Document of

The World Bank

FOR OmCLAL USE ONLY

Report No. 13775

PROJECT COMPLETION REPORT

CHINA

DALIAN PORT PROJECT

(LOAN 2907-CHA/CREDIT 1875-CHA)

DECEKBER 9, 1994

Transport Operations DivisionCountry Department IIEast Asia and Pacific Regional Office

This document has a restricted distribution and may be used by recipients only in the performance oftheir official duties. Its contents may not otherwise be disclosed without World Bank authorization.

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CURRENCY EQUIVALENTS(as of April 1994)

Currency Name = RenminbiCurrency Unit = Yuan (Y)

$1.00 = Y 8.7$0.115 = Y 1.00

$114,943 = Y 1,000,000

FISCAL YEAR

January 1 - December 31

MEASUREMENT EQUIVALENTS

Metric System British/US system

1 meter (m) = 3.281 feetI square meter (m2 ) = 10.764 square feet1 cubic meter (m3 ) = 35.315 cubic feet

1 kilometer (km) = 0.621 mile1 ton-km = 0.621 ton-mile

i ton = 2,208 pounds

PRINCIPAL ABBREVIATIONS AND ACRONYMS USED

DPA - Dalian Port AuthorityERR - Economic Rate of ReturnGOC - Government of ChinaICB - International Competitive BiddingMOC - Ministry of CommunicationsMOF - Ministry of FinanceMOR - Ministry of RailwaysREIRR - Reevaluated Economic Rate of ReturnSAR - Staff Appraisal ReportSEZ - Special Economic ZoneSPC - State Planning Commission

FOR OFFICIAL USE ONLYTHE WORLD BANK

Washington, D.C. 20433U.S.A.

Office of Director-GeneralOperations Evaluation December 9, 1994

MEMORANDUM TO THE EXECUTIVE DIRECTORS AND THE PRESIDENT

SUBJECT: Project Completion Report on ChinaDalian Port Project (Loan 2907-CHAlCredit 1875-CHA)

Attached is the Project Completion Report on China - Dalian Port Project (Loan 2907-CHA/Credit 1875-CHA) prepared by East Asia and Pacific Regional Office with Part H contributedby the Borrower. The US$71 million Loan and US$25 million Credit were approved in February1984, and closed on December 31, 1993, on schedule. US$750,000 were canceled.

Dalian Port, the second largest port in China serves the northeast provinces of the countryand part of Inner Mongolia. The port was congested and operations hampered by the lack of modernequipment. The project had as main objectives to increase port capacity by construction of containerberths; to facilitate technology transfer in master planning, financial planning and control, and inresearch and design; and address the training needs of port operators, maintenance staff andmanagers.

The PCR, which is satisfactory, contains an adequate description of project processing,execution and results. Changes were introduced in project items during execution. Both theBorrower and the Bank showed the necessary flexibility. Physical works were satisfactorily completed,except for a rail link between the new container terminals and the main rail network. Its completionis delayed by the lack of coordination between different government agencies having differentpriorities and investment programs. This issue was underestimated at appraisal. The total cost of theproject was lower than projected and the reestimated rate of return higher. Except for the non-completion of the railway link, all covenants were complied with. The relatively modest institutionalobjectives of the project were reached. Extensive training was carried out, reaching twice as manystaff as planned. Finances of Dalian Port are sound, but the trend is not favorable, operating costsbeing high and the presentation of the revenue account unclear.

The outcome of the project is rated as satisfactory, its institutional development as modestand its sustainability of its benefits as likely.

The project may be audited together with the Tian Jin Port Project (Ln 2689-CHA) and theHuang Pu Port Project (Loan 2877-CHA) after they are completed.

Attachment

This document has a restricted distribution and may be used by recipients only in the performance oftheir official duties. its contents may not otherwise be disclosed without World Bank authorization.

FOR OFFICIAL USE ONLY

PROJECT COMDPLETION REPORT

CHINA

DALIAN PORT PROJECT(LOAN 2907-CHA/CREDIT 1875-CHA)

CONTENTS

Preface .............................................. iEvaluation Summary .......................................... ii

PART I. PROJECT REVIEW FROM BANK'S PERSPECTIVE ............... 1

Project Identity ............................................ 1Background .......... 1Project Objectives and Description ...................... 2Project Design and Organization ...................... 3Project Implementation ....................................... 4Project Results ......................... ......... ...... 5

Financial Performance ................................... 6Economic Reevaluation ... ............................. 11

Project Sustainability ................... 12Bank Performance ................... 12Borrower Performance ................... 12Project Relationship ........... ........................ 13Consultant Services ......................................... 13Training ................ 13Project Documentation and Data ................................. 13

PART II: PROJECT REVIEW FROM BORROWER'S PERSPECTIVE .... ...... 14

Section A ................................................ 14Section B ........................................ 15Section C ....................................... 15Section D ....................................... 16Repayment Ability ........................................... 17

This documcnt has a rcstricted distribution and may be used by rocpients only in the performance of theirI official duties. Its contents may not otherwise be disclosed without World Bank authorization.l

PART III: STATISTICAL INFORMATION ........................... 18

Project Timetable .......................................... 18Disbursement Record ........................................ 19Project Implementation .................. 20Project Cost and Financing .................. 21

Project Cost ......................................... 21Project Financing ............ 23Allocation of Loan Proceeds.. ....................... 23Studies ......................... 24Training.. ...................... 25

Status of Legal Covenants ........................ 26Use of Bank Resources. . ...................... 27

Staff Inputs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27Mission Data. . ........................ 27

Procurement.. ........................ 28

ANNEX 1: Economic Analysis.. ......................... 29

Table 1.la: Port Traffic (1985-1993) and Forecast (to 2010) ..... . . . . . 35Table 1.lb: Port Traffic (1985-1993) and Forecast (to 2010) .... . . . . . . 36Table 1.2: Dalian Port Authority: Ship Time Analysis .... . . . . . . . . 37Table 1.3: Operational Parameters Assumed for Economic Evaluation .... . . 38Table 1.4a: Dalian Port Project: Estimated Economic Cost .... . . . . . . 39Table 1.4b: Dalian Port Project: Estimated Economic Cost ......... . 40Table 1.5: Dalian Port Project: Shadow Price Conversion Factor ... . . . . 41Table 1.6a: Cargo Handling Without and With Proposed Berths . ... . . . .. 42Table 1.6b: Cargo Handling Without and With Proposed Berths . . . . . . . . . 43Table 1.7: Cargo Loading/Unloading Cost Savings .44Table 1.8: Dalian Port Project: Economic Benefits Summary .45Table 1.9: Economic Rate of Return and Sensitivity Analysis . . . . . . . . . 46

Table 1: Dalian Port Authority: Income Statement ..... . . . . . . . . . . . 47Table 2: Dalian Port Authority: Balance Sheet ..... . . . . . . . . . . . .. 48Table 3: Dalian Port Authority: Sources and Applications of Funds . . . . . . . . . .49

PROJECT COMPLETION REPORT

CHINA

DALIAN PORT PROJECT(LOAN 2907-CHA/CREDIT 1875-CHA)

PREFACE

This is the project completion report (PCR) for the Dalian Port Project in China forwhich loan 2907-CHA and credit 1875-CHA in the amounts of $71 million and SDR 18.2million, respectively, were approved on February 9, 1988. The loan and credit were closed onDecember 31, 1993, as originally planned. Final disbursements were made on April 28, 1994.The credit was fully disbursed; however, $750,507.53 of the loan will have to be cancelled.

The PCR was jointly prepared by the Transport Operations Division, China andMongolia Department of the East Asia and Pacific Region of the Bank (Preface, EvaluationSummary, Parts I and III), and the Borrower (Part II).

Preparation of this PCR was started just before the project closing date and it is based,inter alia, on the staff appraisal report, loan agreement, development credit agreement, projectagreement, supervision reports, correspondence between the Bank and the Borrower, and internalBank memoranda.

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PROJECT COMPLETION REPORT

CHINA

DALIAN PORT PROJECT(LOAN 2907-CHA/CREDIT 1875-CHA)

EVALUATION SUMIVARY

Objectives

1. The project's principal objective was to assist the Government of the People'sRepublic of China (GOC) to relieve congestion in the port of Dalian and increase its handlingcapacity by providing additional facilities and improving the planning, managerial andoperational capabilities of its staff.

Implementation Experience

2. The project became effective on October 3, 1988, four months after the loanand credit agreements were signed. The project launch was quick and smooth with majorcontracts in civil works awarded shortly after loan/credit effectiveness. The componentsfinanced by the loan/credit were completed satisfactorily on schedule by December 31, 1993,despite additional works such as (a) a modification of the breakwater to accommodate a bulkgrain vessel, (b) repair of typhoon damage to the breakwater, (c) the construction of amultipurpose warehouse at a later stage, and (d) procurement of additional container handlingequipment.

3. Overall project implementation was satisfactory, mainly due to its lack ofcomplexity. The Bank-financed components were implemented by a single executing entity, theDalian Port Authority (DPA); coordination was simplified, and decision-making was fast.However, the civil works contracts took longer than expected because the breakwater wasdamaged by a typhoon and its structural design was modified so it could be converted to a grainterminal at a later stage. Procurement of some major equipment was unnecessarily protracteddue to a lack of familiarity with the Bank's procurement guidelines. Nevertheless, these delayswere rectified during implementation, and the project was completed in the time frame originallyplanned.

4. Lack of coordination among the Government organizations, however, was asignificant obstacle for the locally-financed railway link to the port, as it delayed construction

by about two years. At issue was the fact that the Ministry of Railways (MOR) was responsiblefor railways outside the port area, and coordination among it, DPA and the Ministry ofCommunications (MOC) was difficult. It was only the Bank's persistence that caused the StatePlanning Commission (SPC) to intercede.

5. The Bank's procurement procedure, in particular ICB, was new for DPA; theBank insisted the Borrower strictly follow the evaluation and postqualification criteria providedin bid documents. Thus, final evaluations of the bids for the procurement of rubber-tired gantrycranes were delayed. However, this practice has since been successfully applied and delaysminimized.

Results

6. The major objective of the project was achieved. It provided multipurpose andcontainer berths that considerably expanded the port's capacity. Its institutional goals were alsoachieved substantially, through technical assistance: DPA's capacity to carry out developmentalplanning (master planning and financial planning), to manage its facilities, and to undertakeresearch and design activities was enhanced. The project's benefits were also achieved,including savings in (a) cargo-handling costs, (b) ship waiting and berthing time, and (c) cargotime. The ERR on the project as completed is estimated at 26.7% against the 19.9 % in the SAR(paras. 6.15-16).

7. DPA's financial performance was satisfactory: The average annual growth rateof net revenue and net profit after taxes are higher than in the SAR (para. 6.7). Under presentfinancial arrangements, the port enjoys a healthy range of liquidity, leverage, and profitability(para. 6.13).

Sustainability

8. The project is sustainable. It provided new port facilities outside the towncenter (which has serious traffic congestion) and port traffic will grow even more, in conjunctionwith the economic development of the Dalian area as well as the country. Further, DPA is afinancially stable entity with adequate financial resources to maintain and operate the portefficiently. Moreover, with the modern equipment and extensive training provided under theproject, DPA has the potential to increase the port's productivity even further and provideservices at competitive costs.

Findings and Lessons Learned

9. The findings and lessons from the implementation of the project are:

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(a) While DPA was quite capable of implementing project components within itsimmediate control, those outside its jurisdiction, where coordination and cooperationwith other agencies were involved, proved to be beyond its capacity.

(b) Lack of coordination between government agencies was the result of the agencieshaving different priorities vis-a-vis the investment programs (paras. 5.3(a) and 6.3).

(c) The investment priorities of a port, where the economic impact of its operatioil willprimarily be regional, may differ from those of a national carrier, such as the railway.Often, the investment is an insignificant item for the latter, although it may be highlyimportant to the former.

(d) Based on these lessons, future port projects should be designed so the implementationof works could be executed by one entity or, if this is not possible, by those under thesame ministry. However, it may be difficult to design multi-modal projects that wouldconform to this goal.

(e) During implementation, priorities may change, requiring the investment packagefinanced by the loan to be modified. This is particularly true in an economicenvironment like China where rapid growth is taking place. Thus, both the Bank andBorrower's approach to implementation were flexible enough to respond to changespositively and rapidly (para. 5.3(b)).

(f) Greater attention should be paid to familiarize the Borrower's project implementationstaff with the Bank's procurement and disbursement guidelines before projectexecution begins (para. 5.6). Thus, a project launch seminar is quite valuable, as wasconfirmed by the delay in implementing this project.

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PROJECT COMPLETION REPORT

CHINA

DALIAN PORT PROJECT(LOAN 2907-CHA/CREDIT 1875-CHA)

PART I. PROJECT REVIEW: THE BANK'S PERSPECTIVE

1. Project Identity

Name Dalian Port ProjectLoan/Credit Number Loan 2907/Credit 1875RVP Unit East Asia and Pacific RegionCountry ChinaSector TransportProject City DalianLoan/Credit Amount $71.0/SDR 18.2 millionDisbursed $70,249,492.47/SDR 18.2 millionCancelled $750,507.53 (under processing)

2. Background

2.1 Along with energy, transportation is recognized as one of the critical areas ofinvestment to support continued economic growth in China. Based on its experience in the portsector, the Bank identified several important deficiencies, including (a) insufficient berths, (b)an inadequate number of experienced port operators and managers, (c) deficient long-termplanning and coordination (including intermodal aspects) among the various authorities, and (d)the lack of modem technology to address technical problems.

2.2 In 1986, the GOC reorganized the port subsector so as to obtain greaterproductivity and faster development through increasing port autonomy and accountability. In sodoing, it separated policy-making from operational functions. As a result, the latter weredevolved to self-accounting port authorities with adequate financial and operational autonomyto manage their day-to-day affairs.

2.3 Dalian port, built in 1899, is the second largest among the 15 major coastalports in China. Its economic hinterland includes the three northeast provinces (Liaoning, Jilin,and Heilongjiang), and four large districts in the eastern part of Inner Mongolia; no other deepwater sea ports serve these areas. Other ports in the area are at Yinkou (at the mouth of the

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Liaohe river) and Dandong (at the mouth of the Yalu River); but, both are estuarine ports withonly limited depth.

2.4 In 1985, Dalian's traffic reached 44 million tons, of which 77% was foreigntrade. The major commodities handled were crude oil and petroleum products (45% and 15%of the traffic, respectively) at specialized terminals. The remaining commodities were grain(12%), chemical fertilizers (2%), which were largely bulk items and 11.4 million tons of breakbulk cargo, including iron and steel. During the year, total traffic exceeded the port's designcapacity of some 36 million tons, which resulted in an average of 40 ships each day waiting forberths. As the average ship cost Y 16,000/day in the port, the annual waiting cost was over Y230 million. Moreover, traffic has been projected to double over the next decade, because aspecial economic zone (SEZ) was being built north of Dalian city, the government wasemphasizing foreign trade and it was highly likely that coastal shipping would increase. Thus,Dalian port needed to be expanded.

2.5 To meet the expansion, a new site had to be found. The main operatingdistricts of Dalian port were constrained by the encroachment of urban development and couldnot be further enlarged. Various sites around Dalian Bay were investigated before Dayao Baywas selected, because its water depth was suitable and it was located near the recently builtcrude oil terminal and adjacent to the SEZ.

3. Project Objectives and Description

Project Objectives

3.1 The objectives of the proposed project were to increase Dalian port's capacityto handle cargo flow and improve its operational procedures. The project would (a) expandChina's port capacity, which was in danger of constraining economic growth; (b) facilitatetechnology transfer in areas such as long-term planning (master planning), financial planning andcontrol, and berth management; (c) support MOC's research and design capabilities; (d) supportthe study of the present and potential use of containers in areas around Dalian to ensure adequatecoordination of transportation and storage facilities; and (e) address the training needs of portoperators, maintenance personnel and managers.

Project Description

3.2 The project included the following components:

(a) Two container berths for 30,000 dwt ships and two general purpose berths for 25,000dwt ships that could be converted to container berths when needed. These berthswould require the construction of (i) a 1,840m- long breakwater and shore protectionworks; (ii) two container freight stations; (iii) a railway, roads, warehouses, and

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storage yards, where needed; (iv) a railway line from the in-port rail line of Dayaowanto the Jin-xian marshalling yard, and an access road from Dayaowan to the Shen-dafreeway; and (v) the required maintenance and auxiliary buildings. It would alsorequire (vi) the dredging of about 2.5 million m3 of soil and backfill and stabilizingthe fill material, (vii) installing water supply, sewerage and power supply systems, and(viii) providing equipment needed for loading/unloading and harbor operations as wellas navigational aids and boats.

(b) Training of port operators and other specialists through technical assistance in (i) portoperations, design, planning and construction supervision; and (ii) financial control,particularly of capital expenditures and operating costs.

(c) A study of intermodal transport of containers in the Dalian hinterland to reduce theport's congestion.

(d) A review and update of the port master plan which was being prepared by DPA staff.

4. Project Design and Organization

4.1 In the 1980s, ports in China suffered serious congestion due to a deficiency inport capacity. Thus, the project would provide new facilities and improve efficiency. In thiscontext, the design parameters and criteria for project design were straightforward and wellunderstood by the parties concerned, which included MOC and DPA. Consequently, the projectwas adequately and efficiently prepared by DPA and foreign consultants.

4.2 Project preparation by the Bank took about one year. The first Bank missionwas sent in October 1985; the project was appraised on November 12, 1986.

4.3 The project was to be the first phase of the new port development at DayaoBay. Given the range of facilities required, the complexity of coordinating the survey, designand site preparation and the constraints of the site, the implementation plan was well designedand construction was well executed. Also, the scope and size of the project was not overlyambitious.

4.4 A great degree of flexibility in the execution of the works financed by theBank/IDA was required to ensure that the project content kept apace with to changing prioritiesimposed by the ongoing economic reforms. This flexibility was only possible because the workswere executed by one executing agency (DPA). Simple project organization contributed to theproject's success.

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5. Project Inplementation

5.1 The project was implemented satisfactorily within the scheduled completiondate: It became effective on October 3, 1988, about four months after the legal documents weresigned on July 15, 1988. Prequalification of bidders, preparation of bid documents, as well asbid evaluation for civil works contracts, were undertaken prior to loan/credit effectiveness.

5.2 Construction of civil works was managed by DPA's Construction Command,a self-accounting unit that reported directly to the agency director, with assistance from foreignconsultants.

5.3 The completed project deviated from the SAR in these respects:

(a) Construction of the railway link to the port was delayed. This was part of the project,but locally financed. The delay was due to poor coordination between MOR andMOC/DPA. Bank supervision missions repeatedly urged GOC through SPC to resolvedifficulties between the concerned entities. It appeared that the MOR, which wasresponsible for part of new railway line, had other priorities and did not consider thenew line of sufficient importance to its operations to include it early on in itsinvestment program. In fact, agreement to execute the works was only reached in late1990. Thus, the link is now being constructed by both MOC and DPA and should becompleted by October 1995, nearly two years after the project's closing date. Thedelay causes economic losses during the period when no railway link is available toprovide containers with direct rail transportation. Thus, until it is completed,unloaded containers will have to be transshipped by barges to the old terminal wherea railway link exists.

(b) The breakwater design was modified to incorporate the development of a grainterminal in the new port. This was a good example of the close coordination betweenthe Borrower and the Bank. Before the project, this terminal was to be located at theexisting port area near Dalian city. DPA decided to include it in the Dayao Bayproject at the time the master plan was prepared and requested Bank approval tomodify the breakwater and multipurpose berths (in the Bank-financed project) toaccommodate bulk grain vessels. The Bank agreed and it meant the breakwater couldaccommodate an 80,000 dwt grain vessel; however, it required that the breakwater bewidened and deepened, at a cost of Y 28.2 million. About the same time, a "GrainDistribution and Marketing Project" under the Ministry of Commerce was beingprepared. Several joint meetings were attended by the Borrower and Bank's transportand agriculture divisions and it was agreed that part of the new port facilities shouldbe converted into a grain terminal. This facility is an integral part of the GrainDistribution and Marketing Project (Loan 3624/Credit 2518-CHA) which the Bankapproved on June 17, 1993.

(c) The Bank financed the procurement of additional cargo-handling equipment (threeunits of front-lift container-handling cranes) to meet increased container traffic.

(d) The Bank financed the construction of a multipurpose warehouse which was originallyplanned to be locally financed.

Lesson: Flexibility in implementation, which allowed appropriate changes to be made to projectdesign, was possible because of close coordination between the Bank and the Borrower.

5.4 When the breakwater was being constructed, a few caissons which were notyet secured by stonefill were displaced by a typhoon (in September 1992). This cause a slightdelay in the completion and a marginal increase in the contract price (Y 1.4 million).

5.5 The Bank has maintained a close relationship with Japan's Overseas EconomicCooperation Fund (OECF). MOC/DPA had expressed a desire to use OECF funds for a phaseII project after the Bank-financed phase I is completed. At present, the OECF and GOC arenegotiating the second phase and asking for the Bank's opinion.

5.6 Procurement. There were no major procurement problems. However, therewas some delay in the procurement of rubber-tired gantry cranes due to the Borrower's lack offamiliarity with Bank procurement procedures, and a lack of clarity about the commercialrelation between China and the Republic of China. This was because the Borrower appliedevaluation factors that were not specifically provided for in bid documents. This lead to severalmonths' correspondence before the lowest responsive bidder was awarded the contract.

6. Project Results

6.1 All project objectives were achieved during the implementation of the project;however, there were several minor modifications to the use of loan/credit:

(a) The breakwater was modified to accommodate bulk grain vessels and grain unloaders;

(b) Additional equipment for container handling was procured;

(c) Cost savings were used to finance the construction of a multipurpose warehouse whichoriginally was planned to be financed locally.

6.2 Final project cost is estimated at $242 million against $231 million estimatedat the time of appraisal. The final cost will only be known when the construction of the railwaylink will be completed in October 1995. The cost of civil works increased slightly due to thebreakwater modification and additional container equipment.

6.3 All project components were completed by December 31, 1993, except for theconstruction of the railway link to the port (a locally-financed component). This contrasts with

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the agreements required at the time of loan negotiations, which stipulated that GOC wouldensure that all road and railway connections would be completed before the port component wascompleted. The agreement between MOR and MOC/DPA to begin construction works was onlyconcluded in late 1990, about two and half years late. It is fortunate that the economic loss dueto this delay was not critical to the success of the project (see economic evaluation); however,if it had been completed on time, it would have contributed to the benefit stream by an estimated$4.6 million per annum.

Lesson: Coordination between ministries and government agencies takes time and can beproblematic.

6.4 During project implementation, no environmental or resettlement problemsarose.

Financial Performance

6.5 Decentralization. While the project was prepared in 1986, the port'smanagement and financial administration was decentralized from the State (MOC) to localmunicipal government. In turn, the municipality delegated its responsibilities to the portauthority, which handles day-to-day management, operation, construction and development ofthe port. However, major projects and plans affecting the long-term development of the portstill need the approval of the State Council through MOC, although the port bears the financialobligations for its own development. To avoid burdening the municipal government, thefinances of the port were restructured by the annual lump sum payment. This enhanced theport's internal cash generation by reducing, in 1986, a five-year fixed tax obligation to theGovernment. To date, this advantageous arrangement is still in effect.

6.6 The port's decentralization had a significant impact on its financial andmanagement structure. The following table summarizes the key financial terms of the port'smanagerial and financial restructuring, as well as the size of the projects that require Stateapproval.

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Date of Size of project Major financialdecentralization needing state approval terms to the port

January 1, 1986 Rehabilitation and new The annual income andprojects over Y 0.5 million adjustment tax payments to

the State are replaced by anannual lump sum paymentof Y 5.27 million until theend of 1990. This paymentwas reduced to 3.56 millionfor the period 1991-95.

6.7 Past Performance. The financial performance of the port for the last eightyears, through the construction period which ended in 1993, was satisfactory. When the actualmeasured costs included in the PCR for 1985-92 are compared with the projection in the SAR,the PCR figures show a higher-than-expected average annual growth of net revenue (16.8% perannum in the PCR versus 8.9% per annum in the SAR). However, the increase in grossrevenue was offset by (a) the high growth rate of operating costs (30.4% per annum in PCRversus 11.4% per annum in the SAR), and (b) the large increase in nonoperating expenses andwage bonuses. Net profit after taxes shown in the PCR is Y 226.8 million, which is slightly lessthan the estimated net profit of Y 244.2 million provided in the SAR.

6.8 The total volume of traffic handled by the port during this period was not verydifferent from the level forecast at appraisal (52 million tons in the SAR versus 52.1 million tonsin the PCR); the small difference can be attributed to changes in the port's operating costs andcharges. The SAR forecasts were developed at a time when the country had a policy ofcontrolling prices for almost every major commodity at the State level, and, as a result, costincreases and inflation were rare. In addition, the State handled the allocation of majorresources during the previous three decades and only charged users the "planned" prices.Therefore, the financial forecasts presented in the appraisal assumed that (a) port charges wouldremain virtually constant; and (b) the rate of inflation would be minor (in the range of 4.5%-6.5% from 1985-92). These assumptions, although reasonable at the time, proved unrealisticdue to a much higher-than-expected cost-pushed inflation.

6.9 Between 1985-92, although port tariffs were still controlled by the State, theyincreased by 16.8% per annum. However, this increase does not match the rapid increase in

unit operating costs, of 30.4% a year. Highlights of the port's actual income and cost summariesare shown below compared with the forecasts in the SAR. No SAR forecast was provided for1993, but the actual financial results given by the port for 1993 are reported in Table 1.

1985 1990 1992 1993Actual Actual SAR Actual SAR Actual

------------------------ (Y million) -------------------------

Net revenue (after business taxes) 263.7 494.2 413.6 783.3 475.2 1,020.5Less:

Operating cost (includingdepreciation) 77.9 234.5 135.2 500.0 165.5 809.7

Net nonoperating(income)/expenses 7.3 52.6 4.8 53.0 5.6 10.7

Profit before taxes 178.5 207.1 273.6 230.3 304.1 200.1Less: Taxes 140.6 5.3 60.0 3.6 60.0 3.6Net profit after taxes 37.9 201.8 213.6 226.7 244.1 196.5Average net fixed assets 555 1,090 1,281 1,942 2,098 2,393Return on average net

fixed assets (%) /a 32 19 22 14 16 8Operating ratio /b 30 47 33 64 35 79

/a Retum on average net fixed assets = Profit Before TaxesAverage Net Fixed Assets.

/b Operating ratio = Operating CostsNet Revenue.

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6.10 DPA's financial performance has not been as good as was expected during theappraisal: Operating ratios continued to deteriorate and were substantially higher than theappraisal targets. This trend was caused by rapid increases in costs and no matching hikes intariffs, despite supervision mission reminders.

6.11 The rate of return on net fixed assets, while generally satisfactory, also declinedfrom 32% in 1985 to 14% in 1992 and 8% in 1993. This was due to cost increases and the factthat fixed assets were not revalued. However, it should be noted that, due to the mission'sconcern, DPA revalued them in 1993. This will help DPA accumulate depreciation reserves ata faster rate to replace the retired assets. It is encouraging to note that, following MOF'sinstructions, DPA adopted a new accounting system based on international accounting standards,effective July 1, 1993, that will adopt commercial practices and improve the financialmanagement information system.

6.12 Present Performance. Despite the rapid increase in operating costs, the port'scurrent financial position was still sound at the end of 1993: Current assets substantiallyexceeded current liabilities. Also, the port's actual current ratio in 1992 was 2.7 (1.1 for 1993),which is not substantially different from the SAR original forecast of 2.9. In addition, thepercentage of net current assets in the form of cash did not change much--from 35.8% in 1985to 34.7% in 1993. The salient points of the port's balance sheet during these years are listedin Table 2.

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1985 1990 1992 .1993Actual Actual SAR Actual SAR Actual-----------------------------(Y million) ------------------------------

Net fixed assets 630.8 1,147.4 1,143.6 2,144.0 2,051.32,931.4LaCurrent assets 129.3 269.0 527.6 379.1 411.2 827.0Special fund assets 67.0 179.8 67.1 241.3 67.11,083.5/b

Total 827.1 1 596.2 2.008.3 2.764.4 2,529.6 4.841.9

Equity 614.0 614.0 614.0 614.0 614.0 614.0Port development fund 0 700.2 872.4 1,796.7 1,300.4 2,733.2Long-term debt 29.8 94.1 296.8 111.5 370.2 622.2Current liabilities 81.1 85.7 122.9 140.0 142.8 770.3Special funds 102.2 102.2 102.2 102.2 102.2 102.2

Total 827.1 1.596.2 2Q008.3 2.764.4 2,529.6 4841.9

Debt:capital ratio /c 4.6 6.7 16.6 4.4 16.2 15.7Current ratio /d 1.6 3.1 4.3 2.7 2.9 1.1

/a Including other fixed assets./b Long-term investment and other assets./c Debt = capital ratio = Total Long-term Loans

Total DPA's Capital./d Current ratio = Current Assets

Current Liabilities.

6.13 Future Performance. Under present financial arrangements, despite the highincrease in operating costs, the port still enjoys a healthy range of liquidity, leverage, andprofitability due to its flat lump sum payments to the State (these were reduced once in the lasteight years, in 1991). The port's new responsibility for financing its own capital programs hasnot yet had an impact on its cash flow (Table 3), but it is expected to weigh more heavily in thefuture. In addition, the preferential tax terms granted by the State, which are set to expire in1995, could change at any time after that. Therefore, to maintain the current favorable terms,

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the port's financial personnel should test many scenarios and alternatives before negotiating withState officials.

Economic Reevaluation

6.14 The economic analysis in this report is based on a reevaluation of the data ontraffic, operational performance, economic costs and benefits of project components as comparedto the estimates provided by the SAR. The methodology used was similar to that in the SAR andcan be briefly summarized as follows: (a) capital investment and maintenance costs were revisedto reflect 1994 prices and included in the cost stream; (b) the benefits stream, also reflected in1994 prices, was also included, and consists of savings in port handling, ship port time (berthand waiting), and cargo port time (berth and waiting); and (c) a project life of 20 years wasassumed and the capital investment period for all project items is from 1987 to the end of 1995(including the railway link to the port). Benefits started to accrue both for general cargo berthsand container berths in 1994. The estimated economic loss caused by the delay in the railwaylink was $0.5 million/year, which is less than 1 % the project's total annual benefit andconsidered insignificant.

6.15 When reviewing the port components altogether, it was found that three majorfactors improve the reevaluated economic rate of return (REIRR): (a) an increase in the averagedaily ship cost in port, (b) a reduction in capital construction costs in terms of constant prices,and (c) higher-than-expected general cargo and container traffic. Conversely, these factors areoffset by decreasing cargo value and benefit in container handling.

6.16 Assessing these revised data, the overall EIRR for this project is 26.7%, whichis higher than the SAR estimate of 19.9% (see Annex 1 for a detailed analysis).

6.17 The REIRR and SAR estimates of the project in terms of economic rate ofreturn, sensitivity analysis and net present value (NPV) are given below:

SAR PCR

Best estimate of rate of return (%) 19.9 26.7NPV (12% discount rate, Y million) 493.6 1,397.1

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7. Project Sustainability

7.1 The project is sustainable: DPA is financially sound and with a sharply growingeconomy in China and the Dalian city area (including SEZ, which is next to the port) beinglocated in the center of a major industrial area, the port traffic is expected to continue growing.DPA is vigorously responding to market forces including seeking joint ventures with foreigninvestors to develop and improve services in the port. There is no known factor that will negatethe sustainability of the project.

8. Bank Performance

8. 1 The Bank's performance in identifying issues and preparing the project has beengood and quick. It was identified in October 1985 and appraised in November 1986. Bank staffresources leading to appraisal were 82.8 staff-weeks and supervision was also efficient. Theannual average input of staff resources was 11.5 staff-weeks for the life of the project. Also,sectoral coordination within the Bank was good.

8.2 The Bank took a consistent position when it came to procurement and providingappropriate instructions and guidance, when necessary. A good example was with regard to theprocurement of rubber-tired gantry cranes. After this procurement was finalized, no majorconfusion or delays were experienced.

9. Borrower Performance

9.1 In general, the Borrower's performance was good and preparation,implementation, and supervision were adequate, as was staff deployment. DPA has anexperienced autonomous department to implement the project's physical aspects and anappropriate number of sufficiently experienced staff were made available.

9.2 The Borrower's capability in long-term financial planning, budgeting accountingand costing, for which technical assistance was provided, was strengthened and will be testedafter the project is completed.

9.3 As shown in Table 7, Part III, covenants were mostly met. Some delays wereexperienced with submitting the reports in the master plan and intermodal study; this was dueto the delay in internal authorization. Tlhe internal procedures should be improved.

9.4 The Borrower will need to closely monitor the operation of the new containerterminal, with its advanced systems of managing information and equipment; however, DPA'sperformance in this area has not been proven.

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10. Project Relationship

10.1 The working relationship between Borrower and Bank was satisfactory duringthe preparation and implementation period. The Bank's contribution in terms of advice andguidance was accepted in a positive manner and this resulted to the timely completion of a well-rounded project.

11. Consultant Services

11.1 Foreign consultants were engaged to help DPA supervise construction. Ingeneral, the GOC was reluctant to hire them for Bank projects, because of their cost and theirlimited capacity to access local information. Thus, they were not employed for the studiesdesigned under project; consequently, DPA financed the studies with domestic funds. However,this arrangement could have limited the scope of work and extensiveness of the study (althoughthis is not yet conclusive).

12. Training

12.1 Extensive training was carried out. Under the project, 3,167 staff were trained,against the 1,620 targeted in the SAR. In particular, training for management was satisfactorilycompleted (631 staff compared with the 269 expected in the SAR). Overseas training, however,fell short, at 340 staff-months for 192 staff against 500 staff-months for 112. The shortfall hasbeen supplemented by additional domestic training that was acceptable, since the quality of localtraining is satisfactory.

13. Project Docunmentation and Data

13.1 The legal documents for loan 2907-CHA/credit 1875-CHA were adequate andappropriate for achieving project objectives in the key organizational and financial areas. Theproject appraisal report provided a useful framework for both the Borrower and the Bank duringproject implementation. DPA promptly provided sufficient data and clarifications for the PCR,which helped facilitate its early completion.

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PART II: PROJECT REVIEW FROM BORROWER'SPERSPECTIVE

Section A

1. Dayao Bay Project of Dalian Port is a major project in the seventh five-yearplan in China which was reviewed and formally accepted by the State Acceptance Committeeat the beginning of 1993. The new port was officially operational and opened to traffic on July1, 1993. The acceptance committee commented on the project's general layout, handlingtechnology and structure type design as being reasonable with sound quality; environmentalprotection, fire-fighting facilities complied with design requirements and relevant stateregulations; the project completion files and documents were basically completed, precise andsystematic and complied with acceptance requirements; the handling equipment was provided,operational organization established, operations staff met the capabilities required.

2. The completion of this project enables the Port of Dalian to have a set ofmodernized and formalized containers, multipurpose berths with top level of facilities, equipmentand management systems in China. It can accommodate container ship of the third generationand is open to liners from Asia, Europe and America, etc. It provides a solid foundation forthe development of the Dayao Bay Port area as a transfer hub port with deepwater. When theport operates at its design capacity, it will be of major significance for greatly raising containertransport capacity within Dalian Port and Northeast region to promote hinterland economicexpansion and especially the development of Dalian Economic and Technical Zone. It alsoplayed an important role in relieving the restrictions within the existing port.

3. For construction of the project, it imported large amounts of advanced portequipment with modern container operation management systems; trained a lot of technical,operational, maintenance and management staff and especially overseas training that enabledtrainees to widen their view, learn and obtain some international, advanced technology andmanagement experiences which would be a great benefit to the Dalian Port to become aninternational modern port.

4. In the project execution period, the Dalian Port Master Plan was drafted andsome necessary revisions were made according to study prepared for container inlanddistribution. These were all done by Chinese technical staff themselves. We believe that thestudy results are of great significance and comply with Chinese conditions.

5. By the execution of Dalian Dayao Bay Project, the construction andmanagement level of Dalian Port had greatly raised, especially as a big step in internationalconstruction of supervision in the procurement aspect. An amount of technical andadministrative staff now possess rich professional knowledge, management experiences, familiarwith international construction supervision, ICB procurement and the World Bank procurementguidelines.

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6. Particular attention was given to environmental protection. There were nosignificant effects to the local environment after the project completion in the case of largeexcavations, backfilling, dredging and other construction.

7. Success of the Project Management. The Dalian Port Authority establisheda project management system gradually after the project appraisal and set up a dedicatedorganization in charge of overall management. The smooth completion of the project fullyshowed that the organization and management of Dalian Port Project were completedsuccessfully, effectively and satisfactorily.

8. The project design was basically undertaken by the Chinese design institute,i.e., the Water Transportation Design and Planning Institute of MOC. In general, the designwas a success. The design institute made a great effort to ensure the satisfactory execution ofthe project including preparation of bidding documents and site construction design revision, etc.

9. In accordance with the change of the port master plan and development needsin the project period, the breakwater was modified to accommodate 80,000 dwt bulk grainvessels (to import wheat), by utilizing the Bank's saving of the loan. The advantage ofdeepwater at Dayao Bay was fully taken. In addition, the Bank loan and savings were used toconstruct a multipurpose warehouse, purchasing an additional three units of container frontloaders. All those items purchased outside the Bank's loan were finished before thedisbursement deadline.

Section B

10. The first part of the PCR drafted by the World Bank is comprehensive. Itdescribes completely all the major items of the project executed and the analysis provided ismainly correct and complies with the actual conditions.

11. With respect to the data of each item in the list of the PCR, Part III, weacknowledge that they are correct and fully show the overall situation.

12. With regard to the delay in procurement, the main reason was that so manybidders had bid for the works, the bidding document requested two different delivery methods,i.e., CIF and turnkey items technology are complicated and confirmation of the bidder'sexperience and subcontracting background, caused the additional time for bid evaluation.

Section C

13. During the whole implementation period, the World Bank was very positive,serious, effective, and due to these fruitful efforts enabled the project to be completed accordingto schedule. The Dalian Port Authority appreciates all officers and experts from the World Bankwho participated in this project for their efforts day and night, and their contribution made to

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the port development. It gave us deep impressions of their strong sense of responsibility andspirit of job respect.

14. From the project appraisal to reimbursement deadline, we have been keepinga close cooperative and mutual respect with the technical Division, Communication Division,Disbursement Division, etc., of the Bank. This is the first time that Dalian Port has used a Bankloan. Due to mutual efforts, especially in guidance on all aspects granted by the Bank's experts,the Dalian Port became familiar with relevant rules rapidly and overcame all difficulties ontechnical, commercial, financial application and other project executions, and completed theproject satisfactorily.

15. Each site supervision mission from the World Bank made a significant effecton the project execution. They inspected the site situation on time, and collected first-handinformation, resolved problems in the construction to accelerate the construction procedure bystrengthening a mutual understanding and trust so that an easy understanding can be reached.Especially, the Bank's mission gave us great support and assistance on breakwater modification,loan and savings application and civil works price adjustment, etc., and also direct shoppinglimitation adjustments, and LCB for purchasing some listed shopping equipment, etc. The Bankofficers' instruction, understanding and quick responses to our request facilitated implementation.

16. Two or three years after the appraisal of the project, the cost of equipmentincreased considerably. This additional cost was absorbed by the cost savings in civil workscontracts resulted from the devaluation of renminbi.

Section D

17. Generally, the project implementation can be kept to strictly follow the mutualagreement and use the loan according to the Bank's guideline and requirement.

18. In order to have a sound implementation of the Dayao Bay Project, the Portof Dalian carried out comprehensive training to relevant staff including the senior projectmanagement staff training at the Bank, local procurement and disbursement training, invitedforeign consulting company for construction supervision and financial training. Training hasbeen carried out, for example, by visiting overseas and investigating domestic major projects ofthe Bank such as the Lubuge Power Station and the East Pier Project of Taijing Port to ensurethat managers possess the basic relevant experience and knowledge.

19. In all stages of the project execution, a positive close relationship wasmaintained with the World Bank, full attention to the Bank's instructions and followed the rulesseriously. Therefore, no major problems occurred in the execution period.

20. For the key railway link construction, the Chinese government confirmed thatthe construction should be undertaken by MOR in 1986 and in the same year, a major reform

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began to the Chinese railway construction systems. The problem of investment had occurredas this was a special line servicing the port and it contradicted with the new systems. By severalcoordinations made by SPL and the Bank's attention, the railway was confirmed to be built byMOC and MOR in 1992 and estimated to be finished in 1995. Due to the delay in completiontime, Dayao Bay Port cannot be fully efficient in the first two years.

21. Some delays caused in the project execution are mainly due to too manyapprovals, too long a preparation time for ICB, lack of experience for bid evaluation and someother reasons such as limited power authorization, etc.

22. Use of foreign consultants to supervise civil works contracts created a favorableenvironment among the supervision teams; they trained and worked with the Chinese supervisionteam for preparing detailed monthly reports. There are still some weak points that exist, suchas some inadequate supervision and lack of equipment.t; thus, some inspections had to rely onthe social services, etc.

Repayment Ability

23. Since November 1, 1993, the Dayao Project entered the repayment period; thePort of Dalian needs to annually pay US$8.5 million as retuming the capital and interestaccordingly. As in recent years, local exchange rates had big changed, i.e., from 2.80:1 up to8.72:1. It is really giving heavier repayment load to the project executor and the adjustment ofport tariff rate is limited by the state policy regulations. The loss caused by the exchange ratechange cannot be recovered. The Port of the Dalian Authority recommended that relevant stateauthorities pay attention to this matter.

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PART III: STATISTICAL INFORMATION

1. Project Timetable

Date DateItem planned actual

Identification 10/85

Preappraisal - 09/86

Appraisal mission 11/86 11/12/86

Loan negotiations 04/87 12/87

Board approval 06/87 02/09/88

Loan signature - 07/15/88

Loan effectiveness 04/88 10/03/88

Loan closing 12/31/93 12/31/93

Loan completion 06/94 04/30/94

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2. Disbursement Record

Period Credit (SDR '000) Loan ($'000)Disbursements Cum. disbursements Disbursements Cum. disbursements

10/01/88-12/31/88 5,019,293.46 5,019,293.46 0.00 0.00

01/01/89-03/31/89 0.00 5,019.293.46 0.00 0.00

04/01/89-06/30/89 0.00 5,019.293.46 0.00 0.00

07/01/89-09/30/89 3,118,827.44 8,138,120.90 0.00 0.00

10/01/89-12/31/89 0.00 8,138,120.90 0.00 0.00

01/01/90-03/31/90 3,509,942.50 11,648,063.40 0.00 0.00

04/01/90-06/30/90 0.00 11,648,063.40 0.00 0.00

07/01/90-09/30/90 2,453,853.63 14,101,917.03 0.00 0.00

10/01/90-12/31/90 1,788,361.85 15,890,278.88 1,460,402.07 1,460,402.07

01/01/91-03/31/91 781,997.80 16,672,276.68 5,677,150.27 7,137,552.34

04/01/91-06/30/91 427,949.62 17,100,226.30 7,698,789.88 14,836,342.22

07/01/91-09/30/91 25,922.67 17,126,148.97 7,620,595.98 22,456.938.20

10/01/91-12/31/91 99,175.68 17,225,324.65 9,634,820.30 32,091,758.50

01/01/92-03/31/92 675,093.58 17,900,418.23 6,424,566.59 38,516,325.09

04/01/92-06/30/92 35,413.63 17,935,831.86 7,530,583.13 46,046,908.22

07/01/92-09/30/92 0.00 17,935,831.86 9,001,251.76 55,048,159.98

10/01/92-12/31/92 95,079.62 18,030,911.48 2,444,947.87 57,493,107.85

01/01/93-03/31/93 51,048.30 18,081,959.78 2,664,029.64 60,157,137.49

04/01/93-06/30/93 0.00 18,081,959.78 1,231,316.34 61,388,453.83

07/01/93-09/30/93 118,040.22 18,200,000.00 4,547,165.84 65,935,619.67

10/01/93-12/31/93 0.00 18,200,000.00 1,385,452.38 67,321,072.05

01/01/94-03/31/94 0.00 18,200,000.00 2,164,581.31 69,485,653.36

04/01/94-04/30/94 0.00 18,200,000.00 763,839.11 70,249,492.47

undisbursements:

750,507.53

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3. Project Implementation

Project Planned Actual Months ofcomponents completion completion delays

Civil Works

Breakwater Part I 6/89 12/90 18Reclamation 12/90 11/91 11Dredging 10/89 07/89 -3GC and Iron Ore Berth 12/90 09/91 9GC and Fertilizer Berth 6/90 9/91 15Breakwater Part II 6/90 5/91 11End part of Berth 6/90 10/91 16Foundation Treatment 12/90 12/91 12Road and Yard, MP Berth 6/92 6/92 0Container Quaywall 12/90 10/91 10Breakwater Part III 11/92 12/93 13CT Road and Yard 11/92 10/91 -13CFS 6/92 9/91 -9Building 6/92 8/91 -10Rail in Port 9/92 12/94La 27Water Supply and Sewage 9/92 12/91 -9Heating and Ventilation 11/92 12/91 -11Power Supply 11/92 12/91 -11Rail Outside Port 6/92 6/95 36Infrastructure Outside 12/91 12/91 0

Equipment

Cargo Handling Equipment 12/92 12/93Lb 12Communication and Navigation 6/92 10/92 4Computers 12/92 6/92 -6

Technical Assistance

Training 12/93 12/93 0Port Master Plan 6/89 8/92 38Intermodal Study 12/89 5/92 29

L/ Expected/b Additional cargo handling equipment included.

4. Project Cost and Financing

A. PROJECT COST

Appraisal estimate Actual5'000 Y'0O0 5'000 Y'OOO

Local Foreign Total Local Foreign Total Local Foreign Total Local Foreign Total

A. Civil WorksGeneral Purpose Berths1. Gen. cargo & iron ores 735 4,754 5,489 10,275 14,642 24,917 786 4,780 5,566 3,701 20,246 23,9472. Gen. cargo & fertilizer 461 3,374 3,835 7,009 9,798 16,807 549 3,331 3,880 2,579 14,106 16,6853. Breakwater part 2 1,058 6,792 7,850 7,452 13,209 20,661 568 3,380 3,957 2,378 13,474 15,8524. Berth head protection 429 2,216 2,645 2,490 3,633 6,123 158 1,042 1,200 805 4,563 5,3685. Breakwater part 1 3,638 0 3,638 10,094 3,656 13,750 3,710 0 3,710 14,037 0 14,0376. Reclamation 5,889 16,899 22,788 1,735 74,840 76,575 1,424 13,619 15,043 6,928 20,032 26,9607. Foundation treatment 1,572 0 1,572 9,649 7,807 17,456 2,897 549 3,446 14,091 40,746 54,8378. Dredging 343 4,050 4,393 4,255 13,335 17,590 254 2,842 3,096 1,107 10,604 11,7119. Roads and yards 2,340 0 2,340 7,955 0 7,955 669 0 669 3,598 0 3,598

Subtotal 16.465 38.085 54.550 60.914 140.920 201,834 11,015 29.552 40,567 49.224 123.771 172.995

Container Berths10. Quay structure 748 6,578 7,326 9,838 15,737 25,575 1,312 8,107 9,419 6,252 34,346 40,59811. Breakwaterpart 3 1,002 8,037 9,039 9,838 21,756 30,854 1,644 11,802 13,446 8,744 53,564 62,30812. Roads and yards 3,217 0 3,217 14,767 8,255 23,022 5,763 0 5,763 30,637 0 30,63713. CFS 151 1,700 1,851 677 5,443 6,120 995 2,088 3,083 5,306 10,198 15,50414. Aux. buildings 5,383 0 5,383 15,066 9,916 24,982 908 2,115 3,023 4,849 12,121 16,97015. Rail in port 243 0 243 1,051 0 1,051 212 0 212 1,154 0 1,15416. Water supply & sewerage 942 0 942 4,962 0 4,962 1,237 0 1,237 6,538 0 6,53817. Heating & ventilation 598 0 598 3,038 0 3,038 2,253 0 2,253 11,701 0 11,70118. Power supply 1,777 0 1,777 8,067 0 8,067 3,540 0 3,540 18,308 0 18,30819. Infrastructure outside

port 13,027 200 13,227 59,566 0 59,566 20,389 0 20,389 88,130 0 88,13020. Rail outside port /a 49,200 0 49,200 182,040 0 182,040 44,059 0 44,059 301,068 0 301,06821. Temporarywork 3,835 0 3,835 10,101 0 10,101 2,765 0 2,765 11,271 0 11,27122. Land acquisition 15,767 0 15,767 36,372 0 36,372 15,185 0 15,185 58,001 0 58,00123. Others 1,587 0 1,587 6,030 0 6,030 13,007 0 13,007 65,576 0 65,576

Subtotal 97.477 16.515 113.992 360.673 61,107 421,780 113,057 24.112 137.169 617.535 110.229 727.764

Total - Civil Works 113.942 54.600 168,542 421.587 202.027 623,614 124,072 53.664 177.736 666 759 234.000 900.759

A. PROJECT COST (cont'd)

Appraisal estimate ActualS'OOO Y'OOO S'000 Y'OOO

Local Foreign Total Local Foreign Total Local Foreign Total Local Foreign Total

B. Equipment24. Management & computer 0 1,310 1,310 0 4,844 4,844 0 1,288 1,288 0 7,089 7,,08925. Cargo handling 692 21,368 22,060 2,560 79,062 81,622 42 35,827 35,869 231 193,447 193,67826. Commun. & navigation 575 2,221 2,796 2,127 8,218 10,345 100 3,027 3,127 1,00 16,778 17,77827. Equipment tests 76 190 266 281 703 984 137 300 437 199 1,637 1,83628 Power equipment 0 480 480 0 1,776 1,776 557 512 1,069 3,099 2,759 5,85829. Water supply equipment 0 90 90 0 333 333 0 87 87 0 476 47630. Service boats & vehicles 0 387 387 0 1,432 1,432 42 1,150 1,192 202 6,343 6,545

Total - Equipment 1.343 26.046 27,389 4,968 96,368 101,336 878 42,191 43,069 4,731 228,529 273.260

C. Training and Techn. Assistance31. Training and others 631 1,500 2,131 3,193 4,133 7,326 4,529 12,772 17,301 20,816 151,942 172,75832. Construction supervision 0 1,000 1,000 1,949 4,385 6,334 186 560 746 900 2,393 3,29333. Studies management 0 1,000 1,000 1,062 2,682 3,744 804 0 804 3,000 0 3,00034. Survey & design 2,345 300 2,645 4,474 2,268 6,742 2,203 0 2,203 8,381 0 8,38135. Financial seminar 0 100 100 333 962 1,295 0 50 50 0 262 262

Total-Trainin &T.A. 2,976 3,900 6,876 11,011 14,430 25,441 7,722 13,382 21.104 33,097 154.597 187.694

Total Baseline Cost 118.261 84,546 202,707 437,566 312,825 750.391 - - - - - -

Physical contingency (10%) 11,827 8,455 20,282 43,756 31,283 75,039

Total 130,088 93.001 222,989 481,322 344108 825,430 - - - - - -

Price contingenciesAnnual - - - - - - - - - - - -Compounded - - - - - -

Amount 4,618 2,999 7,617 86,010 57,495 143,505 - - - - - -

GRAND TOTAL 134.706 96.000 230.606 567,332 401,603 968,935 132,672 109.237 241,909 704,587 617,126 1,321.713

/a Estimate.

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B. PROJEcT FINANCING

Sources Planned Final($'000) ($'000)

Bank loan 71,000 70,249IDA 25,000 25,000Domestic financing (DPA and MOR) 134,600 146,660

Total 230,600 241,M9

C. ALLOCATION OF LOAN PROCEEDS

Category Original allocation Final allocation Actual disbursementsCr. Ln. Cr. Ln. Cr. Ln.

(SDR'000) ($'000) (SDR'000) ($'000) (SDR'000) ($'000)

1. Civil Works(a) Parts A.1, A.2 and A.4 of the

the project 12,400 33,300 13,360 28,700 13,478 30,037(b) Part A.3 of the project 2,900 - 2,340 - 2,332(c) Warehouse under Part A.6 of the

project - - - 1,200 -

2. Goods for Part A of theproject - 24,700 2,000 41,100 2,018 40,235

3. Consultants service &training 2,900 - 500 - 372

4. Unallocated - 13,000 - - -

Special Account -22Cancellation 751

Total 18,20 71.00 18.20 71.000 18.2 71.00

D. STUDIES

System Purposes as defined at appraisal Status Impact of study

1. The Draft Master Establishing a planning scheme for Completed in August The Long-Term Development PlanningPlan of Dalian the port construction to comply 1992 (38 months' Scheme has been used in the constructionPort with the future requirements of the delay La) of Dayao Bay and in the enlargement of

anticipated throughput. existing port throughput.

2. Intermodal Distri- To establish an effective distribu- Completed in May The data and findings in the report havebution System of tion system of containers to/from 1992 (29 months' assisted the port in building up the mod-International the hinterland. To develop an ade- delay Ma) ernized container berths and in the designContainers of quate transportation system and a of the system for the transportation ofDalian Port process for efficient documentation. containers by rail.

/a Delay was partly due to the revision of the reports.

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E. TRAING

1. Number of staff

Planned Actual

Management 269 631Equipment operators 381 412Stevedores 424 1,590Auxiliary services 546 534

Total 1 620 3.167

2. Overseas Training

Planned ActualNumber of Staff- Number of Staff-

staff months staff months

Equipment operators 25 75 75 60Maintenance 50 300 81 70Computing 21 93 18 36Management 16 32 118 174

Total 112 500 192 34Q

3. Financial Training

Domestic training Overseas trainingNumber of Staff- Number of Staff-

staff months staff months

132 1,406 12 17

5. Status of Legal Covenants

Original RevisedAgreement Section Status date date Description of covenant Comments

Development 3.01(a) (i) OK 07/15/88 - Borrowers to carry out the con- The construction of railway link isCredit struction of railway lines from expected to be completed in October

Dayaowan to the Jin-xian marshal- 1995. The access road has beenling yard and an access road from completed.Dayaowan to the Shen-da Free-way.

3.05 OK - Dec. 1989 Undertaking a study of intermodal Study report has been submitted totransport of containers. the Bank.

4.01(a) OK - - Borrower to maintain proper re-cords and accounts.

4.01(b) OK - - Accounts to be audited and fur- Audited financial report for each C

nished to the Bank not later than year had been submitted to the Banksix months after end of fiscal year. by the end of June.

Project 2.01(b) OK 07/15/88 - DPA to carry out Part C of theProject.

4.01(a) OK - - DPA to maintain proper recordsand accounts.

4.01(b) OK - - DPA to have accounts audited and Audited financial report for eachsubmitted to the Bank not later fiscal year had been satisfactorilythan six months after end of fiscal submitted to the Bank by end the ofyear. June.

4.03 OK - - DPA to prepare and furnish afinancial plan for the current yearand each of the next four years byApril 30 of each year.

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6. Use of Bank Resources

A. STAFF INPUTS

1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 Total

Preappraisal 0.1 26.1 5.20 - - - - - - - - 31.4

Appraisal - - 51.4 - - - - - - - - 51.4

Negotiations - - - 7.4 - - - - - - - 7.4

Supervision - - - 0.5 9.2 11.7 19.0 12.9 10.7 4.4 - 68.4

B. MISSION DATA

Month/ No. of Days in Specializations Performance Rating Type ofyear persons field represented status /a trend /b problems /c

Identi/Prep 03/86 3 20 EC, EGR, FA

Appraisal 11/86 5 30 EC,EGR,FA,O

P,FA

Supervision 1 10/88 4 16 EGR,EC,FA,E 1 1C

Supervision 11 09/89 2 8 OP,FA 1 1

Supervision III 06/90 2 8 EGR,FA 2 3 M

Supervision IV 12/90 2 6 EGR,FA 2 2

Supervision V 08/91 3 15 OP, EGR,FA 2 2

Supervision VI 09/92 1 3 EGR 2 2

Supervision VIl 09/93 1 4 EGR 2 2

Supervision VIII 12/93 2 8 EGR,FA 2 2

/a 1 = problem free or minor problems; 2 moderate problems; 3 major problems./b 1 = improving; 2 = stationary; 3 = deteriorating./c M = Management; P = Procurement.

7. Procurement (ICB)

Bid Biddocuments documents Evaluation Award Period

sent to to Bid sent to of Contract undertaken inContract the Bank bidders opening the Bank contract price evaluation

(M/DIY) (M/D/Y) (M/D/Y) (MID[Y) (M/D/Y) ($ mln) (months)

1. Reclamation works Dec. 87 01/30/88 04/22/88 08/29/88 10/05/88 - 42. Maritime works Dec. 87 01/30/88 04/22/88 06/24/88 10/05/89 - 23. CFS April 89 11/18/89 01/19/90 05/17/90 06/29/90 - 54. Container gantry crane April 89 07/27/89 09/28/89 05/00/90 12/08/90 12.5 145. Transtrainer April 89 07/27/89 09/28/89 05/00/90 12/15/90 8.4 146. Portal crane April 89 07/27/89 09/28/89 04/09/90 06/05/90 3.0 97. Port mobile tower crane April 89 07/27/89 09/28/89 04/09/90 06/29/90 3.5 98. Chassis April 89 07/27/89 09/28/89 05/00/90 10/23/90 0.4 12 °°9. Prime mover (A) April 89 07/27/89 09/28/89 05/00/90 12/21/90 0.0 1410. Prime mover (B) April 89 07/27/89 09/28/89 05/00/90 07/10/90 0.7 1011. Front lift container crane April 89 07/27/89 09/28/89 04/09/90 09/01/90 2.6 1112. Communication equipment April 89 07/27/89 09/28/89 05/00/90 09/01/90 1.6 1113. Computer system April 89 07/27/89 09/28/89 04/09/90 07/10/90 1.3 1014. 3T forklift April 89 11/26/90 01/10/90 05/03/91 06/15/91 0.2 615. 6T forklift (A) April 89 11/26/90 01/10/90 05/03/91 08/07/91 0.3 816. 6T forklift (B) April 89 11/26/90 01/10/90 05/03/91 06/04/91 0.3 617. Container forklift April 89 11/26/90 01/10/90 05/03/91 07/20/91 0.3 718. Weightbridge April 89 11/26/90 01/10/90 05/03/91 06/05/91 0.1 019. High-mast lighting April 89 11/26/90 01/10/90 05/03/91 08/06/91 0.3 820. Mobile crane April 89 11/26/90 01/10/90 05/03/91 09/15/91 1.7 921. Front lift container crane Feb 93 07/10/93 08/10/93 09/17/93 09/29/93 1.1 3

- 29 - ANNEX 1

PROJECT COMPLETION REPORT

CHIINA

DALIAN PORT PROJECT(LOAN 2907-CHA/CREDIT 1875-CHA)

ECONOMIC ANALYSIS

A. TRAFFIc

1. As shown in Table 1.1, the overall traffic of the port is increasing steadily.Actual traffic performance, during 1990-93, was almost the same as the SAR forecast in termsof total port traffic. However, general cargo and container traffic were higher than the SAR'sestimates and are summarized as follows.

TRAFIC HANDLED BY DPA(million tons)

Forecast (SAR) Actual (PCR)Total General Container Total General Container

Year traffic cargo ('000 teu) traffic cargo ('000 teu)

1990 48.4 8.3 175 45.3 10.3 1671991 50.2 8.7 191 49.6 12.3 2061992 52.0 9.0 209 52.1 13.7 2561993 52.8 9.4 228 52.9 15.3 285

2. Despite the severe economic recession suffered in 1989 and 1990, the averageannual traffic growth of the port during 1985-92 still shows a increase of 3.7 percent per annum,compared to an estimated 3.6 percent in the SAR. Based on the economic activities of the area(a newly developed Special Economic Zone is located adjacent to the project site), the porttraffic forecast figure for the next decade (1995-2005) is estimated to be approximately12 percent higher than the SAR, and 5 percent higher thereafter to 2010 (Table 1.1).

3. General Cargo Traffic. Traffic performance is higher than the SAR estimate.For the last three years (1990-93), the actual traffic handled by the port was on average46 percent higher than the SAR estimate. The port needed the additional general cargo berthsto meet the general cargo traffic demand. In 1993, DPA commenced construction of phase two

- 30 - ANNEX 1

of the Dayao Bay project. Phase two includes the building of six additional general cargoberths, financed by OECF Japan, adjacent to the two Bank-financed berths.

4. Container Traffic. The actual container traffic of the port, between 1990-93,was 13 percent higher than the SAR estimate. The growth of the container penetration ratio,however, is concentrated only on foreign trade, particularly foreign incoming traffic, whichincreased from 20 percent in 1985 to 66 percent in 1993. For domestic cargo, thecontainerization ratio decreased sharply from the overall 8 percent in 1985 to only 1 percent in1993. While foreign-going container traffic increased substantially, the share of domesticcontainer traffic also shrunk sharply from 32 percent of total container traffic in 1985 to thenegligible 5 percent in 1993. The actual container penetration ratio of the port can besummarized as follows:

ACTUAL CONTAINER PENETRATION RATIo IN DALuAN PORT(%)

1985 1993In Out Total In Out Total

Foreign going 20 4 7 66 12 17Domestic going 10 7 8 2 1 1Domestic sharing - - 32 - - 5

5. The rapid growth of foreign incoming containerized cargo represents the currentcargo handling trend for international sea transport. Today many international ports only acceptcontainerized cargo, and this requirement will force the port to expedite the containerization ofits foreign outgoing traffic. The development of domestic container transport has fallen behinddue to the lack of adequate investment in transport facilities for the domestic users. Sinceimprovement of domestic container handling will involve very large sums of capital, includingthe participation of many agencies (port, road, highway, bridge, electric power, trackingindustry, management information systems, etc.), it is estimated that progress in this area willbe rather slow in the foreseeable future.

B. SHIP TIME ANALYSIS

6. General Cargo Carriers. Comparing 1985 and 1993, general cargo carriersspend an average of 10.2 days and 6.9 days, respectively, in the port, of which the ship waitingtime in the port (nonproductive time plus weather stoppage) accounted for 7.3 days and 4.2days, respectively. During the same period, thie average working time per ship (productive timeat berth) has decreased from 2.9 days to 2.1 days due to the improvement in the handlingefficiency of the port. Despite the higher traffic demand, the decrease in ship waiting time from5.5 days to 1.3 days reflected that had the added capacity provided by the project not had takenplace, the increase in ship waiting time would have been much larger (Table 1.2).

- 31 - ANNEX 1

7. Container Ships. The port does not have separate records for container shipsuntil 1990. During the last three years (1990-93), berth operation (productive time at berth) andthe overall port operation (total average port days per ship have shown improvements in thehandling of containers with the number of the ships visiting the port almost doubling (Table 1.2).

C. BERTH OPERATIONS

8. The operating parameters for general cargo and container berths at the portalso differ from the SAR estimates. Detail parameters used for the economic reevaluation ofeach project berth are shown in Table 1.3 and highlighted as follows:

SAR PCR Percentestimate estimate -age

1987 1994 1994 change---- prices ---- prices

1. Berth numbers-without projectGeneral cargo 21/24 - 23 -Container 2 - 2 -

2. Berth numbers-new projectGeneral cargo 2 - 2 -Container 2 - 2 -

3. Maximum annual throughput per proposed berthGeneral cargo (mt) 0.58 - 0.58 -Container ('000 teu) 110 - 103 -6%

4. Average ship size- new projectGeneral cargo ('000 dwt) 25.0 - 25.0 -Container ('000 teu) 2.1 - 2.1 -

5. Average shipment size-new projectGeneral cargo ('000 dwt) 13.5 - 13.5 -Container ('000 teu) 1.8 - 1.8 -

6. Cargo valueGeneral cargo ('000 Y/ton) 2.0 3.7 3.0 -19%Container ('000 Y/teu) 20 37 30 -19%

7. Average daily ship cost in portGeneral cargo ('000 $/day) 4.5 5.6 14.3 +155%Container ('000 $/day) 10.2 12.7 23.7 +87%

8. Cargo-handlingGeneral cargo (Y/ton) 6.5 12.0 13.6 +13 %Container (Y/teu) 61.4 113.6 90.5 -20%

- 32 - ANNEX 1

D. ECONOMIC CosTS AND BENFiTS

Economic Costs

9. All costs necessary for the completion of the facilities planned under the projecthave been taken into account in the economic reevaluation of the project. However, certaincosts incurred in the construction of the breakwater area for the grain terminal, railwayconstruction outside the port, and channel dredging which will also facilitate construction of thenext phase, have been completely or partially omitted, as this cost also related to other separateprojects of which benefits cannot be quantified under this project. All inputs and outputs havebeen evaluated in constant 1994 economic costs (Table 1.4). Financial costs have beenconverted to economic costs by shadow pricing each berth's input categories. Conversion factorsfor each input category are based on estimates determined in completed Bank studies.

10. The overall conversion factor is 0.96, of which 0.95 is for general cargo berthsand 0.98 is for container berths. The factors derived for the various cost items have beenapplied to the annual project expenditures to obtain the stream of project economic costs (Table1.5).

11. In the PCR, the shadowed economic project costs, at 1994 prices, are 14.5percent higher than financial costs, and total economic costs of the project are 15.2 percentlower then the SAR estimate at constant 1987 prices.

TOTAL PROJECT ECONOMIC COST COMPARISON(Y million)

Generalcargo Container Total

SAR: Economic-1987 constant 439.41 496.24 935.65

PCR: Financial (current) 519.97 517.00 1,036.97Economic - 1994 constant 584.89 602.06 1,186.95Economic - 1987 constant 391.05 402.15 793.19

% change (PCR vs. SAR)Economic-1987 constant -11.0% -19.0% -15.2%

- 33 - ANNEX 1

Economic Benefits

12. The economic analysis primarily focussed on the benefits derived from relievingcongestion in the port. Details of the traffic forecast are shown in Table 1.1. The project willyield quantifiable benefits in the form of savings in cargo handling coats, ship time (both waitingtime and operating time), and cargo time (Table 1.6).

13. Savings in Cargo Handling Cost. Savings, although relatively small, areexpected in the direct cost of cargo handling in the new facilities as compared with the presentfacilities at the port. Without the project, the only way to handle traffic in excess of availableberth capacity would be through more costly lighterage. It is estimated that the lightening costswould be 3 to 4 times greater than normal handling costs. Detailed estimates of handling costsavings are shown in Table 1.7. Lighterage has been assumed for cargo tonnage in excess ofberth capacity at 95 percent occupancy, at a cost three times that of normal handling.Substantial savings in handling costs are expected after the renovation of existing berths, and atthe proposed berths. Savings in handling costs have been converted to economic benefits byshadow pricing the main cost components of normal handling and of lightening. Conversionfactors of 1.05 for berth handling and 1.1 for lightening are used; these factors were estimatedin a previous Bank study.

14. Savings in Ship Time. Savings in ship time include both reductions in shiptime waiting for berths and working at berths due to improved cargo handling. Estimates ofsavings in ship waiting time resulting from the project are shown in Table 1.8. Ship costs usedfor the economic evaluation are at the low end of the ship cost model developed by the Bank.The annualized ship resale value, plus operating costs, has been used to calculate projectbenefits. The annual resale value of ships has been assumed to reflect the present state of theshipping industry, and gives a slightly lower return than the annualized replacement value ofships.

15. Savings in Cargo Time. Savings in ship cargo time also apply to the interestsaved on the value of the cargo. For domestic cargo, the marginal source of working capitalwould be loans from the People's Construction Bank of China at 8-9 percent interest. Forforeign cargo, the higher foreign exchange working capital needed would require more foreignborrowing, and it is assumed that this would be at China's marginal cost of capital ofapproximately 12 percent. Roughly 40 percent of all cargo passing through Dalian port concernsdomestic trade. Interest savings have, therefore, been calculated assuming an average rate ofinterest of 11.0 percent per annum.

16. Total project benefits for the items discussed above are presented by year inTable 1.8. The major project benefit would be in ship-time savings. These savings wouldaccrue first to ship owners and could be passed on to cargo owners. As for general cargo andcontainer traffic, the vast majority of ships calling at Dalian are either Chinese-owned (COSCO)or Chinese-operated; it is expected that 90 percent of the project benefits for such traffic willalso accrue to China directly.

- 34 - ANNEX 1

E. OVERALL ECONOMIC REEVALUATION AND SENSrInITY ANALYSIS

17. Table 1.9 sets out the Reevaluated Economic Rate of Return (REIRR), NetPresent Value (NPV) and sensitivity calculations for the entire project. The overall REIRR is26.7 percent. Compared with the SAR, the sensitivity of REIRR and NPV of the project tovariations in costs and benefits are summarized as follows:

SAR PCR

Best estimate of rate of return (%) 19.9 26.7NPV (12% discount rate, Y million) 493.6 1,397.1

Table 1.1 a: Port Traffic (1985-1993) and Forecast (to 2010)('000 tons)

- 1915 -1990 - 1991 - 1992 - 1993 - 1995 - 2000 - 2005 -2010-~~~~~~~~~~~~~~~. .... -- -- .. '00---- 205200 ---On Out Total in Out Total In Out Total In Out Total In out Total In Out Total to Out Total Io Out Total In Out Total

Coal O SO . :, , :0 :11 II2:11 11 :OO1 IForeign 40 281 321 439 381 820 13 36 375 2 124 1 124 0 148 148 Oo 500 J3500 2,000 704 .0 0 3023020 1.00 300Dometict 0 112 152 1.86 154 2.014 J,44 102 1.4 1,809I 30 1.6 ,4 0176 300 3013050 40540 790 00850 1 0.I I.80 1,85 12,250

Total 4~0 43 47 ,1 552 4 1,40 464 1.924 1.811 204 2.015 I,346 218 1.964 3,000 350 3,350 7,000 1,10 ,150 9,900 1,001,70 12.02401.5

Crude oil 00I.o :0 ,:0 11I100 100Foreig 01623 16.2814 48 14,142 1419 508 13.6,22 14.1~30 974 12.659. 13.63~3 1,3351 11,153 12.5621 6.000 14.0 20:.000 3,000 12000 19.0 350 3,50 2,00 20,00 50 200

ForeIgn 0 4.005 4.005 41 3,625 3,66 0 9.655 3.655 6 3.323 3,329 1502,676 2,326 0 6,500 6,500 I 5,500 .500 0 3,750 8.350 0O12.000 12.00Total0 6,63 6,67 41 ,587 ,628 8,06 3,06 10 . 7,6 7,725 ,6 7,227 0 11201120 0 10,00 10000 1450 13,5600 13,6500 21 0 07,000 13.000

ForeIgn 1,146~~~~~~2 03.14 1.25 0 1.28 2,33 I11 2,34 1,3 08170131 2133 140 1 1,45 a0 s240 50 240390 7 .2 .0 0 ,0DomestIc 4~~~~~ ~~~~9 23 19 72 " 295 2 329 217 3 220 111 2 194 13 77 08 4 5112 200 1750 2:000 15 0 0235 7 50 20 10 0

foreign 2.09 21 0542,30 44 43 93 32 74126 0 4461,081,8 192,2 1.00 30 1.0 1.000 1,0 2.000 1.:5001 1.257 235 1,0 1,500 .00o~~~nest1o 25 936 961 16 519~~~~~~~~~~~II 5351 34 1.033 1.069, 34 .6236 1.70 177 :1.29 8,7 50140 .5 10130 ,0 0 1 115 1,2510 10 .000 2:1,000

Forig 0 4 4 0 S 301 30 2 , 19 9 14 14 1 1 5 0 15 20I15200 0 150 11,00 O I1250 13,5 0 17,00 18,00oeT. c 9 I 1 1047 39 18 9762 49 6 o35 33 4566 7867 54: 96 1507 10-0-00 10 10-0-0 10 20 10 0 0

Total 961r0e7 1 98 5 2 27 4 332 169 2702 5574 24 3073 1.00 250 3.50 1,00 5 00 102S 290 225 3.25 1000 200 30

Foreg 1 4 21 3 3376 013361736 52437 42 15 64 49 150 1,5020 .40 3,0 0240 ,00 0 2,00 .0Oo.tir 0 25 725 0 4 4 077 77 0 13 43 16 36 384 02 0 50 0 50 50 0 0Total 172: 29 6 3 33 12 1a 1a280 05 313 ,0 813 53 530 11535 31B 1,0 1,03 8 .60 0 15 00 1,6500 0 2.9'0 000 2.900. I 0 2.90 2.900 .70. 2,9 00 2,900

JForeig 8400 21 8,,0 324 249 56 332 56 1129 34: 95 169l. 631 93I 2160 2,000 0 300 1500 500 150I 15100 7,1 22710 2,00. 1:010 3:08DomestIc 1 705 706 1 336 337 5 403 413 10 648 858 21 653 678 0 300 800 0 000 500 0 500 500 8 500 5007 1 71 10 ': 0 0

Toa 9 0 72 3 360 39 78 464 54 84 74 82I435 3 20 30 ,0 000' O 500 65-0 150 17 725 20 600 80

TOreg 578, 414 4,791 4 0127 84 336 21 353 834 41. 2390 27831 ,45tJ2 3642 6401 63.6I 850 64 2 0 0 0 5 0 1 0 0 0

toreig.s 3 20 432 43 314 312 185 37 22 219 12 421 1228 1 152 104 70 360 430 0 I00 300 20 176 420 50 150 650

Total 95 34 239 70 991 21.0 53 71,3 1,35 53 1,00 1,5 37 393 830 10 1,300 1,350 100 5.00 6,00 40 5350 935O 00 65 40 1.3501

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.7 -37-

ANNEX I

Table 1.2: Dalian Port Authority: Ship Time Analysis(Actual ship days per ship)

General Cargo Container

Ship Ship Whole Port

1985 1990 1993 1990 1993 1985 1990 1993

1. Productive time at berth 2.90 1.82 2.06 0.56 0.51 2.35 1.66 1.672. Nonproductive time:

a. Due to port 5.51 0.95 1.28 0.58 0.81 3.66 1.12 1.24b. Due to ship 0.06 0.24 0.07 0.03 0.03 0.06 0.16 0.07c. Due to cargo owner 0.84 2.03 2.41 0.52 0.25 0.70 1.41 1.73d. Others 0.61 0.81 0.92 0.14 0.19 0.51 0.61 0.74

Subtotal 7.02 4.03 4.68 1.27 1.28 4.93 3.30 3.78

3. Weather stoppage 0.25 0.21 0.11 0.06 0.01 0.21 0.19 0.08

Total Average Port Days Per Ship 10.17 6.06 6.85 1.89 1.80 7.49 5.15 5.53..... .... .... .... .... ..... .... ....

Total Number of Ships 1,606 2,197 2,512 740 1,337 3,869 4,593 4,888

Sources: DPA

5 -38-ANNE)

Table 1.3: Operational Parameters Assumed for Economiic Evaluation

General Cargo-Break Bulk Berths

----------------------- Container 3erthsgeneral Proposed ------------------------

cargo general Existing Proposedberths cargo container Container

use berths berth berths

Berths (number) 23 /_2 2 2 /_2 2Cranes per berth (number) 2.0 3.0 1.5 /_3 1.5Average crane productivity per hour (tons/teus) 22 37 20 25Average working hours per day (hours) 18 18 16 18Throughput capacity per berth (tons/teus per day) 792 1,998 480 675Berth operating days per year (days) 305 305 305 305Maximum annual capacity per berth ('000 tons/teus) 229 579 73 103Ship arrivals (scheduled/unscheduled) Unscheduled Unscheduled Unscheduled UnschedulecAverage ship size (DWT) 10,000 25,000 350 /_4 2,100 /_'Average shipment size (ton/teu) 5,000 13,500 250 1,800Cargo value IYuan/ton) 3,000 3,000 30,000 30,000Average daily ship cost in port (Yuan/day) 68,991 126,237 60,900 206,190Unloading/loading cost (Yuan /ton or /teu) /_1 13.60 13.60 90.50 90.50

Notes:(i) theoretical daily berth capacity - cranes per berth x average crane productivity per hour

x average working hours per days.(ii) theoretical annual berth capacity - theoretical daily berth capacity x berth operating days per year.(iii) maximum annual capacity per berth - theoretical annual berth capacity x maximum berth utilization.

/_ 1. Figures in the table are the costs for normal berth handling. If cargo traffic exceeds 95% ber:hoccupancy rate, additional cargo will be handled by lightering at roughly three times the costs fornormal berth handling.For lightering operations, throughput capacity is taken as 50% of normal berth throughput capacity.

/_2: Without project, one existing general cargo berth will be converted to container berth in 1990 due to thecongestion of container traffic.With project, two existing general cargo berths, currently used as a container berth, will be convertedback to general cargo berths in 1991 due to the completion of two proposed container berths.

/3. One TE'J - 10.00 tons./ 4. Equivalent to 5,000 dwt per ship./_5. Equivalent to 30,000 dwt per ship.

Sources: DPA and Bank staff.

May-94

2 39 ANNEX 1

Table 1.4 a: Dallan Port Project: Estimated Economic Cost(Y million)

1988 /_1 1919 1990 1991 1992

Local Foreign Total Local Foreign TotalTotall Foreign Total Local For ign Total Local Foreign Total

A. Total Project:

1. Multi-purpose (Gen-eral Cargo) Berths 0.13 0.00 0.13 0.83 6.23 9.06 2.54 13.44 20.S9 4.23 14.11 19.04 1.47 4.60 6.072. Container Berths 0.12 0.00 0.12 0.60 6.19 6.79 2.48 16.22 20.71 4.50 16.87 21.47 1.51 1.62 3.333. Dredge /3 0.61 15.21 15.82 0.00 0.91 0.91 0.00 0.00 0.00 0.00 0.00 0.00 0.50 0.00 0.504. Breakwater ( GrainTerminal) /_4 0.00 0.00 0.00 0.00 0.00 0.00 0.47 3.52 3.99 5.50 7.38 12.66 1.29 30.19 31.46S. Railway, roads out-

side the port-DPA 7.87 0.00 7.87 10.55 0.00 10.55 6.75 0.00 6.75 2.27 0.00 2.27 3.57 0.00 3.57-MOR 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Subtotal /_3 7.87 0.00 7.67 10.55 0.00 10.55 6.75 0.00 6.75 2.27 0.00 2.27 3.57 0.00 3.576 Training and Tech.Assistant 0.05 0.00 0.05 0.10 1.62 1.92 0.22 0.74 0.96 0.35 0.62 0.97 0.13 0.28 0.417. Others 89.5s 0.00 89.55 35.24 27.07 62.31 44.77 46.03 90.80 17.34 62.31 149.65 76.69 14,.36 243.25

Total Current 96.33 15.21 113.54 47.32 44.22 91.54 57.24 S6.95 144.19 104.19 102.09 206.26 87.36 201.25 288.61

B. By Berths:

a Multi-purpose (Gen-eral Cargo) Berths:1. Direct cost 0.13 0.00 0.13 0.13 6.23 9.06 2.54 18.44 20.98 4.23 14.81 19.04 1.47 4.60 6.072. Dredge 0.12 3.04 3.16 0.00 0.18 0.16 0.00 .00 0. 00 0.00 00 .00 0.10 0.00 0.103. Railway, roads out-

side the port 1.57 0.00 1.07 2.11 0.00 2.11 1.35 0.00 1.35 0.45 0.00 0.45 0.71 0.00 0.714. Training and Tech.Assistant 0.03 0.00 0.03 0.05 0.91 0.96 0.11 0.37 0.46 0.16 0.31 0.49 0.07 0.14 0.215. Others 44.78 0.00 44.78 17.62 13.54 31.16 22.39 23.02 45.41 43.67 31.16 74.83 39.45 62.18 121.63

Total. Currenc 46.63 3.04 49.67 20.61 22.86 43.47 26.39 41.83 68.22 46.53 46.28 94.81 41.80 86.92 128.72

1994 Prices 78.67 3.53 62.20 31.90 26.77 58.67 35.83 46.34 62.17 63.97 90.16 114.12 51.50 90.32 141.62Economic cost 74.48 3.34 77.82 30.20 25.35 55.SS 33.92 43.67 77.79 S6057 47.49 108.06 49676 SS.S1 134.27..... ...... ..... ...... ..... ...... ..... ...... ..... ...... ..... ..... . ..... ......... ................................................

b. Container Berths:1. Direct cost 0.12 0.00 0.12 0.60 6.19 6.79 2.49 16.22 20.71 4.50 16.97 21.47 1.51 1.62 3.332. Dredge 0.12 3.04 3.16 0.00 0.16 0.18 0.0 .00 0.00 0.0 0 0.00 0.10 0..0 0.103. Railway, roads out-

side the port 1.57 0.00 1.57 2.11 0.00 2.11 1.35 0.00 1.35 0.45 0.00 0.45 0.71 0.00 0.714. Training and Tech.Assistant 0.02 0.00 0.02 0.05 0.91 0.96 0.11 0.37 0.46 0.17 0.31 0.46 0.06 0.14 0.205. Others 44.77 0.00 44.77 17.62 13.53 31.15 22.36 23.01 45.39 43.67 31.15 74.62 39.44 62.16 121.62

Total: Current 46.60 3.04 49.64 20.38 20.81 41.19 26.33 41.60 67.93 46.79 46.43 97.22 41.82 64.14 125.96

1994 Prices 78.62 3.53 82.15 31.55 34.37 55.92 35.75 46.06 81.63 64.32 52.49 116.81 51,52 87.44 138.96Economic cost 77.04 3.46 80.50 30.92 23.98 54.80 35.03 45.15 80.18 63.03 51.43 114.46 50.48 85.66 136.16..... ...... ..... ...... ..... ..... .... ...... ..... ...... ..... ..... . ..... ...... ..... ... .. ... .. ... .. ... .. ... .. ... .. ... ..

/_I . Include all expendicures prior to 1968 Cont ed/_2 Estimates./_3 Share by ten berths./_4 To the grain terminal./ _S All figures are rounded.

-40- ~~~~~ANNEX I-40- AK

Table 1.4 b: Dalian Port Project: Estimated Economic Cost(Y million)

1993 1994 /_2 1995 /_2 Total_- -- - _._.................. -- -- - -- - -- - -- -- -- -- -- -- ........-------------- ... __ __

Local Foreign Total Local foreign Total Local Foreign Total LoCal Foreign Total

A. Total Project

1. Multi-purpose (Gen-eral Cargo) Berths 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 9.20 46.08 55.28

2. Container berths 0.00 0.00 O.00 0.00 0.00 0.00 0.00 0.00 0.00 9.22 43.20 52.423. Dredge /_3 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 1..1 16.12 17.234. Breakwater ( Grain

Terminal) /_4 1.48 29.88 27.36 0.00 0.00 0.00 0.00 0.00 0.00 8.74 66.97 75.71S. Railway, roads out-

side the port-DPA 11.97 0.00 11.97 88.12 0.00 88.12 0.00 0.00 0.00 131.10 0.00 131.10-MOR 60.00 0.00 60.C0 100.00 0.00 100.00 40.00 0.00 40.00 200.00 0.00 200.00

Subtotal / 3 71.97 0.00 71.37 188.12 0.00 188.12 40.00 0.00 40.00 331.10 0.00 331.106. Training and Tech.

Aia tant 0.00 1.93 1.93 0.00 0.00 0.00 0.00 0.00 0.00 0.85 5.39 6.247. Othera 3.99 139.61 146.19 0.00 0.00 0.00 0.00 0.00 0.00 344.37 429.39 783.75

Total: Current 82.03 167.42 249.45 188.12 0.00 188.12 40.00 0.00 40.00 704.59 617.14 1321.73...... ...... ...... ...... ...... ...... ...... ...... ............. ...... .......

D. By Berths:

a. ulti-purpose (Gen-*ral Cargo) Berths:I. Direct cost 0.00 0.00 0.02 0.00 0.00 0.00 0.00 0.00 0.00 9.20 46.08 55.282. Dredge 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.22 3.22 3.443. Railway, roads out-

aide the port 14.39 0.00 14.39 37.62 0.00 37.62 1.00 0.00 8.00 66.20 0.00 66.204. Trining and Tech.

Assistant 0.00 0.97 0.97 0.00 0.00 0.00 0.00 0.00 0.00 0.44 2.70 3.14S. Others 4.29 69.81 74.10 0.00 0.00 0.00 0.00 0.00 0.00 172.20 219.71 391.91

Total: Current 18.68 70.78 89.46 37.62 0.00 37.62 8.00 0.00 8.00 248.26 271.71 519.97

1994 Prices 20.93 72.19 4.11 37.S2 0.00 37.62 7.04 0.00 7.04 327.45 190.31 617.76Sconomic cost 19.81 69.30 89.11 35.62 0.00 35.S2 6.67 0.00 6.67 310.03 274.86 584.89

..... ..... ..... ...... ..... ...... ..... ...... ..... ....... ......... ..... ....... ..........................__

b. Container Berths:1. Direct cost 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 9.22 43.20 52.422. Dredge 0.00 0.00 O.CO 0.00 0.00 0.00 0.00 0.00 0.00 0.22 3.22 3 .443. Railway, roads out-

side the port 14.39 0.00 14.39 37.62 0.00 37.62 8.00 0.00 8.00 66.20 0.00 66.204. Training and Tech.

Assistant 0.00 0.96 0.96 0.00 0.00 0.00 0.00 0.00 0.00 0.41 2.69 3.10S. Others 4.29 69.80 74.09 0.00 0.00 0.00 0.00 0.00 0.00172.17 219.67 391.84

Total; Current 16.68 70.76 89.44 37.62 0.00 37.62 8.00 0.00 8.00 248.22 268.78 517.00

1994 Prices 20.92 73.17 94.29 37.62 0.00 37.82 7.04 0.00 7.04 227.34 287.08 614.42Economic cost 20.50 71.70 92.27 36.56 0.00 36.16 6.90 0.00 6.90 320.76 281.30 602.06

... .......................... ..... ...... ..... ...... ..... ...... ..... ...... ............ ..................... ......

/_1. Include all expenditures prior to 1938/_2. Estimates./_3. Share by ton berths./_4. To the grain terminal./_5. All figures are rounded.

Table 1.5: Dalian Port Project: Shadow Price Conversion Factor(Y million, 1994 prices)

Conver --- General Cargo Berths---------- ----------- Container Berths------------- -------------- Total Project----------------sion -----Financial----- ------ Economic----- ----- Financial----- ------ Economic ----- -----Financial------ ------ Economic------factor Local Foreign Total Local Foreign Total Local Foreigni Total Local Foreign Total Local Foreign Total Local Foreign Total

Land 0.80 79.69 0.00 79.69 63.75 0.00 63.75 54.67 0.00 S4.67 43.74 0.00 43.74 134.36 0.00 134.36 107.49 0.00 107.49Labor:

Unskilled 0.54 13.31 0.00 13.31 7.19 0.00 7.19 6.23 0.00 6.23 3.36 0.00 3.36 19.54 0.00 19.54 10.55 0.00 10.55Semi skilled/Technician 0.80 8.46 0.00 8.46 6.77 0.00 6.77 3.74 0.00 3.74 2.99 0.00 2.99 12.20 0.00 12.20 9.76 0.00 9.76Supervisor 2.00 1.71 5.31 7.02 3.42 5.49 8.91 0.52 2.36 2.88 1.04 2.44 3.48 2.23 7.67 9.90 4.46 7.93 12.39

Materials:

Steel 1.00 13.01 40.50 53.51 13.01 41.90 54.91 5.07 22.74 27.81 5.07 23.52 28.59 18.08 63.24 81.32 18.08 65.42 83.50Timber 1.00 4.12 12.81 16.93 4.12 13.25 17.37 1.31 5.89 7.20 1.31 6.09 7.40 5.43 18.70 24.13 5.43 19.34 24.77Cement 1.00 8.23 25.62 33.85 8.23 26.50 34.73 2.63 11.77 14.40 2.63 12.18 14.81 10.86 37.39 48.25 10.86 38.68 49.54Sand 0.80 13.41 0.00 13.41 10.73 0.00 10.73 8.38 0.00 8.38 6.70 0.00 6.70 21.79 0.00 21.79 17.43 0.00 17.43 4.Stone 0.80 43.79 0.00 43.79 35.03 0.00 35.03 23.20 0.00 23.20 18.56 0.00 18.56 66.99 0.00 66.99 53.59 0.00 53.59Bitumen 1.00 16.35 0.00 16.35 16.35 0.00 16.35 0.00 0.00 0.00 0.00 0.00 0.00 16.35 0.00 16.35 16.35 0.00 16.35Others 0.80 27.86 86.67 114.53 22.29 89.66 111.95 1.89 8.49 10.38 1.51 8.78 10.29 29.75 95.16 124.91 23.80 98.44 122.24

Fuel:Diesel 1.00 0.82 0.00 0.82 0.82 0.00 0.82 25.61 0.00 25.61 25.61 0.00 25.61 26.43 0.00 26.43 26.43 0.00 26.43Gasoline 1.00 0.04 0.00 0.04 0.04 0.00 0.04 0.15 0.00 0.15 0.15 0.00 0.15 0.19 0.00 0.19 0.19 0.00 0.19Heavy oil 1.00 0.04 0.00 0.04 0.04 0.00 0.04 0.15 0.00 0.15 0.15 0.00 0.15 0.19 0.00 0.19 0.19 0.00 0.19Others 1.00 0.10 0.00 0.10 0.10 0.00 0.10 0.25 0.00 0.25 0.25 0.00 0.25 0.35 0.00 0.35 0.35 0.00 0.35

Water 0.80 1.71 0.00 1.71 1.37 0.00 1.37 1.38 0.00 1.38 1.10 0.00 1.10 3.09 0.00 3.09 2.47 0.00 2.47Electricity 2.00 4.12 0.00 4.12 8.24 0.00 8.24 3.59 0.00 3.59 7.18 0.00 7.18 7.71 0.00 7.71 15.42 0.00 15.42Construction 0.80 3.90 12.17 16.07 3.12 12.59 15.71 0.00 0.00 0.00 0.00 0.00 0.00 3.90 12.17 16.07 3.12 12.59 15.71Mechanical equipment 1.00 2.65 73.27 75.92 2.65 75.80 78.45 98.33 167.68 266.01 98.33 173.46 271.79 100.98 240.95 341.93 100.98 249.26 350.24Others 0.80 4.94 15.36 20.30 3.95 15.89 19.84 11.12 49.85 60.97 8.90 51.57 60.47 16.06 65.21 81.27 12.85 67.46 80.31

Total 248.26 271.71 519.97 211.22 281.08 492.30 248.22 268.78 517.00 228.58 278.04 506.62 496.48 540.49 1036.97 439.80 559.12 998.92

overall conversion factor 94.7% 98.0% 96.3%..... ..... .....

/_I: Foreign cost has been converted to Yuan by using 1 USS - 9.00 shadow exchange rate.

Source: DPA's and mission's estimate.

-42- -42- ~~~~~~ANNEX I

S

Table 1.6 a: Cargo Handling Without and With Proposed Berths(General Cargo Berths)

1.990 1992 199 1.993 1994 1995 2000 2005 2010

A. TRAFFIC DEMAND ('000 TONS) /_1 10,314 12,330 13,762 15,277 1t,164 17,223 22,860 24,3S0 25,580

......... ............................ _

B. WITHOUrT PROJECT

Existing Berths--------------- /_2 /_2 /2 / 2 /_2 /_2 /_2 /_2 /_2

1. Berths (number) 21 22 23 23 23 23 23 23 23

2. Traffic ('000 tons) 10,314 12,330 13,762 15,277 16,164 17,223 22,860 24,3s0 25,580

2. Annual ship berth days required 13,023 15,568 17,376 19,289 20,409 21,746 28,864 30.745 32,298

4. Annual ship berth days available 6,405 C,710 7.015 7,015 7,015 7,0 1 5 715 7,015 7.015

5 Berth occupancy rate (t) (95 (9l5) t95) (95) (9S) (95) (95) (95) (95)

6. waiting time queuing facrOrs 0.5 0 51 0.49 0.49 0.49 0.49 0.49 0.49 0.49

7. Annual tocal ship port days:

a. Actual ship berth dayS S.085 6,085 6C OSS 6,085 6,08 C S 6,085 6 ,085 6,085

b. Ship waiting days 7,163 7.940 8.514 9,452 10,000 10,656 14,143 15,065 15,826

c. Ship lightering days 13.77 1,967 22.553 26,409 28,649 31,323 45,559 49,321 529427

Total ship port days 27.125 32.992 37,182 41,946 44,734 48,064 65,787 70,471 74 338

......... ...... ....... ...... ------ -- -- --- -- -- ------

C. WITH PROJECT

Existing Berths_-------------- / 2 / 2 /2 /2 /2 /2 /2 /_2 /2_

1. Berths (number) 21 22 23 23 23 23 23 23 23

2. Traffic ('000 tons) 10.314 12,330 13,762 15.277 14,566 14,125 18,747 19,969 20,978

3. Annual ship berth days required 13,023 15.56C 17,376 19,289 18,391 17,835 23,670 25,213 26,487

4 Annual ship berth days avail ble 8.405 C,710 7, 015 7,015 7,015 7,015 7,015 7,015 7,015

S Berth occupancy rate (t) (95) (95) (95) (95) (95) (95) (95) (95) (9M)

6. Waiting time queuing factors O.SS 0.51 0. 49 0. 49 0. 43 0 .43 0. 43 0. 43 0 .43

7. Annual total ship port days:

a. Actual ship berth days 6,085 C.375 C.664 ,C664 6,664 6,664 6,664 6,664 6,664

b Ship waiting days 7.163 7,940 .514 9,452 7 908 7,669 10, 178 10,842 11,389

c. Ship lightering days 13.877 15,3S7 21,424 25,250 23,454 22,342 34,012 37,098 39,646

Total ship port days 27 125 12. 702 36,602 41,366 38,026 36,675 S0,854 54,604 57,699

_ .. ...... ...... ........ ...... ------.. ------ ------ -- -- ------

Proposed Berths /2 2 / _ /_ /2

1. Berths (number) 2 2 2 2 2

2. Traffic ( 000 tons) 1,598 3,098 4,113 4.231 4,602

3 Annual ship berth days required 800 1,l55 2,059 2,193 2.303

4. Annual ship berth days available 610 610 610 610 610

S. Berth occupancy rate (t) (95) (95) (95) (95) (95)

6. Waiting time queuing factors 0 .43 0. 43 0. 4 0. 4 0 43

7. Annual total ship port days

a Actual ship berth days 080 580 5d0 58C 580

b Ship waiting days 344 667 885 943 99C

c. Ship lightering days 441 1,943 2.959 3,227 3,447

Total ship port days 1, 365 3,190 4,424 4,750 S,017_ . . . .. .. .- - -- - -

Notes: Wi annual ship berth days required . traffic/theoretical daily capacity per berth.

(ii) annual ship berth days available . nufber of berths x berth operacing days per year.

(iii) berth occupancy rate . annual ship berth days required / annual ship berth days available.

(iv) waiting cime queuing factors are !:om Port Developmtnt, UNCrAD 1978, and berth throughput. UNC'AD 1983

(v) annual ship waiting days atnnual ship berth days required x waiting time queueing faccors.

/_: Includes large berths operation only.

/2: Traffic would exceed the practical capacity of these berths. ror the purpose of the economic evaluation it has been

assumed that ways will be fourd, e.g., thrcugh lightering, to move the traffic through the port with waiting trIns

not exceeding those correspording to 95% berth occupancy rate.

Sources DPA and Sank staff.

May- 94

-43-

ANNEX I

3

Table 1.6 b: Cargo Handling Without and With Proposed Berths(Container Berths)

1990 1991 1992 1993 1994 1995 2000 2005 2010

A. TRAFFIC DEMAND t000 TUs) /1 167.0 206. 0 256 .0 28S.0 360.0 434. 4 862. 8 1, 122 0 1, 418 4...... ..................

B. WITHOUT PROJECT

Existing Container Berths---------- ----- -/-2 / 2 /2 /2 /2 /2 2 2 21 Berths (number) 2 2 2 2 2 2 2 2 22. Traffic t000 TSUs) 167.0 206.0 256.0 285.0 360.0 434.4 862.8 1,122.0 1,4198.3. Annual ship berth days required 348 429 533 S94 750 90S 1.798 2,338 2,9554. Annual ship berth days available 610 610 610 610 610 610 610 610 610

5 Berth occupancy rate (t1 S7 70 87 (95) (95( OS) (95) (95) (95)6. Waiting time queuing factors 0.18 0.41 1.58 4.34 4.34 4.34 4.34 4.34 4.347. Annual cocal ship port days:a. Actual ship berth days 348 429 533 580 580 6S0 580 580 580b. Ship waiting days 63 176 842 2,578 3,255 3,928 7,803 10,147 12,82SC. Ship lightering days 0 0 0 29 341 651 2,437 3,517 4,751

Total ship port days 411 605 1,375 3,187 4,176 5159 10,820 14,244 18,156~~~~~~~.... .. ---- ---..--...-.. . . ...... . ....... ------ . .... ___..C. WITH PROJECT

Existing Container Berths- - ------ ------------- / 2 /_2 /_2 /_2

1. Berths (number) 2 2 2 2 2 2 2 2 22. Traffic t000 TEUs) 167.0 206 .0 256 .0 285.0 149.6 180. 5 358 .6 466.3 589.53. Annual ship berth days required 348 429 533 594 312 376 747 971 1,2284 Annual ship berth days available 610 610 610 610 610 610 610 610 610S Berth occupancy rate (t) 57 70 87 (95) 51 62 (95) (9S) (9S)6 Waiting time queuing factors 0.18 0.41 1.58 4.34 0.04 0.12 2.08 2. 08 2 .067 Annual total ship port days;a. Actual ship berth days 348 429 533 580 312 376 580 580 saob. Ship waiting days 63 176 842 2,578 12 45 1.269 1,269 1,269c. Ship lightering days 0 0 0 29 0 0 335 783 1,297

Total ship port days 411 605 1,375 3,187 324 421 2.184 2,632 3,146..... ----- ---- .. ._ _....... .. --- ..... . ..... -----

Proposed Container Berth

1. Berths (number) 2 2 2 2 22. Traffic ('000 TElS) 210.4 253.9 504.2 655.7 828.93. Annual ship berth days required 312 376 747 971 1, 2284 Annual ship berth days available 610 610 610 610 6105 Berth occupancy rate (t) S1 62 (9S) (9S) (95)6 Waiting cime queuing factors 0.04 0.12 2.08 2. 08 2 .387. Annual total ship port days:a. Actual ship berth days 312 376 580 580 530b. Ship waiting days 12 45 1,554 2,020 2,554c. Ship lightering days 0 0 335 783 1.297

Total ship port days 324 421 2.469 3 ,383 4,431

Notes: (i) annual ship berth days required traffic/theoretical daily capacity per berth.(ii) annual ship berth days available . number of berths x berth operating days per year.(iii) berth occupancy rate . annual ship berth days required / annual ship berth days available.(iv) waiting time queuing factors are from Port Development, UNC-AD 1978, and Berth throughput, UNCTAD, 1978(v) annual ship waiting days . annual ship berth required x waiting time queueing factors.

/1. Includes foreign (in/out), loaded and empty containers./2. Traffic would exceed the practical capacity of these berths. For the purpose of the economic evaluation it has been

assumed that ways will be found, e.g., through lightering, to move the traffic through the port with waiting timesnot exceeding chose corresponding to 955 berth occupancy rate.

Sources: DPA and Bank staff.

May-94

5 -44-ANNEX 1

Table 1.7: Cargo Loading/unloading Cost Savings(Y million, 1994 prices)

General Cargo Berths Container Berths

1994 1995 2000 2005 2010 1994 1995 2000 2005 2010

A. Taffic demand ('000 tons) 16,164 17,223 22,860 24,350 25,580 360.0 434.4 862.8 1122.0 1418.4

B. Berth capacity at 95% occupancy rate ('000 tons)

Withou. project 5,267 5,267 5,267 5,267 5,267 278.2 278.2 278.2 278.2 278.2

With project 6,425 6,425 6,425 6,425 6,425 473.7 669.2 669.2 669.2 669.2

C. Traffic handling (t000 tons)

Without project Berth 5,267 5,267 5,267 S,267 5,267 278.2 278.2 278.2 278.2 278.2

Lightering 10,897 11,956 17,593 19,083 20,313 81.8 156.2 584.6 843.8 1140.2

Total 16,164 17,223 22,860 24,350 25,580 360.0 434 .4 862 . 1122.0 1418.4

With project Berth 6,425 6,425 6,425 6,425 6,425 360.0 434.4 669.2 669.2 669.2

Lightering 9,739 10,798 16,435 17,925 19,155 0.0 0.0 193.6 452.8 749.2

Total 16,164 17,223 22,860 24,350 25,580 360.0 434.4 862.8 1122.0 1418.4

D. Loading/unloading costs (Yuan million)

Without project Berth 75.21 75.21 75.21 75.21 75.21 26.44 26.44 26.44 26.44 26.44

Lightering 489.06 536.59 789.57 856.45 911.65 24.43 46.65 174.59 2s2.00 340,52

Total 564.27 611.80 864.78 931.66 986.86 50.87 73.09 201.03 278.44 366.96

With project Berth 91.75 91.75 91.75 91.75 91.75 34.21 41.28 63.59 63.59 63 59

Lightering 437.09 484.61 737.60 804.47 859.68 0.00 0.00 57.82 135.23 223.75

Total 528.84 576.36 829.35 896.22 951.43 34.21 41.28 121.41 198.82 287.34

E. Net loading/unloading savings (Y million) 35.43 35.44 35.43 35.44 35.43 16.66 31.81 79.62 79.62 79.62

---- ---- --- ---- ---- --- ---- ---- --- ----- ..... . . . . . . . . . . . . - - - . . . . . . . . .

Notes: 1. The conversion factors for handling cast are: (a) At berth 1.05; and (b) Lightering 1.10.

2. Lightewring costs are taken to be three times handling cost at berth.

Sources: DPA and Bank staff.

May-94

-45- ~~~~~~ANNEX I

Table 1.8: Dalian Port Project: Econoniic Benefits Summary(Y million, 1994 prices)

1994 1995 2000 2005 2010

General Cargo Berths... ... _. .... .. _ ..

Ports: Loading/unloading savings 35.43 35.44 35.43 35.44 35.43Ships port days savings 290.51 383.07 471.8 495.08 514.64Cargo port days savings 32.11 37.41 40.58 41.34 42

Less: Benefits accruing to foreigners (10%) 35.80 45.59 54.78 57.19 59.21

Total 322.25 410.33 493.03 514.67 532.96

Container Berths,_..._.. _ ........

Ports: Loading/unloading savings 16.66 31.81 79.62 79.62 79.62Ships port days savings 167.75 201.71 16.95 9.73 0.53Cargo port days savings 14.51 17.76 10.56 13.61 17.10

Less: Benefits accruing to foreigners (10%) 19.89 25.13 10.71 10.30 9.73

Total 179.03 226.15 96.42 92.66 87.57

Total Project

Ports: Loading/unloading savings 52.09 67.25 115.05 115.06 115.05Ships port days savings 458.26 584.78 488.75 504.81 515.22Cargo port days savings 46.62 55.17 51.14 54.95 59.10

Less: Benefits accruing to foreigners (10%) 55.69 70.72 65.49 67.49 68.94

Grand Total 501.28 636.48 589.45 607.33 620.43......... _............ ......... . ...... . .......... ......

Notes: 1. Estimated savings in reduction of loss and damage.2. Opportunity cost of capital for cargo is assumed to be 11.00%.

Sources: DPA and Bank staff.

May-94

Table 1.9: Economic Rate of Return and Sensitivity Analysis(Y million, 1994 prices)

_ --------- Base Case ----- - ------- Case 1-------- ------- Case 2- ------- -------- Case 3--------

--------- Costs------- Total Net Net Net Net

Capital Maint- Bene- Cash Costs Benefits Cash Costs Benefit s Cash Costs Benefits Cash

Year invest. enance Total fits Flow (.15%) Flow (-15%) Flow (+15%) (-15%) Flow

1988 158.32 158.32 (158.32) 182.07 (182.07) 158.32 (158.32) 182.07 (182.1)

1989 110.35 110.35 (110.35) 126.90 (126.90) 110.35 (110.35) 126.90 (126.9)

1990 157.97 157.97 (157.97) 181.67 (181.67) 157.97 (157.97) 181.67 (181.7)

1991 222.52 222.52 (222.52) 2S5.90 (255.90) 222.52 (222.52) 255.90 (255.9)

1992 270.43 270.43 (270.43) 310.99 (310.99) 270.43 (270.43) 310.99 (311.0)

1993 181.31 181.31 (181.31) 208.51 (208.51) 181.31 (181.31) 208.51 (208.5)

1994 72.48 33.00 105.48 501.28 395.80 121.30 501.28 379.98 105.48 426.09 320.61 121.30 426.09 304.79

1995 13.57 33.00 46.57 636.48 589.91 53.56 636.48 582.92 46.57 541.01 494.44 53.56 541.01 487.45 1

1996 33.00 33.00 627.07 594.07 37.95 627.07 589.12 33.00 533.01 500.01 37.95 533.01 495.06 a%

1997 33.00 33.00 617.67 584.67 37.95 617.67 579.72 33.00 525.02 492.02 37.95 525.02 487.07 1

1998 33.00 33.00 608.26 575.26 37.95 608.26 570.31 33.00 517.02 484.02 37.95 517.02 479.07

1999 33.00 33.00 598.86 565.86 37.95 598.86 560.91 33.00 509.03 476.03 37.95 509.03 471.08

2000 33.00 33.00 589.45 556.45 37.95 589.45 551.50 33.00 501.03 468.03 37.95 501.03 463.08

2001 33.00 33.00 593.03 560.03 37.95 593.03 555.08 33.00 504.07 471.07 37.95 504.07 466.12

2002 33.00 33.00 596.60 563.60 37.95 596.60 558.65 33.00 507.11 474.11 37.95 507.11 469.16

2003 33.00 33.00 600.18 567.18 37.95 600.18 562.23 33.00 510.15 477.15 37.95 510.15 472.2

2004 /_1 49.50 49.50 603.75 554.25 56.92 603.75 546.83 49.50 513.19 463.69 56.92 513.19 456.3

2005 /_1 49.50 49.50 607.33 557.83 56.92 607.33 550.41 49.50 516.23 466.73 56.92 516.23 459.3

2006 33.00 33.00 609.95 576.95 37.95 609.95 572.00 33.00 518.46 485.46 37.95 518.46 480.5

2007 33.00 33.00 612.S7 579.57 37.95 612.57 574.62 33.00 520.68 487.68 37.9S 520.68 482.7

2008 33.00 33.00 615.19 582.19 37.95 615.19 577.24 33.00 522.91 489.91 37.95 522.91 485.0

2009 33.00 33.00 617.81 584.81 37.95 617.81 579.86 33.00 525.14 492.14 37.95 525.14 487.2

2010 33.00 33.00 620.43 587.43 37.95 620.43 582.48 33.00 527.37 494.37 37.95 527.37 489.4

2011 33.00 33.00 620.43 587.43 37.95 620.43 582.48 33.00 527.37 494.37 37.95 527.37 489.4

2012 33.00 33.00 620.43 587.43 37.95 620.43 582.48 33.00 527.37 494.37 37.95 527.37 489.4

2013 33.00 33.00 620.43 587.43 37.95 620.43 582.48 33.00 527.37 494.37 37.95 527.37 489.4

2014 33.00 33.00 620.43 587.43 37.95 620.43 582.48 33.00 527.37 494.37 37.95 527.37 489.4

Total 1186.95 627.0 1814.0 10876 9062.4 2086.0 10876 8790.3 1814.0 9244.9 7430.9 2086.0 9244.89 7158.9

ERR - 26.7 t 24.3 * 23.9 t 21.5 t

NIV (12%) -1,397.1 1,262.4 1,052.8 918.2

/_1: Major maintenance.

May-94

Table 1: Dalian Port Authority: Income Statement(Y '000)

Actual 1986 1987 1988 1989 1990 1991 1992 1991

1983 1984 1985 Actual Eatint. Actual For-.cat Actual forecast Actual Foracast Actual Forecast Actual Forecast Actual Forecast Actual

Traffic t 000 too) 49523 -- 54,720 -- 59,092 -- 59,590Whole Port 35,196 40,161 43,815 44.287 -- 46,097 -- 48,526 -- 50,918 _-Port Authority (DPA) 32,783 37,535 40,465 40,286 41,942 41.950 43,473 43,982 45,060 46,167 46,704 45,335 46,409 49,587 50.176 52,065 52,007 52,878Of vhicbs Containera 159 276 404 579 541 678 725 942 972 1,221 1.303 1,368 1,745 1.781 2,339 2,121 3,134 2,347

lev.nu.

Loading/unloading 136,515 146,003 198,471 218,165 250,981 222,407 269,601 245,826 288,795 289,230 304.886 370,978 323,914 473,704 346,655 621,548 373,454 791,310Storage 0 23,822 25,949 27,917 28,859 32,366 30,912 36.539 32,873 39,451 34,958 46 ,937 37,176 55,507 39,630 45,372 42,246 58,990Other 27,375 30.515 34.9U3 39,310 38,794 49,212 41,553 68,885 44,189 67,862 46,992 84.952 49,973 113,207 53,271 131,038 56,797 205,043Harketing 5,728 6,083 13,776 9,501 15,321 8,961 16,411 8,019 17.452 11,892 19,559 9,180 19,736 13,264 21.039 13,397 22,428 17,730

Subtotal 169,618 206,423 273,079 294.893 333,955 311,948 358.477 359,269 381,309 408,435 405,395 512,047 430,799 655,682 460,595 811,355 494,915 1,073,073…----___ ------- _ ------ _ ------- ------- ------- ------- ------- ------- ------- _ ---- ____ _- -- ___ __----__ __-----_ ___----_ ____--- ____--- -____----

Least Operating tax 6,395 6,351 9,404 10,341 13,311 10,621 14,281 12,402 15,190 14.411 16,150 17,851 17,166 23,242 18,339 28,037 19,667 52,543

Total Net lRvenau 163,223 200,072 263,675 284,552 320,644 301,325 344,196 346,867 366,119 394,024 389,245 494,196 413,633 632,440 442,256 783.318 475,248 1,020,530

Operating Costs /-I

Loading/unloading 36,244 34.136 41,811 52,331 50,618 60,245 55,166 73,216 61,268 106,124 69,445 139,103 80,031 226,296 91,224 299,082 102,182 445,261 PStorage 0 9,938 7,557 10,771 8,133 12,394 8,878 15,395 9,691 24,693 10,579 33,085 11,548 49,673 12,369 62,954 13,249 75,019Other 12,621 14,762 17.545 20.489 18,883 25.573 20,613 33,660 22,502 37,190 24,564 53,817 26,815 89,871 28,722 126,119 30,765 270,583Marketing 4,694 5.125 10,998 7,872 11,837 7,395 12,922 6,799 14,106 10,129 15,398 8,519 16,809 11,742 18,005 11,812 19,286 18,830

Total Operating Costs 53,559 63,961 77,911 91,463 89,471 105,607 97,579 129,070 107,567 178,136 119,986 234,524 135,203 377,582 150,320 499,967 165,482 809,693…----___ ------- _ ------- _ ------- _ ------- _ ------- _ ------- _ ------- _ ------- _ ------- _ ------- _ ------- _ ------- _ ------- _ ------- _ ------- _ ------- _ -------

Operating Profit 109,664 136,111 185,764 193,089 231,173 195,718 246,617 217,797 258,552 215,U88 269,259 259.672 278,430 254,858 291,936 283.351 309,766 210,937

Nonoperating Incone 1.631 789 1,701 2,154 1,800 3,711 1,900 145 2,000 3,187 2,100 757 2,200 8,729 2,300 2,346 2,400 43,737Nonoperating Expenses 4,132 4,919 9,000 8,072 5,000 13.727 5,500 17,215 6,000 19,917 6,500 30,737 7,000 33,496 7,500 38,878 8,000 41.*69Other Expena*s-W.&g loauu -- -- -- -- -- -- -- 3,109 -- 5,078 -- 5,502 -- 6,700 -- 14,427 -. 0Finance harges 0 0 0 0 1,072 2.174 1,072 2.174 2,222 2,146 5,291 17.080 9,001 2,000 11,772 2,048 13,095 12,560

Profit Before Tazes 107.163 131,981 178,465 187,171 227,973 163,528 245,017 195,444 254.552 192,934 264,859 207,110 273,630 221,401 286,736 230,344 304.166 200,145

Incon tax 58,940 72,590 98.156 0 0 0 0 0 0 0 0 0 0 0 0 0 0Other taxes 36,694 38,460 42,458 0 0 0 0 0 0 0 0 0 0 0 a 0 0 0Payants to State 0 0 0 5,273 60,000 5,273 60,000 5,273 60,000 5,273 60,000 5,273 60,000 3,564 60,000 3.564 60,000 35.64

Net Profit after Taxes 11,529 20,931 37,851 161,898 167,973 178,255 183,017 190,171 194,552 187,661 204,859 201,837 213,630 217,837 226,736 228,780 244,166 196,581…---___ ---___ - -____ -- -------_ -------_ ------- ------- -------_ -------_ ------- ------- ------- _----- _ __--- ___- - ___--- ___---_ __---___ _---_--_ __---___ _---___- -___---

Operating Ratio 33 32 30 32 28 35 28 37 29 45 31 47 33 60 34 64 35 79leturn on Aseets tmployed 28 32 29 36 28 37 28 34 22 29 19 22 19 18 14 16 8

Ii Includes depreciation.

Source, DPAApril 1894

Table 2: Dalian Port Authority: Balance Sheet(Y '000)

Actual 1-1 1oss 196 7 1988 lost 1to I9 18 1993

1964-3 - --1984 195 AtalEtst Actual Forac..t Actual For.cast Actual For-cst Actual Forecast Actual foroeat Actua1 Forteast Actual

As.et.

---Fixed as.etoAt cost 606,$50 625.795 784.898 798,611 797,398 161.418 660,898 922,774 1,024.298 1,249,850 1,251.898 1,409.174 1.657,998 1.555.311

2.016.198 2,938.944 2,366,198 3.720,830

L.&.s d.prociation 138.808 146.010 154.127 158,864 161,912 1 74 .6 70 182,482 194,976 198.977 254,915 218.894 261.757 244.556 318.973 276.505 794.957 314.851 965.613

Subtot.1 467,742 479,185 630.771 639,747 629,426 686,748 678.416 727.798 825.321 994,935 1.033,004 1,141,417 1,413.642 1.236,344 1.739,693 2.143.987 2.051.347 2,731.017

Oth.rfix.da..s. to 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 -0 - ---- 0 -196;,420

Current sasat.I,' :ntorl. .14,251 14,352 13,910 15,659 15,643 19,185 16,944 21,300 18,221 24,163 19,594 24,171 21,071 29.884 22.714 39,964 24,485 34,408

R c iva&bl &others 74.182 85,411 69,115 60,092 71,727 41,532 84.189 50,423 90,534 102.147 917, 35 7 114,253 104,695 54,705 112.857 150,945 121,655 505,490

Cash 37,194 34.220 46.243 67,151 198,795 35.024 315,025 78,376 407,942 95,538 49 2 ,32 8 130.558 401,801 161,738 335,9 15 188,240 265.075 287.099

Subtotal 125.621 l33.99 129.268~3 T122.902 292,165 95,741 416,158 150.099 516,697 221,848 609,219 268.982 5 2 7.5617 246.327 471.486 379,149 411.215 826,997

Special, fu,nd asset. 37,824 64,914 67,078 199,772 67,078 196,704 67,078 224.156 67,018 235,977 617, 078 179,830 67,078 281,986 67.078 241.238 67.078 0

Long term investment

4-

.. d oth.r .... t. 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1.083.493 00

Total A ... t. 631,193 678.682 827.117 962,421 9$6.669 979,193 1.1!j.6!2 1.102.053 1.0.96 1,452.760 1.709.361 1,596,229 2,008.287 1.764.657 2,278,257 2,764,394

2,529,640 4.841.927

LiabilitIes & Equity

S1-tat f. fn,ds-Co.tributed 480,712 492,755 613.956 613,956 613,956 613.956 6 13 , 956 613,956 613,956 613.956 613.956 613.956 613.956 613,956 613.956 613,956 613,956 613,916

latarna1 fund. for portd.valopm.nt 0 0 0 15 7 ,776 151.445 166.997 316.843 280.230 492,940 548,954 6478 ,59 7 700.243 8 72.,389 852,490 1,078.337 1,796,752 1,300.451 2.7533202

LIT loan - IBID 0 0 0 0 0 0 0 10.000 63,900 82,000 170.500 82.000 270.000 114,290 330.400 97.118 355,300 373.875

- Local 0 0 29.785 22 ,6173 29.785 28,022 29 ,785 9.347 29,785 12.107 29.785 12.107 24,807 16,875 20,850 14,339 14.893 248.285

Current llbab. 82,102 105,035 91,116 65.556 91,223 6 7 ,958 98,808 86,260 106.255 9 3 ,4A83 114,263 85,663 1 2 2 .875 64,786 132,454 139.969 142,780 770.349

Spatial funds 67,779 80,892 102,260 102,260 102,260 102,260 102,260 102.260 102.260 102,260 102,260 102,260 102.260 102.260 102,260 102.260 102,260 102,260

Total Li.. & Equity 631,193 678.682 827,117 962.421 988,669 979.193 1,161,652 1.102,053 1.409.096 1,452,760 1.709,361 l5 96 ,229 2.008.287 1.764.657 2,218.257

2.764,394 2.529,640 4,841,921

Debt.CapLtal (XI 0.0 0.0 4.6 2.9 3.7 3.5 3.1 2.1 1.8 7.5 13.4 6.7 16.6 8.2 11.2 4.4 16.2 15.7

Current Ratio 1.5 1.3 1.6 1.9 3.2 1.4 4 .2 1.7 4.9 2.4 5.3 3.1 4.3 3.8 5.6 2.1 2.9 1.1

/li laIan.a Sh..t .. lu.m for 1983-.85 repr ....t . oaldtnof tho..s .. assts ad LiabilitL.. of the Dallas Port AdmInistratIon

.and the United StavedorLag Corporation which *ere sorg.d on the creatLon of th. Port of Dalian Authority on JTanuary 1, 1986.

Source. DPAApril 1994

Table 3: Dalian Port Authority: Sources and Applications of Funds(Y '000)

Actual 1996 1987 1988 1989 1990 1991 1992 1993

1994 1985 Actual Estinate Actual F;r-sest Actual Forecet Actual Forecast Actual Forecast Actual Forecast Actual Forecast Actual

Source.

Not profit 20 931 37,851 181 ,98 167,973 178,255 193,017 190 171 194.552 187 661 204.859 201,937 213,630 217.637 226.736 226.780 244.166 196 581Dapr.clatIon 7.202 8,117 4.737 13,945 15,806 14,510 20.306 16,495 59 939 19.417 68.42 25.462 57.216 32 149 475 984 38.346 190.856Star. contribution 12,043 121,201 0 0 0 0 0 0 0 0 0 0 0 0 0 0 08orrot'in i - IBRt 0 0 0 0 0 0 25,434 63.900 14 926 106,600 54 772 99,500 167 306 60,400 149,130 24,900 114,712

- Local 0 29,785 62,951 0 66,045 0 59,445 0 19,026 0 15,793 0 34,151 0 26.439 0 16,270

Total Soorcas 40,176 196,954 249,586 161,818 260,106 197,527 295,356 274,947 281,552 331,376 279,244 338.592 476,510 319,285 878,333 307,412 518.419-~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~4

Applicatitoa

Capital .ap.ndltut 19,245 159,103 177.993 12.500 136,998 63,500 99,734 163,400 100.590 227,600 158,835 406,100 231,402 358,200 365,979 350,000 678,658 1ytia funtd -xpnditure 34,908 18,648 48,464 16.528 148,189 17.619 151,084 18,455 81,621 19,202 49,026 19,838 215,369 20.788 423.977

Spo aaal-0t ~ 0 4 0 0 0 0 0 0 0 0 0 0 0 0 000L... repayment -Local 0 0 13.935 0 6,482 0 8,482 0 34,915 0 16,429 2.978 31,517 5 957 30,738 5.957 22,293

Change .1capit-l (11,003) 7,180 (11 714) 238 2 564 178 (7,296) 175 47,364 189 19,934 203 (32,958) 226 31.137 241281,3911

Tot-l AppIic.tloas 43,150 184,931 228,678 29,266 292,233 91,297 252,004 182,030 264,390 246,990 244,224 429,119 445,330 385,171 851,931 378,252 419,560T.t.1~~~~~~ ~~~~~~ ~ ~ ~ _p - - - - - - - - - - - - - - - - - - - - - - -__ _______ ___- - -_ - -__ - - -_ - - - - - - - - - - - - - -- - - -- - -- - - - - -- - - - - - - - - - - - - - - - - - - - _

Net Funds Flow (2,9741 12,023 20,908 152.552 (32,127) 116,230 43,352 92,917 17,162 -84,386 35,020 (90,5271 31,)80 (65.886) 26,502 (70,8401 98,859

Opeoito 2 7 17nca 37,194 34.220 46,243 46,243 67,151 198,795 35,024 315,025 78,376 407.942 95,538 492,328 130,558 401,801 161,738 335,915 188,240

Closing Balance 34,220 46,243 67,151 198,795 35.024 315.025 78,376 407,942 95.538 492,328 130.558 401,801 161,738 335,915 188,240 265.075 287.099

Sources DPAApril 1994