2,259 2,483 2,783 3,076 3,262 3,465 2,320 660

I/ Assumed that oirent foreign exchange retention regime ereby 65Z of foreign aIrr y xevesare retained by the entity prevails during projection period.

2/ AUlahle foreign exchange reterticos less foreign exchange epenses.

Annex 6

-85-

SOMALIA

PORT MODERNIZATION PROJECT

Selected Docume and Data Available In the Project File

General Reports

1. Ministry of National Planning, Somalia: National Development Strategyand Program, 1985

2. UNDP: Annual Development Report, Somalia, 1984

3. IBRD/UNDP: Report of a Joint UNDPIWorld Bank Technical Cooperation- Assessment Miasion, September 1985

Relating to the Project

1. Hostrup-Schultz and Sorensen' Mogadishu Deep Water Harbor ExistingBreakwater and Pier SubsidenceInvestigation, 1982 and 1983

2. Ministry of Public Works, Somalia: Mogadishu Deep Water Harbor

3. Ramboll and Hanneiann: Master Plan Study, 1985

4. UNCTAD: Trainiag Needs Survey, 1985

5. Somalt Ports Authority: Tariff Regulations, 1985

Chartt

SCKALIA

PM2 "DWOTATIZfON WROJICT

ormaausatlon Oirtt

unot TIMSPOI?

MID PORtS ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ Mmi POT

COORDIVATIONI

WRETSARIATII

PIUOINIZL PLAINING -I 9

TR~~~~~~~~~~~~~~~~"IC ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ JTRW

CIAINS ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~~~~~~~~~~~~~~UR AAZ

rUT gI [IIg HI 111 Xiq §[

___:__ '__ _._.___ ____.. [I ___ _ ;

___ __ _ __ _ :[ii-~~~~ ~~~~~~~~ _ .i . - ,

-~~~~~~ ~ ~ ., ., - , __ - .-

__ . . - _ . , - _- __ ,X

_ - ~-~-'-- - - J - -- -- -- -a- -- - "-f

_ _ _ --- --- ------- -r a- . _

_ __ _~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ I.._ . ._._l- ., . w - .- S - - * - - _

tBRD 19505

A' PEOPLE' DEMOCRATICREPUBLIC OF YEMEN

12- '/DJI8OUTI/ s./ -i?lltt*OUTJIT +

) *Ioaido Candaf> A A * M~~~~~~~~~~~~~~~~~~Aded Rem Cnta~~~~~~~~~~~~~~~~Ms taK) A.A'W Ao

i~~~~~~~~~~~~ct J A ULt,/_

m ~~~~~~~ALD \ AWA t KORF t t /

T1ig Wotahe' ARGv, LAsaf- ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ (

. OATL r . ts_ A,LcD /i 7

A PORT MODERNIZATION 2-X

PROJECT 7[7r PROJPCTPOQFTS LKt R z

RI81TUSlAtQUS SURPACAD ROADS lUtO.S A8EW / L A t j -

- RAVALEARTH SUtRPACAO ROADS ,_,

4 S MAJOR ORTS

+ DOME5ATIC AIRFIELOS o PR MNTDERNAIOAAL ATItRELOSN *\¶ S/

. PIVERSOCTP/RTS

DI OSTRJI C7 iUJNOARPES / E / 08'

NREGIO:N RSUNRARCES T L ,

INTERNATIAONAL RUNOARIES . /ji /\

REIO B.. \OAAIES

ATER~~~~~; 4FNATON6JALe B OUb0AIES A..........

.~ -iAR*A _ ASARE qELSUA kAPARoRiE4

fLeA_- rAD~E o itA7;

I <I Or< EL9AROE bj

_4. iuY 1 SAUI ARABIA 1ELDERE^-_-_/ooLa/NcX64\YET O ULO tUT C-2

~ APMADSJ ~ ,DUGIMal *- .UR

J ̂ i K N VA fENK f r 9eK ~~~~~~~~~~~ALa ALAKS' 0 0u 2t80 3.W&0

HARR DOA Po Sn4Ar |PA IA1

I ~~~~~~~~~~~~~~~~~~~- w F.-

LJ l g < > {*{ Lw 9jz nDE le 7O

TANZNIA A UIA BA

L ; Of {}L'S JAE >_ .~~~~~~~~JAUAY 98

_o+,~~~~~~o~u S U DAO8 S__ ,

\ \ i tifarnAne ~~~~~~~~~~~~~~~~~~~~01-- E T H I O P I A 7 '

\\/ rrd f__re _ KE6N YA i.

\) ~~~~ ~~~~~44 7 TANZANIA JANUARY 1986

SOMALIA

PORT MODERNIZATION PROJECTPORT OF MOGADISHU

-4~~~9A

4-i~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~l4

'~~~~~~~~~ \

Eli EXISTING FACILITIES

C| PROPOSED DEVELOF

PIPELINES FOR OIL I

I GUARD HOUSE 14 WASHING AREA

14eg,>s > tt 2 I T. WEIGH BRIDGE I5 OFFICE

3 40 T. WEIGH BRIDGE 16 SUBSTATION

4. FIRE STATION 17. TOILETS

i_/ 5 POLICE BUIiDING 18 SHOWERS

N X - 9 t t > \ fi 6. OFFICES 19 EtECTRICAL CASIN

OlE '\ I I L . 7. CUSTOMS 20. FOAM PROPORTIONER- C) .....L & Z 8. ADMINISTRATION BUILDING 21 FIRE PUMPS

N.--'s3S f 9. OFFICE (MMTt 22. SPHERE RECEIVER

* *- xa 10. CANTEEN 23 LIVESTOCK LINK SPAN

11. SERVICE STATION 24 RO-RO RAMP

12. VEHICLE REPAIR SHOP 25. AIRPORT CUSTOMS WAREHOUSE

-. 0, -X 13. INSPECTION 26 ANNEX OFFICES

NEW SAR ALLWG_YARD .. . . ) 4 0NEW% / Ho

9 A~t 4S

YAR0 FER UVE AJ{IMA4S \ , \ / / /~~~ARKIN

4 - A V 10 LE POAL

\ r- ./ /0 100 200 FEET

IT _ 25 50 METERS

IUCTS

T~ - A oc' r Tl Tw nt fS T ar CAONA, oR

Oror CrO. Ir Orfla. rOO at 0'bi - - TlT rT_omO>Tw- . starirtO r O o -trro T ao trrwtrt rse rm

JANUARY

/ X \\~~~~~~~

OWN NO '. i2

/<\~~ ~ ~~~~~~~ / tlNAtE YARO_____ EOH~SATO I |ONTAINER YARD EXTENSION FOR CONTR

i ~ ~~~ ~ ~~~ J ;1*1 g02 s.,. E

GefRAL/ L= -i

/ ;I I

_ _, / -/

.- ~RA /~ //

,' 2000 / SO 10 lS FEET

\ 25 SO METERS _

\ /' /_ __0

IBRD 1H

SOMAL IA

PORT MODERNIZATION PROJECTPORT OF BERBERA

H - Wn FL0 -Ts.sA

L.A

) E

lVESTQ9 811XK .

iYSTO(;5_CAUK'AY :

F EXIS'ING FACILITIES

PROPOSED DEVELOPMENT

-I -.-.--.~ i j ~ s s t ^ ; e f l 4 r A C E S S C AU S E

JANUARIf

MOLASSES TANK

BERTH NO. 2LENGTH a 170 M -9.5S

RTRANST SHED

.# the ~ ~x.0'.~RO - RO _RAMP.MAINTENANCE i , w, T

.

LONGSHOREMEN' S FI2 RANIESE

x /R~~~~~~~~T

t__~~~~~~~~~1 I I77

115RD 1!

SOMAL iA .

PORT MODERNIZATION PROJECTPORT OF KISMAYO

EXISTING FACILITIES

PROPOSED DEVELOPMENT

0 5 10 FEET

0 2 3 4 5 METERS

NEW QUAY FROTWtop RHBLTTED PIER

BERTH N0. ILENGTh 170 M -9.5

MN.BLDG

WATER PUMP BLDG SCALE HUSEACCESS CAUSEWA

t IV t I I I F I-I I a 1 1 1 1 I X I I I F- F l I I AAI I i I i I } } iI | | | | i } I l 1 |A INUARY I I I IL 9T I

JANUARY 19i