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Document of

The World Bank

FOR OMCUL USE ONLY

Report No. 5106

PROJECT COIIPLETIO1i REPORT

BJRMA

SECOND PORT PROJBCT - CREDIT 671-BA

May 30, 1984

South Asia Regional Off ice

|heis document ls a restitentdisma ani mhy be used. byr cipiots only in the perfruonice of their oficial duties Its coctets my not dbwise be discLosedl witbo World BIc adtborizaioo.

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BURMA

SECOND RANGOON PORT PROJECT (Credit 671-BA)

PROJECT COMPLETION REPORT

Glossary of Abbreviations

BPC = Burn* Pbor£ CorporationFERD = Foreign Economics Relations DepartmentGOB Government of the Union of BurmaGibb = Sir Alexander Gibb & Partners (London)NEDECO = Netherlands Engineering Consultants

(Netherlands)NKK Nippon Kokan KaishaPTC = Posts & Telecommunications CorporationK = KyatsKKY = Kyant Thaing YayTNY = Thaung Naing YayAVECO = Adriaan Volke Dredging CompanyORT = Organization for Rehabilitation

through TrainingBFSSC = Burma Five Star Shipping CorporationICB = International Competitive Bidding

Weights and Measures

1 foot (ft) - 0.305 metres (m)1 mile (mi) = 1.609 kilometres (km)1 pound (lb) - 0.45 kilograms (kg)1 long ton (ton) - 1.02 metric tons

FOR OFFCIAL usE oNLY

BURMA

SECOND PORT PROJECT - CREDIT 671-BA

PROJECT COMPLETION REPORT

Table of Contents

Page No.

Preface .................... iBasic Data Sheets ......................................... iiHighlights **.**.** Lv

I. INRODUCION I...................................

A. Background ........... e.......******o*******e****e**** 1B. The Problem *.......................................... 2C. Pinancial Assistance 2..............................*. 2

II. PROJECT PREPARATION AND APPRAISAL ............... 3......... 3

A. Feasibility Study ....... ......... *.... ........... *... 3B. Appraisal of a Second Port Project ..................... 4C. The Credit ............................................ 5

III. PROJECT IMPLIENTATION AND COST ............... o............ 6

A. Effectiveness and Start-up ................... 6........ 6B3 Revision ....... *.* .................................. 7C. Implementation Schedule ........................ 7D. Reporting * ............................................. 8E. Procurement .. .......... *.. ....... *.*.... .. 9F. Project Cost ...... * ............... *................. 21G. Disbursement and Financial Sources ..................... 21H. The Role of International Purchasing Agents ............ 221. Effect of Currency Exchange Rate Fluctuations .......... 26

IV. TRAFFIC AND OPERATIONS ............. ...................... 26

A. Seaborne Traffic .... ............................ *.. 26B. Inland Traffic .... * .............................. 27C. Shipping .............................................. 27D. Dredging ........... o................................. 28

r docunent has a stied distribution and may be used by recipients only in the performanceof their official dutieL Its contents may not otherwise be disclosed without World Bank authorization.

Page No.

V. FINANCI.AL PERFORMANCE .... * ....................... ....... 29

A. Income and Expenditure Accounts ........................ 29B. Source and Disposition of Funds ..... ................... 30C. Balance Sheets ........... .............................. 30

VI. ECONOMIC RE-EVALUATION ............................. *e..*...w 30

A. Objectives ............................................. 30B. Overall Assessment of Project Benefits ................. 32C. Future Prospects ....... ....................... ....... 33

VII. BANK PERFORMANCE ....................... ***.*************** 34

A. Project Justification and Objective .................... 34B. Project Implementation and Supervision ................. 34C. Working Relationship .. ................................. 35

VIII. CONCLUJSIONS ............... 6......36

ANNMEES

Annex A - Amount of the Credit and Utilization .................... 39

Annex B - Project Implementation Schedule ......................... 40Annex C - Project Items and Costs - Foreign Exchange Portion ...... 41Annex D - List of Cargo Handling Equipment ........... ............. 42Annex E - List of Workshop Tools and Equipment .................... 43Annex F - List of Plant and Machinery ............................. 44Annex G - Economic Re-evaluation . ......... ....................... 45

Annex H - Consultant's Comments ........... ........................ 48

TABLES

Table 1 - Actual and Appraisal Estimates of Project Costs ......... 51Table 2 - Schedule of Disbursements ............................... 52Table 3 - Actual and Forecast Traffic of Major Commodities ........ 53Table 4 - Revenue Income and Expenditure Accounts for

the Years 1976/77 - 1980/81 ........................... 54Table 5 - Sources and Disposition of Funds 1977-1981 .............. 55Table 6 - Balance Sheets 1977-1981 ................................ 56Table 7 - Forecast Income and Expenditure Statement ............... 57Table 8 - Actual and Appraisal Estimates of Cost and Benefits

in Cargo Handling Component ........................... 58

BURMA

SECOND RANGOON PORT PROJECT (Credit 671-BA)

PROJECT COMPLETION REPORT

Preface

This report presents a performance analysis of the Burma SecondPort Project for which the Executive Directors approved Credit 671-BA inthe amount of US$10 million on December 31, 1976. The Credit was closed inMarch 1982. This Project Completion Report (PCR) was prepared by theSouth Asia Regional Office (ASN) based on a PCR prepared in mid-1982 bythe Borrower (Burma Ports Corporation (BPC) on behalf of the Government ofthe Union of Burma). Since the ASN version is essentially the same asthat prepared by BPC, except for modifications which were extensivelydiscussed with BPC and agreed upon, the PCR was not sent to the Borrowerfor comments. Comments by a consultant, who assisted BPC on implementationof the project have been added as Annex H, and have been cross-referencedthroughout the text.

In accordance with the revised procedures for project performancereporting, this PCR was read by the Operations Evaluation Department (OED)staff but the project was not audited by OED.

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BURMA.

PROJECT PERFORMANCE AUDIT BASIC DATA SHEET

Key Project Data

Item Appraisal Estimate Actual or Re-estimate

Total project cost (US$ million) 16.1 16.1Credit amount (US$ million) 10.0 10.0Disbursed - 12/31/81 10.0 10.0 1/Project completion date 12/31/80 1213118TProportion of main project )Elements finished by original )completion date ) 100.0X 90.0% 2/

Economic rate of return 37.0% - 3/Financial Performance Reasonable ReasonableInstitutional Performance Reasonable Reasonable

Cumulative Estimated & Actual Disbursement

Fiscal Year Estimated Actual Actual/Estimated (Z)

1978 1.6 1.2 751979 6.85 5.4 791980 9.6 7.3 761981 10.0 10.0 100

Other Project Data

Item Original Plan Actual

First mention in files 1974Government's application - 11/76Negotiations date 11/76 11/3 - 11/8/76Board approval date - 12/21/76Credit agreement date 1/13/77Effectiveness date - 3/18/77Closing date 12/31/81 12/31/81

Borrower Government of BurmaExecuting Agency Burma Ports CorporationFiscal Year of Borrower April 1 - March 31Follow-on Study Name Rangoon Port StudyStudy No. Umbrella II

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Mission Data

No. of No. of Date ofItem Month/Year Weeks Persons Manweeks Report

Identification 12/75Preparation 1974/75Appraisal 6/76 3.0 3 9 6/23/76Supervision I 6/i4-06/28/77 3.0 2 6 7/13/77Supervision II 11/23-12/05/77 1.5 2 3 1/20/78Supervision III 5/10-05/19/78 1.5 2 3 6/20/78Supervision IV 1/19-01/29/79 1.5 3 4.5 3/13/79Supervision V 10/10-10/13/79 0.5 1 0.5 10/29/79Supervision VI* 12/03-12/12/79 1.5 4 6 12/20/79Supervision VII* 3/02-03/15/80 2.5 1 2.5 3/24/80Supervision VIII 5/18-05/24/80 1.0 1 1 6/23/80Supervision IX* 4/29-05/02/81 1.0 2 2 6/02/81Supervision X* 12/06-12/09/81 1.0 2 2 2/18/82

Note: *- a combined supervision

Currency Exchange Rates

Name of currency (abbreviation) - Burmese Kyat (K)

Year Exchange Rate

1977 US$1 = K 7.141978 US$1 - K 6.551979 US$1 - K 6.471980 US$1 - K 6.491981 US$1 - K 7.70

1/ The credit account was kept open untll March 1982when installation and payment of electronic positionfinding equipment was completed (PCR paras 3.07 and 3.37).

2/ i) Supplementary purchase of management informationsystem (PCR para 3-05).

ii) Installation and payment of electronic position finders.

3/ Cannot be quantified at present (Annex G).

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BURMA

SECOND RANGOON PORT PROJECT (Credit 671-BA)

PROJECT COMPLETION REPORT

Highlights

Introduction

1. The Association was asked to assist in financing a project fordeepening the Rangoon Port sea access channel (through rehabilitation ofdredgers) and the provision of cargo handling equipment, spares for exist-ing equipment and vessels and materials for the replacement of pontoons.The request followed a UNDP-financed study in 1974/75 which recommended along-term investment program for the Port of Rangoon and confirmed thefeasibility of deepening the channel by three feet. The channel deepeningwas intended to permit vessels of up to 15,000 dwt to enter and leave theport at most states of the tide. At the time of implementation, thecondition of the channel limited access of ships 10,000 dwt to the port.Burma Ports Corporation (BPC), the state economic enterprise in charge ofRangoon Port, and the eight outports, was also hampered by vessels andequipment being out of service through usage and old age and lack ofessential spare parts, resulting in increased cargo handling costs for theport. The credit comprised the foreign exchange cost of investments inthe last year of the Second 4-Year Plan (1977/78) and the first two yearsof the Third 4-Year Plan (1978/79-1979/80).

Project Content

2. The project emphasized rehabilitation, maintenance and improvementin the utilization of available transport capacity, and contributed to theexpansion of exports and the reduction of the costs of imports.

3. The Credit was signed on 1/13/77 with a closing date of 12/31/81.It was for US$10 million equivalent to cover the foreign exchange cost ofthe project. Total project cost was estimated at US$16 million equivalent(the Government of Burma (GOB) would finance the local currency costs).Credit proceeds were for:

(a) rehabilitation and repair of two dredgers;

(b) purchase of Electronic position finders and navigationalaids; cargo handling equipment and associated spareparts; construction equipment for pontoons, bridges andancillaries; and

(c) training of port personnel and rehabilitation and repairsto survey, buoy and pilot vessels (PCR para 2.11).

An important addition to the project was made in 1980 when IDA approvedBPC's application to use unallocated funds to procure a computer, andassociated software, jointly with Post and Telecommunications Corporation(PTC), for the accounting and management information needed by the respec-tive organizations (PCR paras 3.61-3.65). This was a notable achievementbecause the high cost would have debarred acquisition by either organiza-tion individually. However, cooperation has resulted in the establishmentof the joint computer center at much reduced cost to the respectiveorganizations and the country.

Delays in Implementation and Disbursement

4. There were major delays in the rehabilitation of the suctiondredger 'Thaung Naing Yay" (PCR paras 3.19-3.25 and 7.02) completion ofwhich was originally planned for December 31, 1977, and was achieved onlyby May 30, 1979, due to lengthy administrative procedures.

5. There also were delays in the procurement of the Electronic posi-tion finding equipment for which the final disbursement was made in March1982, after the closing date (PCR para 3.37). This was due to a con-troversy over installation and training charges with the original ten-derers, which culminated in cancellation of the bids and an invitation forfresh bids (PCR-para 7.04). The delay had significant implications forthe channel dredging operation, which was not completed by the closingdate, due to the absence of the position finding equipment on the dredger,and consequently the economic benefits of this component have been delayedand are expected to accrue in the coming years (see also para 4).

6. Actual cumulative disbursements were behind schedule during thethe second part of the project, but only the payment for the Electronicposition finding equipment (mentioned above) was still outstanding at theclosing of the Credit (PCR Table 3).

7. A comparison of actual foreign exchange costs with those estimatedat appraisal shows that rehabilitating the dredger had a 12 per centoverrun; the Electronic position finding equipment had an overrun of 35.5per cent. These overruns were compensated for by underruns in the otherproject categories, so that actual project costs corresponded with theappraisal estimates (PCR paras 3.67 and Table 1).

Economic Re-evaluation

8. By 1980/81 traffic at Rangoon Port was running at 127 per cent ofappraisal forecasts, especially because of increase3 in the throughput ofrice and petroleum, in the export sector (PCR para 4.01). In spite of theincreased traffic, there was an improvement in cargo handling operations(PCR para 4.02).

9. Exports handled per gang/shift improved by 43 per cent and importsby 20 per cent over the rates existing at appraisal time. Cargo handlingcosts per ton fell by 22 per cent due to the project. The actual economicrate of return for the cargo handling equipment was 53 per cent as com-pared to 50 per cent at appraisal (Annex G). 1/

10. One of the objectives of the project was to maintain a targetdepth of 15' below datum depth in the sea access channel, allowing 15,000dwt ships to enter port at most states of the tide. This target could notbe achieved at the inner bar for various reasons stated in the PCR (paras4.08-4.10). However, all technical measures necessary for proper dredgingare now in place and it is expected that it wil' be achieved next season.Therefore, the full potential economic benefits cannot be ascertained atpresent.

11. Points of Reference for Future Project Design

(a) BPC feels that the Bank's advice to utilize outside purchasingagents was not appropriate, as the objective of relieving BPC ofpart of the administrative burden was not achieved (PCR para3.80). The use of outside agents was suggested in the light ofprevious Bank experience on projects in Burma, but unfortunatelythe performance of the purchasing agents was not felt to have comeup to expected standards..!/Had performance expectations been met,the agents' use would have been worthwhile. BPC's comments willbe taken into account in designing future projects in Burma.

(b) BPC's reference to suppliers complaints regarding delayed payments(PCR para 3.69) indicates that suppliers should be made aware ofthe various Bank Group disbursement procedures available foreffecting payment and procurement. The delays in effecting pay-ment could not have beLa reduced unless the borrower had beenready to adopt a method of disbursement other than the one thatwas in effect throughout the project.

1/ Benefits on the cargo handling component of the project and otherimprovements have been quantified in Annex G.

2/ See also Annex H for consultant's comments.

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Conclusion

12. Overall, the project has been of benefit to BPC and to the Burmeseeconomy. It enabled BPC to contain deterioration of channel depths and toimprove cargo handling operations. Traffic volume and financial results

surpassed appraisal expectations (PCR paras 4.01 and 5.01). Reportingrequirements were observed and the covenants were met. Actual totalproject costs were as estimated at appraisal (PCR para 3.67). Furthereconomic benefits from reduced shipping costs are expected to be realizedin the coming years.

I. INTRODUCTION

A. Background

1.01 The Port of Rangoon was devastated during the Second World War by theBritish Army on their retreat from Rangoon in 1942 and again by the Japaneseon their retreat in 1945. Three cargo berths were totally destroyed and theothers were severely damaged. Storage accommodations were almostnon-existent. Navigation channels were obstructed by mines and shipwrecks.

1.02 On return of the British in May 1945,the British Military Administra-tion formed a Port Administration Unit and emergency measures were taken toaccommodate ships for landing military cargoes, and clear mines and obstruc-tions in the Rangoon River to keep the channel navigable. However, no majorefforts were taken to rehabilitate the war-torn port facilities.

1.03 The Port of Rangoon handled almost 100 per cent of the country'simports and about 85 per cent of the exports and, therefore, the need forrehabilitation of the Port of Rangoon was of vital importance to thecountry's economy. After Burma regained independence in 1948, efforts weremade to rehabilitate port facilities, but due to lack of funds, coupled withworldwide shortage of essential materials, no major works could be undertakenand only emergency needs could be met with available resources. In 1951through 1953, with the introduction of ECA aid, some covered storage accom-modations were constructed at Brooking Street Wharves Berth No. 2, SulePagoda Wharves Berth No. 4, and Ahlone Wharf, to replace temporary storagesheds. Some pontoons were also replaced with Japanese reparation funds.

1.04 In 1951, the Government of Burma signed an agreement with consultantsfor the overall planning of Burma's economy. Their report submitted in 1953contained, among other things, a program for rehabilitation of the Port ofRangoon. Based on this report, the Port Authority sought the assistance ofIBRD through the Ministry of National Planning. The rehabilitation programconsisted of reconstruction of Sule Pagoda Wharves Berth Nos. 5, 6 and 7 withTransit Sheds and Anc_lllary Buildings, purchase of Cargo Handling Equipment,procurement of a Suction Dredger, a Bucket Dredger, a Buoy Vessel, a PilotVessel, a Sea-going Tug and 4 other harbor craft and some Mooring Buoys,including accessories.

1.05 In May 1956, IBRD granted a loan of US$14 million equivalent to BPCto finance the foreign exchange cost of the rehabilitation program. The loancarried an interest rate of 4.75 per cent per annum repayable in 20 yearsincluding a grace period of 4 years. The rehabilitation works took six yearsand were completed in 1962. The total cost of rehabilitation was about Kyats100 million including the proceeds of the IBRD Loan. The loan was fullyrepaid on April 15, 1976.

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B. The Problem

1.06 In the early 1960s a problem arose as regards shipping along thenavigational clhannels in the Rangoon River. The draft of ships calling atthe Port of Rangoon was controlled by the depths available at the Outer Bar(about 25 miles from the Harbor) at the Rangoon River mouth, and those at theInner Bar at Monkey Point (about 3 miles from the Harbor). In the post-waryears the Spit Channel area of the Western Channel of the Outer Bardeteriorated and when the channel came down to 7 feet of water in 1962, theSpit channel was closed and the Eastern Channel of the outer Bar which car-ried 13 feet of water was used in its place. In 1965, the Eastern Channelalso deteriorated and it had to be shifted progressively towards the eastevery year necessitating shifting of whole sets of channel marking buoys.During 1968 this channel took a very steep bend towards the sea, makingnavigation most difficult. About this time the original Eastern Channelshowed better water again with a depth of 12 feet.

1.07 At that time the draft of vessels entering the Port of Rangoon waslimited to 27 feet. With the worldwide trend to using larger size vessels,it was considered that a depth of at least 30 feet would be required. Tosolve this problem BPC sought the assistance of Netherlands EngineeringConsultants (NEDECO) and experts from the Federal Republic of Germany. Theseexperts after proper surveys suggested that the best way to increase thedraft of the channel would be to dredge the area, for which detailed studiesneeded to be conducted. The experts estimated that the studies would costUS$908,000 (including foreign exchange of US$486,000) and take about 20months.

1.08 The port was one of the most important elements of the transportationsystem of the country and it was, therefore, felt that ways and mwans shouldbe found to solve the problem of the channel without further delay. As theexpenditure for conducting the detailed studies was beyond the means of BPC,especially the foreign exchange cost, it was decided to seek the aPSistanceof the United Nations Development Programme (UNDP).

C. Financial Assistance

1.09 In September 1971, a request was submitted by BPC to the Ministry ofPlanning and Finance through the Ministry of Transport and Communication, toinclude the Rangoon River Project in the 1972-76 UNDP Country Program. TheMinistry of Planning and Finance transmitted to UNDP the Burma CountryProgram in which was included US$536,000 for the Rangoon River Project. InMarch 1973, the UNDP entrusted IBRD to prepare a Draft Project Document onRangoon River Project and to act as the Executing Agency for the Project.

1.10 In July 1973, IBRD completed the Terms of Reference and invited fiveconsultant firms to submit proposals for conducting the studies. In October1973, a joint venture, Sir Alexander Gibb & Partners (Gibb)/NEDECO, was

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selected for carrying out the study. In December 1973, a project d .amentwas signed between the Government, UNDP and IBRD. Total Project costincluded US$536,000 in Foreign Exchange to be contributed by UNDP andK 3,600,000 to be borne by the Government.

II. PROJECT PREPARATION AND APPRAISAL

A. Feasibility Study

2.01 The objective of the study, as described in the Terms of Reference,was to provide Burma Ports Corporation recommendations for:

(a) stabilizing the existing, or an alternative equivalent, channel atpresent published depths, including all technical steps necessary andthe economic and financial consequences of such steps; and

(b) deepening the channel to an optimum depth defined by a comparison ofthe costs of such deepening with the economic and financial benefitsto be gained; such costs to include improvement of operatingfacilities within the port area in instances where this would benecessary by reason of forecast changes in the ship sizes or traffictypes and volumes which would arise from the increased depth of theaccess channel.

2.02 The consultants commenced work in January 1974. The team consistedof experts in the fields of hydraulics, hydrography, dredging, shipping, portoperation, economics, finance and engineering. The consultants were assistedby a team of counterpart staff provided by BPC in various fields. BPC alsoprovided the consultants with transport and other facilities during theirfield investigations.

2.03 The study was divided into two main parts, namely, the TechnicalEvaluation, and the Economic, Traffic and Financial Studies. Each part ofthe study was briefly described as follows:

(a) Technical Evaluations. For the purpose of technical evaluation theconsultants reviewed all available technical data already in handsupplied by BPC and associated departments of the Government and atthe same time conducted detailed field investigations on hydraulicand geotechnical aspects as far as necessary. They also investigatedthe existing pattern and cargo facilities and prepared cost estimatesfor any major works considered appropriate for future requirements.

(b) Economic, Traffic and Financial Studies. This part of the study wasto determine the economic schemes developed as a result of the tech-nical evaluation. The consultants carried out an economic evaluation

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for the alternatives of providing a stabilized channel and deepeningthe channel. They determined (i) the optimum solution; and (ii) theoptimnm timing for implementating in stages the deepening. Theconsultants collected sufficient data to consider savings due toreduction of vessel waiting time and service time, savings in cargo-handling cost and port maintenance cost and lower freight rates dueto the stabilized, or improved access channel. The consultantsstudied in detail the present shipping and traffic pattern, andanalyzed all available data. They proposed detailed forecasts ofmajor comnodities and commodity groups, ship types, sizes andrequired numbers corresponding the cargo through-put forecast. Theconsultants also analyzed the financial situation of BPC and madefinancial forecasts based on assumptions of a realisticallyattainable level of efficiency in port operating procedures and the

-administrative structure including estimates of annual capital,maintenance and administrative costs. Based on the analyses theconsultants determined the internal rate of return of the proposedinvestments and for this purpose estimated the first year benefits tobe obtained from the stabilized, or deepened access channel in theform of reduced freight rates, demurrage, etc. and the estimatedannual increase in future benefits.

2.04 The consultants took 14 months to complete the study and submitteda draft final report to BPC and IBRD in May 1975. IBRD requested BPC in July1975 to study the draft final report and to offer comments for incorporationin the final report. BPC's comments were transmitted to IBRD in September1975. The consultants revised the draft final report and submitted theirfinal report in March 1976 with their findings and recommendations.

B. Appraisal of a Second Port Project

2.05 In May/June 1976, IBRD sent a three-member appraisal mission to holddiscussions with authorities of the Government and BPC for possible financingof part of the foreign exchange cost of BPC's investment program during thethree years 1977/78 to 1979/80. The visit of the mission was the result ofthe recommendations contained in the final report.

2.06 The appraisal mission studied current developments since the sui=is-sion of the consultant's draft final report in 1975. The mission also helddiscussions with authorities of the Government, BPC and other associatedagencies and obtained information on various aspects concerning developmentof the Port of Rangoon.

2.07 Finally, agreement was reached on various points with the Goveramentand BPC, and an Appraisal Report was prepared recommending an InternationalDevelopment Association (IDA) Credit of US$10.0 million equivalent, to theGovernment. The Government was to relend the proceeds of the Credit to BPC

at 9 per cent per annum interest for a term of 15 years, including athree-year grace period.

C. The Credit

2.08 Ir. October 1976, IBRD invited the Government and BPC to send a nego-tiating team to Washington for discussion of the terms for the proposedcredit. A three-member negotiating team, headed by the Deputy Minister ofPlanning and Finance, discussed and agreed the terms and conditions of theCredit.

2.09 The draft Credit Agreement was approved by the Council of Ministersand was signed on January 13, 1977. The Credit was free of interest, but aservice charge at the rate of 3/4 of 1 per cent per annum was to be paid toIDA on the principal amount of the Credit withdrawn and outstanding from timeto tine. The principal amount of the Credit was to be repaid to IDA insemi-annual installments commencing January 15, 1987 and ending July 15,2026, each installment to, and including the installment on July 15, 1996 tobe 1/2 of 1 per cent of such principal amount, and each installment there-after to be 1-1/2 per cent of such principal amount.

2.10 As provided in para 3.01 of the Credit Agreement, the Government wasto relend the proceeds of the Credit to BPC under a Subsidiary Loan Agree-ment. Accordingly, a Subsidiary Loan Agreement was signed between theGovernment and BPC on January 31, 1977. The Subsidiary Loan carried aninterest of 9 per cent per annum of the principal amount and outstanding fromtime to time payable annually on September 30, each year. BPC had to repaythe principal amount in 24 equal semi-annual installments commencing Septem-ber 30, 1980 and ending March 31, 1992. This is being repaid as agreed.

2.11 The Credit Agreement provided USS10.00 million equivalent to beutilized as under:

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Amount of theCredit Allocated

Category (In US$ Equivalent)

(1) Rehabilitation and repair ofdredgers, including provisionof spare parts, documentation,preparation of specificationsand inspection. 1,550,000

(2) Materials, components and spareparts for repairs to survey,buoy and pilot vessel. 260,000

(3) Position finders and navigationalaids. 740,000

(4) Cargo-handling equipment and spareparts for cargo-handling equipment. 3,880,000

(5) Plant, machinery and equipmentmaterials for construction ofpontoons, bridges and ancillaries. 1,590,000

(6) Training 310,000

(7) Unallocated 1,670,000

Total 10,000,000

III. PROJECT IMPLEENTATION AND COST

A. Effectiveness and Start-up

3.01 Although the Developmenc Credit Agreement was signed on January 13,1977, it was to become effective only when the Credit Agreement and theSubsidiary Loan Agreement were duly authorized by the Government, and theopinion of the Central Law Office, as to the admissibility of the provisionsof the Agreements under the rules and regulations of the Socialist Republicof the Union of Burma, was obtained. The authorization of the Government andopinion of the legal authorities were obtained and transmitted to IDA onFebruary 19, 1977. The Development Credit Agreement became effective onMarch 18, 1977.

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3.02 At start-up BPC formed a Project Section with selected personnel,who were familiar with IDA guidelines and procedures and had gained goodexperience in the project works in the course of execution of the first WorldBank Loan in 1956-62. Technical Committees were formed to advise on theevaluation and selection of tenders. The Managing Director of BPC was desig-nated as the authorized representative of the borrower under Section 2.09 forwithdrawal cf funds and for taking any other actions required to be takenunder the provisions of Section 2.02 of the Credit Agreement. Invitationsfor submission of qualification data for the rehabilitation of the SuctionDredger "Thauag Naing Yay- were issued in February 1977. Negotiations werestarted in March 1977 with a consultant firm for appointment as the interna-tional purchasing agents for procurement of certain major items of equipment.Draft tender documents for procurement of materials and components for theconstruction of pontoons and bridges were prepared and forwarded to IDA. inearly May 1977. Quotations for specific spare parts for the repair of exist-ing cargo handling equipment were issued in March 1977 and purchase orderswere issued in June 1977. Thanks to the effort of project staff and thecooperation of IDA, no serious problems arose in the start-up or in thecourse of project implementation.

B. Revision

3.03 The project origiaally included six items as listed in para 2.11 witha provision of US$1,670,000 as an unallocated sum which was reserved forutilization as necessary to supplement any likely deficiencies in fundsallocated for the six categories.

3.04 Except for the addition of -Accounting machines and associated equip-ment and materials-, there was no change in the categories. However, slightchanges had to be made in the type and quantity of equipment within eachcategory. Those additions and changes were supplementary requirements tosuit the situation prevailing from time to time in the course of projectimplementation. The reasons for such changes are given in relevantparagraphs. The original allocations, revisions and final utilized amountare shown in Annex A. Full and timely cooperation of IDA was obtained in allsuch cases.

C. Implementation Schedule

3.05 The project was expected to be completed in four years, byDecember 31, 1980, and the implementation schedule was drawn up in line withthe expected completion date. Actually, 90 per cent of the work was success-fully completed within the period specified. The remaining 10 per cent wascomposed of two sizable items, namely , Electronic position finding equip-ment and "Accounting machine and associated equipment and materials. Thereasons for the delay in the procurement of the Electronic position findingequipment are briefly stated in the relevant paragraphs. Regarding procure-ment of the accounting machines, this item was not included in the original

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implementation schedule and was an addition, negotiated and agreed in early1980. Moreover, the accounting machines were to be jointly owned with thePost and Telecommnications Corporation (PTC) and procurement was undertakenby PTC.

3.06 The Electronic position finding equipment was intended to be usedin the dredging operations and to be ready at the same time the rehabilita-tiou of the suction dredger was completed. The rehabilitation was completedin May 1979 but because of the delays in procuring the Electronic positionfinding equipment the dredging operations in the inner bar had to be carriedout without the equipment. A detailed report on the dredging operations isdescribed in Chapter IV. The implementation schedule and actual performanceare shown in Annex B.

3.07 An insignificant but pertinent incident caused by the delayedprocurement, was that payments for the late items could not be affectedbefore the Closing Date. BPC had to request IDA to keep open the books ofthe Credit account until such time payments could be completed. IDA wasagreeable to BPC's request and all payments were completed in March 1982.

D. Reporting

3.08 Apart from occasional special requests there were three types ofreports which BPC furnished IDA at regular intervals:

Ca) Quarterly progress report;

(b) Monthly return of commitments; and

_c) Certified copies of annual financial statements and audit report.

The quarterly progress report dealt with details of progress, preparation oftender documents, invitations to tender evaluations of bids, contract awards,delivery of materials, and details of the implementation schedule. Thisreport was supplemented by (i) import and export tonnages by principal com-modities for the quarter and cumulative figures for the year to date withcorresponding figures for the preceeding year; (ii) a summary account ofrevenue and expenditure showing figures for the relative quarterly periods ofthe year in comparison with figures for the preceeding year. The monthly_ommitments showed the amounts committed, indicating orders placed during themonth and status of total commitments to date under the various categories.Certified copies of annual financial statement and audit reports were fur-nished to IDA not later than four months after the end of each financialyear. During the entire course of project implementation, BPC experienced nodifficulty in fulfilling these requirements and the reports were furnishedto IDA regularly.

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E. Procurement

General Guidelines

3.09 Except as indicated in para 3.10 below, contracts for the purchase ofgoods were procured in accordance with procedures set forth in Part A of the"Guidelines for Procurement under World Bank Loans and IDA Credits". Biddersfor the rehabilitation of dredgers "Thaung Naing Yay" and "Kyant Khaing Yay"were pre-qualified as described in para 1.3 of Part A of the Guidelines,before inviting bids.

3.10 Components and spare parts that were agreed with IDA could beprocured under procedures other than those referred to in para 3.09.

Review of Invitations to Bid

3.11 For all contracts estimated to cost US$100,000 or more, except forcontracts for components and spare parts as described in para 3.10, theinvitation to bid, specifications, and other bidding documents including theadvertising procedures were furnished to IDA for concurrence.

3.12 Similarly, for prequalification, IDA was requested for concurrenceto the list of prequalified bidders, together with their qualifications, andthe reasons for exclusion of any applicant had to be furnished to IDA.

Review of Proposed Awards and Final Contracts

3.13 After bids had been received and evaluated, BPC informed IDA of thename of the bidder to whom the award was intended to be made, furnished adetailed report on the evaluation and a comparison of the bids received. Onreceipt of IDA's concurrence, contracts were signed or orders issued tosuccessful bidders.

3.14 Promptly after execution, prior to the submission of the firstapplication for withdrawal of funds from the Credit Account in respect ofa contract/firm order two copies of the contract/firm order were sent to IDA.

International Purchasing Agents

3.15 As agreed during the negotiations, a consultant firm was appointed asinternational purchasing agents for certain items under category (2),cargo-handling equipment, category (4) except spare parts, and Plant,Machinery and Equipment under category (5).

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Project Items and Costs

3.16 In June 1977, in consultation with IDA, a list was prepared showingthe items to be procured and their estimated cost in foreign currency for thethree years beginning with financial year 1977-78. This list was made toconform to the individual category of the list of goods cove-ed by the Creditand was to serve as a guide for making withdrawals from the Credit. Thedetails of items and their cost were slightly different from those shown inthe appraisal report and are produced in Annex C.

Execution

3.17 For efficiently carrying out the tasks connected with procurement ofvarious items of equipment and to deal with the large volume of correspon-dence in accordance with IDA procedures, a separate establishment was createdand headed by a Project Manager and consisted of an assistant officer andfive staff members. In addition to the foregoing, a Dredging Manager wasappointed to advise on the rehabilitation of the dredgers, to train dredgercrews and to assist in improving the operation of the suction dredger andbucket dredger.

3.18 In describing the process of project execution, a brief statementenumerating the steps taken, difficulties experienced and other pertinentfeatures in the course of execution, is given. The description is also givenfor each category of project items successively as shown in para 2.11 of theprevious chapter.

Category (1) Rehabilitation of Dredgers

(a) Suction Dredger -Thaung Naing Yay" (TNY)

Prequalification

3.19 As described in para 3.12, qualification papers were sent to IDA onJanuary 10, 1977 for concurrence. In addition, BPC suggested to limit theinvitation to the region extending from Pakistan to Japan in consideration ofthe cost of sailing the dredger to and from the dockyard where it would berehabilitated. IDA's concurrence was received on February 2, 1977.

3.20 To examine and evaluate qualifications, bids and tenders athree-member technical committee was formed, consisting of the Master Atten-dant as chairman and the Dredging Manager and the Chief Mechanical Engineeras members. The duties of the technical committee were to prepare specifica-tions and tender documents, open tenders, examine and evaluate tenders andreport on tenders received with recommendations.

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3.21 Bids for qualifications were closed on May 2, 1977 and 24 dockyardsand shipbuilding firms participated. The technical committee selected eight.IDAts concurrence was sought and an affirmative reply was received on July12, 1977.

Invitation of Tenders

3.22 BPC, with the approval of IDA, selected consultants for the prepara-tion of tender documents, including specifications and the evaluation oftenders. It took three months to complete the preparation of tender docu-ments, and to receive the approval of the FERD, the Central Law Office andIDA. The tender documents were issued to the prequalified bidders on theDecember 14, 1977, with a closing date fixed for January 28, 1978.

Tender Evaluation and Award of Contract

3.24 Seven firms submitted quotations. The tenders were evaluated by theconsultants with the cooperation of BPC's technical committee. The tendersubmitted by Keppel Shipyard, Singapore was selected and IDA concurred.Government approval to the award of contract was received on August 19, 1978and the contract was formally signed on August 19, 1978. The contract pricewas S$ 2,798,641.00.*

Rehabilitation of Dredger

3.25 The Contract provided six months for construction of the componentsand spare parts and 45 days for repairs and rehabilitation. The dredger TNYleft for Singapore on March 24, 1979 and arrived at Rangoon on Nay 30, 1979after rehabilitation. 1/ Actual total contract expenditure wasS$ 2,774,358.90.

(b) Bucket Dredger 'Kyant Khaing Yay" (KKY) Proposed Rehabilitation

3.26 BPC had proposed to entrust the rehabilitation of the dredger to theoriginal manufacturer, who was requested to submit a firm quotation whichamounted to S$ 3,127,154. The quotation was later revised to S$ 2,097,854after dropping certain items which were considered not immediately necessary.As the quotation was much higher than the sum allocated, IDA was requested inDecember 1977 to give its opinion on how the extra costs could be met.

* Singapore Dollars

1/ Completion of rehabilitation had been fixed for December 31, 1977. Delaywas due to lengthy administrative procedures concerning tender submissionand selection.

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3.27 In March 1978, IDA and BPC authorities agreed to abandon the ideaof rehabilitatEng the dredger with the original manufacturer and to invitequotations from eight prequalified bidders, with specifications confined tomost essential items.

Tender Invitation

3.28 The technical committee drew up the specifications and tender docu-ments, and with the approval of IDA, tender documents were issued to eightprequalified bidders on May 30 with the closing date fixed for July 15, 1978.

Tender Evaluation and Award of Contract

3.29 Only six firms submitted quotations. The quotations were examined bythe technical committee and clarifications were sought from the prospectivebidders. After lengthy negotiations and discussions, the quotation submittedby Nippon Kokan Kaisha (NKK), Japan was recommended. IDA concurred and acontract was signed on April 24, 1979. The contract price was Yen101,586,400.

Rehabilitation of Dredger

3.30 The contract provided four months for the manufacture of the bucketladder and new buckets, and 25 days for the repairs and rehabilitation. Thebucket dredger left for Japan on August 15, 1979, but due to a mechanicalbreakdown on the way, the dredger arrived at the NKK Shipyard in Yokohamaonly on October 27, 1979. The dredger was docked on October 28, 1979 andwork started the same day. The rehabilitation work was completed on Novem-ber 16, 1979. The dredger KKY, left Yokohama on November 22, 1979 andarrived at Rangoon on December 31, 1979. Total contract expenditure wasYen 101,326,400. In addition to the contract expenditure, a sum ofYen 16,483,000 was incurred for repair works not covered by the contract.

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(c) Grab Dredgers

3.31 BPC had three grab dredgers purchased from Messrs. Priestman BrothersLtd., England. Spare parts worth of US$74,838.56 were procured from thespecific manufacturers to repair the dredgers. Work was successfully com-pleted in 1978.

Category (2) Repairs to Survey, Buoy and Pilot Vessels

3.32 Spare parts and equipment worth US$275,694.56 were purchased fromspecific manufacturers to repair the survey, buoy and pilot vessels. Thenecessary repair work was carried out in BPC's workshops and dockyard and wassuccessfully completed in 1978.

Category (3) Position Finders and Navigational Aids

(a) Position Finders

3.33 BPC had entrusted the procurement of position finding equipment tothe purchasing agents. Since the equipment was unknown to BPC, the purchas-ing agents were provided with general specifications only. The first quota-tion ieceived from the purchasng agent was fouud not suitable for use in theRangoon Port area. With IDA's approval, fresh tenders were invited fromthree selected firms for a 'trisponder system' position finding equipment.Three tenders were received in January 1979. However, as the tenderersfailed to comply with certain technical and contractual conditions requiredby BPC, the selection of tender was eventually rescinded. 1/

3.34 In January 1980, BPC suggested to invite international competitivebids without specifying the make and type of systems. With IDA's advice, thespecifications and tender documents were prepared and tender invitations wereissued on October 15, 1980 fixing the closing date for November 29, 1980.

3.35 Six tenders were received. The tenders were examined by BPC's tech-nical committee and after thorough examination and clarifications from thetwo lowest bidders the technical committee recommended accepting the secondlowest bid submitted by Messrs. Decca Survey (France). IDA's concurrence wassought on March 19, 1981. A two-member IDA mission which visited Rangoon inApril to discuss some technical information contained in the recommendation

1/ A controversy arose with the original tenderers over installation andtraining charges. It took a long time to sort out matters and since BPCwas unfamiliar with the equipment, and questioned its need, BPC had to bereconvinced that the equipment was essential (PCR paras 4.09, 4.10 and7.04).

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of BPC's technical committee, agreed to the acceptance of the bid submittedby Messrs. Decca Survey (France), subject to further negotiating with thesupplier certain technical requirements, installation of the equipment inRangoon and training of two BPC technicians in France.

3.36 Final agreement was reached and contract formally signed on May 11,1981.

3.37 The Electronic position finding equipment and associated componentswere received in Rangoon in the first week of November 1981. As provided inthe contract, an engineer from Decca Survey (France) arrived on November 19,1981 to install the equipment and to conduct on-the-job training for a periodof one month. However, due to the inadvertent shipping of some wrong com-ponents the installation work was delayed for 33 days. After proper testingof newly arrived components, actual installation and testing operationscomenced on January 18, 1982. The equipment was formally accepted onMarch 5, 1982.

3.38 In accordance with the provisions of the contract, one hydrographerand an electronic engineer left for France on August 31, 1981 for practicaltraining on operating and mairntaining the equipment. They returned toRangoon on November 6, 1981 after satisfactory completion of training.

(b) Navigational Aids

3.39 BPC had been using the lighted buoys and associated equipmentmanufactured by Messrs. Aga Navigational Aids Ltd., England. Therefore,IDA's approval was sought to procure lighted buoys and associated equipmentfrom Messrs. Aga Navigational Aids Ltd., without inviting internationalcompetitive bids. IDA agreed and navigational aids worth US$388,788.72 werepurchased from Messrs. Aga Navigational Aids Ltd., England. They wereinstalled during the years 1978 and 1979.

Category (4) Cargo Handling Equipment and Spare Parts

3.40 Procurement was divided into three parts: pro-urement of new cargohandling equipment, procurement of workshop tools and equipment, and procure-ment of spare parts for existing cargo handling equipment. The procurementof new cargo handling equipment and workshop tools and equipment wasentrusted to the purchasing agents.

(a) New Cargo Handling Equipment

List of Equipment

3.41 It was originally intended to procure 14 items of equipment(Annex C). However, as the need for bulk grain equipment was not immediateprocurement of this item was dropped with IDA agreement and extra quantities

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of five more essential items and two new items was added to the listoriginally prepared.

Procurement

3.42 Procurement was arranged in two batches. For the first specifica-tions were prepared by the technical committee consisting of the Chief Traf-fic Manager the Deputy Traffic Manager (Equipment) and the Chief MechanicalEngineer and were sent to the purchasing agents in July 1977. The purchasingagents issued tender documents in September 1977 and tenders were closed inNovember 1977. The purchasing agents submitted a report to BPC together witha tender evaluation statements and recommendation in January 1978. Thepurchasing agents' report and recommendations were reviewed by the technicalcommittee and the tender committee and IDA concurred in May 1978. Orderswere placed by the purchasing agents in June/July 1978. The first batch ofcargo handling equipment was received in Rangoon during 1979.

3.43 The second batch of the cargo handling equipment consisted of sevenitems for which specifications were sent to the purchasing agents in March1979. The purchasing agents issued tender documents in July 1979 and tenderswere closed in September 1979. The purchasing agents submitted their reportand recommendations in December 1979. The purchasing agent's report andrecommendations were examined by the technical committee and the tendercommilttee and orders were placed in March/April 1980 with IDA's concurrence.The second batch of the cargo handling equipment was received in Rangoonduring the year 1980/81. The list of equipment procured is shown in Annex D.

(b) Workshop Tools and Equipment

3.44 Specifications for 7orkshop tools and equipment were sent to thepurchasing agent in July 1977. However, because of the complicated nature ofthe equipment, the specifications were revised and the revised specificationswere ready for tender in late April 1978. The purchasing agent issued tenderinvitations in May 1978 fixing the closing date on July 17, 1978.

3.45 Thirty nine firms participated for 21 assorted equipment. Due to thelarge volume of work involved in evaluating the tenders, the purchasingagents took three months to complete the evaluation and submitted theirreport and recommendations only in November 1978. The purchasing agents'report and recommendations were examined by the technical committee andcontract proposals for 19 items were submitted to IDA for concurrence. IDAconcurred and orders were issued in March 1979.

3.46 For the other two items fresh tenders were invited by the purchasingagent in April 1979 with revised specifications. Tenders were received inJune 1979 and after proper evaluation and selection, orders were issued inJuly 1979 with the concurrence of IDA. All the equipment was received during1980. The detailed list of equipment is shown in Annex E.

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(c) Spares for Existing Equipment

3.47 BPC was using various types c: cranes, forklift trucks, tractors andtrailers of different makes numbering 355 units, 110 units were beyondrepairs. A sum of US$395,000 was allocated for procuring spare parts for theremaining 245 units. Quotations were invited from the nine manufacturers ofthe various equipment, and spare parts valued US$378,565.29 were procuredduring the years 1977-79.

Category (5) Plant, Machinery and Materials forConstruction of Pontoons, Etc.

(a) Pontoons and Ancillaries

3.48 The following construction materials were procured in 1977/78 withITA's international competitive bids.

gl) Mild Steel Sections 1,375 m/tons

(2) Electrodes 150 m/tons

(3) Marine Paint 23,520 liters

(4) Mooring Chains, Shacklesand Anchors One lot

With the materials, fabrication work started in October 1978 at BPC'sworkshops and civil engineering sites and the following were completed inMarch 1980:

(1) 240 ft x 40 ft Tank Pontoons 2 No.

(2) 120 ft x 20 ft Pontoons 8 No.

(3) 50 ft x 28 ft Sponsons 2 No.

(4) 40 ft x 20 ft Sponsons 2 No.

(5) 30 ft x 20 ft Sponsons 4 No.

(6) 80 ft Span Steel Bridges 8 No.

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(b) Additional Materials for Pontoons, Etc.

3.49 A sum of US$300,000 remained available and IDA was accordinglyrequested in September 1978 to agree to purchase nore construction materialsto renovate old and worn out pontoons. IDA agreed and international competi-tive bids were invited in November 1978 to supply the following constructionmaterials:

(1) Mild Steel Sections 675 u/tons

(2) Marine Paints 4,000 Imp/Gals

(3) Mooring Chains 70 lengths

(4) Steel Wire Ropes 205 coils

3.50 Bids were received in January 1979 and after evaluation and withIDA's concurrence orders were placed in March 1979. All materials werereceived in September 1979. With the materials received, renovation works onthe following items were carried out in BPC's yards:

(1) 120 ft x 20 ft Pontoons 8 No.

(2) 30 ft x 20 ft Sponsons 4 No.

(3) 40 ft x 10 ft Tank Pontoon Units 20 No.

(4) 30 ft Span Steel Bridges 4 No.

Cc) Plant and Machinery

3.51 Procurement of plant and machinery was entrusted to the purchasingagents. Specifications were drawn up by the technical committee for 11 itemsof equipment and sent to the purchasing agents in July 1977. The purchasingagent issued tender documents on December 8, 1977 A total of 20 supplierssubmitted quotations for various items . The purchasing agents evaluated thebids received and submitted their report and recommendation on March 2, 1978.The report and recommendation of the purchasing agents were examined and IDAconcurred to award contracts. Orders wsere placed by the purchasing agentswith respective supplers in June 1978. All the equipment was received inRangoon during 1979. The details of the plant and machinery are shown inAnnex F.

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Category (6) Training

3.52 The IDA Credit provided training of Port personnel in the followingthree fields:

(a) Training of Dredger Crew;

(b) Training of Workshops Personnel; and

(c) Training in Planning and Finance.

The following is the brief description of the training undertaken.

(a) Training of Dredger Crew

3.53 In October 1978 negotiations were started with the Adriaan VolkerDredging Company (AVECO) Dredging Firm from the Netherlands for training adredger crew. Agreement was reached in November 1978 and with the concur-rence of the Ministry of Transport and Communications and IDA a formal con-tract was signed on January 29, 1979. The program covered by the contractconsisted of two parts:

(a) the training of two Burmese dredgemasters in The Netherlands for aperiod of two months;

(b) the training of a dredger crew on board the BPC dredgers in theRangoon river channels by two dredging experts to be provided byAVECO for a period of 16 weeks. The training was to take place fortwo brief periods of eight weeks each, one in the monsoon months ofJuly/August 1979 and the other in the post-monsoon months ofNovember/ December 1979.

3.54 Two Burmese dredgemasters left for The Netherlands on February 8,1979. They under went intensive practical training on board the dredgers ofthe port of Rotterdam and attended lectures on dredging technique conductedby dredging experts of the AVECO Dredging Firm. They arrived back to Rangoonon April 13, 1979 after successful completion of the training.

3.55 An expert engineer and dredger commander from the AVECO arrived inRangoon on July 2, 1979 for the monsoon season training. A training programwas drawn up by the expert engineer and training of dredger crew commenced onJuly 9, 1979 on board the suction dredger Thaung Naing Yay by practicaldredging in the Inner Bar. The training on the Outer Bar Channel took placeon August 22, 1979 and the first phase training was completed on September 2,1979. During the entire training period, the AVECO dredging commander wasassisted by the two Burmese dredgemasters trained in The Netherlands.

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3.56 For the second stage it was originally intended to have the dredgercrew trained for four weeks each on board the Thaung Naing Yay and the"Kyant Khaing Yay." However, as the -Kyant Rhaing Yay' was delayed it wasdecided to curtail the training to four weeks and to invite only one dredgingexpert. The AVECO dredging expert came to Rangoon on November 2, 1979 andthe training took place in Outer Bar area. The AVECO dredging expertreturned to The Netherlands on December 3, 1979 after successful completionof training.

(b) Training of Workshops Personnel

3.57 For training of workshops personnel, a training expert from theOrganization for Rehabilitation through Training (ORT), Switzerland wasinvited to prepare a report and draw up a training program on how the train-ing classes could best be conducted. The expert's report was received in May1979 and based on it a training contract was drawn up and signed with WorldORT Union. The contract provided for training equipment and aids and twotraining specialists to conduct classes on four trades:

(a) Motor Truck Mecbanics;

(b) Marine Engine Mechanics;

(c) Metal Construction and Welding; and

(d) General Maintenance and Repair Fitting.

3.58 The two Specialists arrived in Rangoon on May 31, 1980 and trainingclasses started on June 9, 1980. The first two courses were completed onAugust 29, 1980 and the second two courses were completed on November 14,1980.

Cc) Training - Planning and Finance

3.59 Three teams of two port officials were sent to Singapore for afour-week course with the Port of Singapore Authority for training on thefollowing subjects:

(a) Port Operation/Management - August/September 1979

(b) Planning and Operation ofContainer Terminal - October/November 1979

(c) Conventional CargoHandling Methods - August/September 1980

3.60 A study group of five port officials headed by the Managing Directorvisited the ports of Southampton, Felixstowe and Liverpool in the United

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Kingdom for three weeks in September/October 1980 to update their knowledgeof port operations and planning in western ports. Similarly, another groupof five port officials headed by the General Manager visited ports of HongKong, Manila, Singapore and Bangkok for four weeks in November 1980. With aview to widen the knowledge of worldwide port activities and future trends onport planning, the Managing Director of BPC attended the 12th BiennialConference of International Association of Ports and Harbors held in Nagoya,Japan from May 23-30, 1981.

Category (7) Accounting Machines and Associated Equipment and Materials

3.61 This equipment was not included in the original list of goods to bepurchased with proceeds of the Credit. Since 1947, BPC had employed punchcard accounting machines for accounting and statistical work. The machineswere hired from the then British Tabulating Co. Ltd., later changed toInternational Computers Ltd. Rental and maintenance charges were paidmonthly in local currency to the Rangoon branch of the Company. In early1975 International Computers Ltd., notified BPC that they were not in aposition to continue maintaining the machines after December 31, 1975 andsuggested that ways and means should be sought to switch to other suitabledata processing system. International Computers Ltd., however, agreed to arequest from BPC to help maintain the existing machines until a suitable newsystem was inaugurated so that the work would not be stopped.

3.62 BPC sought advice both from the Rangoon University Computer Centerand other experts on procurement of a suitable data processing unit to copewith the required volume of work. An expert was deputed to BPC and recom-mended the employment of a Mini Computer System similar to ICL 203 model 40.The estimated foreign exchange cost was US$370,000. As the cost was con-siderable, BPC decided to seek assistance from IDA for provision of-funds outof the unallocated category of the Credit.

3.63 A proposal was submitted to IDA. In January 1980, IDA informed BPCthat US$400,000 was appropriated to a new category entitled -AccountingMachines and Associated Equipment and Materials.- In early March 1980, anexpert from IDA Computing Activities Department visited Rangoon to review thetype of equipment and training needed for BPC. The IDA expert recommendedthat a Joint Computer Center be set up between the Posts andTelecommunications Corporation (PTC) and BPC, sharing the foreign exchangecost equally out of IDA Credits 958-BA of PTC and 671-BA of BPC. With theconcurrence of IDA, an agreement was signed between the PTC and BPC for theestablishment of Joint Computer Center outlining the conditions for the useof the equipment and sharing of the capital cost of the equipment and yearlymaintenance cost.

3.64 The invitation of international competitive bids, tender evaluationand selection of the tender were undertaken by PTC and concurrence of IDA, acontract was signed on January 10, 1981 between the PTC/BPC and Messrs.

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Control Data (Thailand) Ltd., Thailand. The total contract price wasUS$776,096 and BPC's share of the cost was US$302,686.

3.65 The accounting machine and associated equipment and materials arrivedin Rangoon during August/September 1981. As provided in the contract tech-nicians from the PTC and BPC were trained in Thailand in the operation andmaintenance of the equipment. The installation of the equipment was carriedout during November 1981 by Control Data (Thailand) Ltd., with useful col-laboration by technicians from the Rangoon University Computer Center andafter successful test operations, an opening ceremony was held on December23, 1981.

F. Project Cost

3.66 The total estimated cost of the project as per appraisal report wasUS$16.156 million, including foreign exchange component of US$9.996 million.The actual total expenditure was US$16.160 million, including foreignexchange cost of US$9.996 million. A breakdown of actual and estimatedproject costs by major equipment, works and services is in Table 1. Forpurpose of fair comparison, the estimated cost of each major item wassuitably modified incorporating the physical and cost contingencies andcomodities and services tax which were shown separately in the originalappraisal estimates.

3.67 Overall project costs were not much different than the appraisalestimates. This was due to the fact that the Credit amount was utilized tothe full extent and there was no change in local tax structure since the timeof preparing project cost estimates. Cost contingencies of 8 per cent perannum expected for the years 1977/78 through 1979/80 did not fullymaterialize. A surplus remained after all items of equipment and materialshad been fully committed. Because of this BPC was able to procure additionalequipment and spare parts for vessels and cargo handling equipment and theaccounting machines and associated equipment and materials. 1/

G. Disbursement and Financial Sources

Disbursements

3.68 Actual disbursements surpassed expectations up to the end of 1979.From then actual disbursements lagged behind. This situation was due to

1/ A 12 per cent overrun in dredger rehabilitation estimates and a 35.5 percent overrun in Electronic position finding equipment were compensatedfor by under-runs in the other procurement categories.

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certain time lags in the procurement of the additional cargo handling equip-ment for which firm orders were issued only in 1980, and to delays in procur-ing the Electronic position finding equipment and the accounting machines.

3.69 There were no significant delays or problems in disbursements(Table 2). However, a minor but notable incidenu is brought to the attentionof IDA. Usur,lly it took from 30 to 35 days from the date of submission ofwithdrawal applications to actual disbursements and on some occasions thebeneficiaries complained about delays in receipt of payment. It was under-stood tnat the mail service took about 14 days to reach Washington andprocessing disbursement by IDA another 15 to-20 days. It would perhaps bebetter for Borrowers if such disbursement times could be shortened. 1/

Financial Sources

3.70 Before the financial year 1976/77, BPC's surplus cash had to bedeposited in the Union Government Consolidated Fund (UGCF). This system wasdiscontinued from April 1, 1976 and BPC was able to accumulate cash surpluseson its own account. K6.2 million had been accumulated when the projectstarted in 1977. In addition, an annual cash surplus during the succeedingfour years to 1980/81 averaged K26.1 million. Therefore, BPC was able tomeet the local costs and other debt obligations without recourse to outsidesources.

H. The Role of International Purchasing Agents

3.71 The idea of utilizing international purchasing agents was suggestedby IDA. during negotiations for the proposed Credit. In the negotiation theBurmese delegation contended that since BPC had sufficiently experienced andcompetent personnel to perform the procurement work, international purchasingagents were not necessary, and that the Government would not be in favor ofemploying such an agency. However, IDA urged the Government to reconsider,at least for the major items in the project, emphasizing that such line ofaction would reduce the administrative burden on BPC, and assist in speedyprocurement which would minimize inflationary price increases. The Burmesedelegation agreed with IDA and employed a purchasing agent.

1/ GOB chose to use IDA's disbursement arrangements for issuing agreementsto reimburse to commercial banks which provide prefinancing of goodsimported for the project. This requires use of the mail services andaccounts for delays. Disbursements under this procedure normally onlytake place after the commercial banks receive IDA's agreement to reim-burse arl to claim reimbursement from IDA. Therefore, the delays men-tioned were unavoidable unless other Bank Group disbursement procedureshad been utilized.

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3.72 BPC entrusted the purchasing agents with the procurement of somevessel equipment and accessories under category (2), cargo handling andworkshops equipment under category (4) and plant and machinery under category(5). The duties and functions of the purchasing agents consisted of:

(a) inviting to tender;

(b) adjudicating and evaluating the tenders;

(c) reporting;

(d) recommending to BPC the award of contracts, and subsequently placingcontracts and associated negotiations;

(e) progressing of contracts;

(f) preparing progress reports;

(g) arranging shipment;

(h) checking of invoices; and

Ci) preparing withdrawal applications on BPC's behalf and submitting themto IDA for payment to suppliers.

3.73 In order to proceed with the duties outlined, BPC furnished thepurchasing agents with detailed specifications of the equipment required tobe purchased. For their services, the purchasing agents were paid commis-sions at varying rates depending on the value of individual orders or con-tracts issued. BPC also authorized the purchasing agents to submitwithdrawal applications directly from IDA for payment of cost of goods aswell as the commission.

3.74 The purchasing agents procured the following:

(a) Vessels Equipment 4 Items

(b) Cargo Handling Equipment 15 Items

(c) Workshop Tools and Equipment 21 Items

(d) Civil Engineering Plant and Machinery 11 Items

The total cost was US$4,261,285.08 and commission and other charges paid wasUS$103,953.68. The performance by the purchasing agents is described below.

3.75 As mentioned, the basic aim of utilizing the services of interna-tional purchasing agents was to help reduce the administrative burden on BPC,

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to assist speedy procurement to minimize the effect of inflation. BPC wasmuch impressed by the record of services performed by the purchasing agentsand was fully confident that the basic aims would be successfullyaccomplished. However, in actual practice the performance by the purchasingagents was, to say the least, below expected standard, if not tnsatisfactory.The following few instances, among several others, are worthy of mention tojustify BPC's contention. 1/

3.76 In the procurement of cargo handling equipment, the procurementconsisted of, among others, two types of forklift trucks. The purchasingagents, in their evaluation of tenders, grossly omitted two tenders, both inthe price comparison and, consequently, in their report and recommendations.This omission might not be serious and could normally be treated as an over-look if the resulting effect did not materially change the selection.However, the two omitted tenders happened to be the lowest evaluated biddersand were finally selected. From then on BPC was unable to rely on the pur-chasing agents' work and had to make every effort to check and re-evaluatetenders and recommendations submitted by the purchasing agents. Thisinvolved considerable office work and time so that the aim of reducing theadministrative burden and speedy procurement was not achieved.

3.77 A second instance involved the procurement of 10-ton mobile cranes.BPC required mobile cranes with a lifting capacity of 10-ton at a radius of 4feet beyond bumper tip, and specifications were furnished to the purchasingagents accordingly. But the purchasing agents, in inviting tenders added acapacity of "10-ton free-on-wheels" clause to the specification withoutinforming BPC. Accordingly, when the tendersi had been finally evaluated, thepurchasing agents recommended for a crane with the capacity of "10-tonfree-on-wheels" which was heavier than that required by BPC and was almost 50per cent more expensive than the ordinary cranes with 10-ton capacity at aradius of 4 feet from bumper tip. The proposal of the technical committeeand the recommendation of the purchasing agents were submitted to IDA fordecision. IDA suggested that alternative bids should be invited for craneswith 10-ton capacity at 4 feet outreach from bumper tip with outriggers. Thematter was finally settled in favor of BPC's wishes but procurement wasunnecessarily delayed for three moRths.

3.78 A third significant instance occurred in the procurement of a fuelinjection pump testing machine. The price contained a discount allowance of10 per cent for payments within 14 days. When an application was submittedto IDA for payment of the machine, the purchasing agents put a claim ofi 768.99 over and above the contract price. A dispute followed between BPCand the purchasing agents over the legality of the claim. BPC gave reasonswhy such a claim was inadmissible (since no expressed stipulation was men-tioned in the contract for reducing the discount allowance if payment wasdelayed beyond 14 days) and although the matter was finally settled with thepurchasing agents admitting their mistake, this event was very tiresome.

1/ For consultant's comments see Annex H.

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3.79 Another unfortunate incident were the delays in shipment. Some ofthe shipments were much behind scheduled delivery dates. In certain cases,delays were caused by failure on the part of the purchasing agents, to imple-ment formal commercial regulations within reasonable time, for example,delays in opening Letters of Credit. An example: the contract for the supplyof forklift trucks was issued in June 1978; the forklift trucks were to beshipped within three months after the receipt of the Letter of Credit, yetthe purchasing agents opened the Letter of Credit only in November 1978 andshipment was delayed for five months. In another case, the delays werecaused by default of the suppliers to adhere to the scheduled delivery dates.In one extreme case the order for supply of some welding equipment was issuedin July 1979. Although shipment of the equipment was to be completed withintwo months, i.e., by the end of August 1979, the supplier was only able tocomplete the shipment in February 1981, a delay of 17 morhs. Such caseswere not infrequent and although there was no monetary loss by the delays,BPC suffered liquidated damages since the equipment could not be put inoperation within the appropriate time to the best possible advantage.

3.80 By citing these unfortunate events, BPC does not imply that thepurchasing agents were incompetent or handled the cases without undue care.There was hardly any doubt that the purchasing agents had tried their best,and taken some pains to perform the duties entrusted to them, to the satis-faction of BPC. In fact, BPC was considerably relieved of the voluminous andtedious paper work of preparing tenders, contract documents and other relatedcorrespondence. However, it is felt that if BPC had undertaken the procure-ment on its own, the work could have been accomplished with the same successand speed without incurring precious foreign exchange expenditure paid tothe purchasing agents. The conclusion is that, in the future, the employmentof outside services should be confined to absolutely necessary cases whichrequire special technical skill and are beyond the capability of BPC's ownpersonnel. 1/

1/ Previous experience with procurement delays on other projects in Burmaled to the recommendation to employ international purchasing agents. TheBank will take BPC's comments into account when developing and designingnew transport projects in Burma.

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I. Effect of Currency Exchange Rate Fluctuations

3.81 It would be pertinent to mention that fluctuations in the US Dollarexchange rate were an important factor in project implementation. Since theCredit was specified in US Dollars, all payments made in other eligiblecurrencies were valued in US Dollars at the exchange rates prevailing on thedate of payment. Therefore, great care had to be exercised in making commit-ments for payment out of the Credit. The changes in the exchange rates wereso swift and the spreads so great from month to month, that it was found verydifficult to make accurate forecasts. The following examples show the rangeof fluctuations in the exchange rate of the US Dollar against two majoreligible currencies:

Year Pound Sterling (L) Japanese Yen (Y)

1978 .51/.55 195/2411979 .43/.50 19512491980 .41/.50 213/2491981 .42/.54 203/232

3.82 1980 happened to be a year hard hit by exchange fluctuations. At thebeginning of the year the exchange rates of one US Dollar against PoundSterling and Japanese Yen, two of the currencies in which most of the trans-actions were carried out, were L 0.485 and Y 249, respectively. When pay-ments fell due in October 1980, the exchange values of the US Dollar was downto L 0.417 and Y 215 and the effect of exchange fluctuatiou cost more thanUS$85,000 over the originally committed amount on four transactions alone.BPC had to exercise restraint in making commitments and the procurement ofcertain spare parts for vessels had to be rescinded. By the end of March1981, the amount expended and committed reached US$9.996 million at the thenprevailing exchange rates, but in May 1981 the value of US Dollar rose and inAugust 1981 a savings of US$50,000 approximately was available. By that timethere was little chance of making further commitments since all payments wereto be completed on or before the closing date of December 31, 1981. However,the uncommitted balance was utilized in purchasing additional accountingequipment readily available in the market. IDA agreed to extend the disbur-sement period to the end of March 1982 to spend the balance.

IV. TRAFFIC AND OPERATIONS

A. Seaborne Traffic

4.01 Table 3 shows forecast and actual traffic handled by the port fromthe appraisal year 1976/77 through 1980/81, by major commodities. Exportsexceeded appraisal expectations because of considerable increase in theexport of rice and rice products, and POL (Petrol, Oil and Lubricants). Thevolume of general cargo import increased more than expected too, but there

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was a shortfall in coal and POL imported which had no significant effect ongeneral cargo handling operations. These latter were handled in specializedterminals at Hteedan Coal Berth and Syriam, respectively.

4.02 Although there were marked variations in the volume of exports andimports handled from year to year, the port operated efficiently and therewere no undue delays, or problems in loading and unloading cargoes, or con-gestion and storage problems. This improved cargo handling efficiency wasundoubtedly attributable to intensive usp nf new equipment (see Annex G).

B. Inland Traffic

4.03 The project was mainly aimed at Burma's foreign trade, as only inthis trade were ships used which would benefit from deepening of the seaaccess channels. However, the progect also included improvement of pontoons,jetties and steel span bridges used for coastal and inland traffic. Thefollowing inland traffic was shipped and landed at the pontoon jetties duringthe five year period:

Year Shipped Landed TotalgmX-( t-ons)

1976/77 380,020 894,134 1,274,1541977/78 487,603 1,022,557 1,510,1601978/79 477,711 1,083,785 1,561,4961979/80 496,199 1,094,054 1,590,2531980/81 515,483 1,119,136 1,634,619

C. Shipping

4 .04 The number of ships (excluding schooners) entering the port increasedfrom 591 in 1976/77 (appraisal year) to 800 in 1980/81. Berth occupancy byships alongside wharves correspondingly increased. Total number of ships andhours spent alongside wharves each year were as follows:

Year No. of Ships Entered Hours Spent Alongside

1976/77 591 65,6481977/78 597 67,7991978/79 713 ;2,9631979/80 817 83,0101Sv0/81 800 84,902

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Although the number of ships increased, delays and waiting times wereappreciably reduced:

Year No. of Ships Delayed Hours Delayed

1976/77 26 1,5941977/78 7 3011978/79 13 9861979/80 1 551980/81 11 427

4.05 There were no significant changes in the size and draft of shipsentering the port during the years of project Implementation. This wasbecause the problem of draft restrictions to cross the Inner Bar persistedalthough the Outer Bar was deepened to well over 15 feet below datum, whichwas the main concern under the project. This subject is briefly discussed inthe following paragraphs.

D. Dredging

4.06 The main purpose of the project was to maintain the depths in theOuter Bar and Inner Bar access channels to a Aepth of 15 feet below datum,thus allowing 15,000 dwt ships to enter and leave the port on high tides. Toachieve this aim, the line of action was to:

(a) overhaul the existing suction dredger TNY;

(b) give specialized training to dredgemasters and crew; and

(c) procure Electronic position finding equipment to be attached to thesuction dredger and survey vessel.

The overhauling of suction dredger 'TNY" was completed in May 1979. Two BPCdredgemasters received specialized training in the field of dredging in theNetherlands for two months from February to March 1979. As a follow up, twodredging specialists from the Netherlands conducted practical training of thetwo dredgemasters and the dredger crew on board the suction dredger TNY atRangoon for two months in the monsoon season of July and August 1979 and forone month in post-monsoon period of November 1979. Electronic positionfinding equipment was procured, but was not available for use until March1982.

4.07 As stated earlier, dredging of the Outer Bar became unnecessary dueto the deepening of the natural channel since 1976. But the Inner Barremained a limitation to port access as the depth could not be adequatelymaintained. Therefore, a work plan was drawn up to dredge the Inner Bar

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chanmel at a critical area 40 hours a week from Monday to Friday, 8 hours perday, leaving Saturday and Sunday for maintenance.

4.08 The intensive dredging of the Inner Bar channel with the TNY com-menced in January 1980. The annual volume of maintenanc3 dredging for theyears ending 1980 and 1981 were 605,881 m3 and 594,607 m , respectively.Regular post dredging hydrographic surveys were carried out weekly in orderto keep a close watch on the extent of development in this channel from weekto week. aowever, in spite of the effor to remove more than the predictedmalntenance dredging volume of 140,000 m annually at the Inner Bar, itappears that the 15 feet depth along the shipping channel could not be main-tained in all seasons.

4.09 The reason f r the extra dredging carried out annually, 300,000 m2instead of 100,000 m , as originally recommended by the consultants, is acompromise to navigators who have raised doubts whether a channel width of100 meters at a confluence of three rivers can be maintained. BPC hasdecided t2 dredge in channel measuring approximated (1,200 m x 150 m) -180,000 m which undoubtedly could be a favorable solution but this must beconfined to the narrow channel with the help of the Electronic positionfinding equipment, if depth of 15 ft is to be achieved.

4.10 The extra dredging carried out, was done in too wide a channelbecause of lack of the position finding equipment which has now beeninstalled and is already in operation. With the help of this, it is hopedthat the 15 feet depth in the Inner Bar channel would be achieved throughoutthe year.

V. FINANCIAL PERFORMANCE

A. Income and Expenditure Accounts

5.01 Table 4 shows forecast and actual income and rzpenditure accountsfrom the appraisal year 1976/77 through 1980/81. There was considerableincrease in traffic income from the year 1979/80 corretponding to the growthin the exports volume of rice products and POL. Demurrage income had doubledappraisal estimates in 1979/80 and tripled in 1980/81. Although this sourceof Income contributed to BPCts finances, such an outcome was undesirable fromthe operational point of view. On the expenditure side, there was a steadyincrease from year to year, following the same pattern of appraisal estimatesalthough the actuals fell short of expectations. One of the covenants in theCredit Agreement was that the annual net earnings from operations should benot less than 6 per cent of the average value of net fixed assets of BPC.BPC was able to fulfill this covenant throughout the years of projectimplementation. The return on fixed assets was abnormally high in 1979/80

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and 1980/81 reaching 28.5 per cent and 26.5 per cent, respectively, which wasthe result of increases in demurrage income. However, even without suchincreases, rates of return would still be as high as 23.9 per cent and 18.2per cent, respectively. 1/ A more meritable erceumstance was that BPC hadachieved this important goal without the nect_sity of tariff increases asrecommended in the Appraisal Report.

B. Source and Disposition of Funds

5.02 From April 1, 1976, BPC, in common with other state enterprises, wasgiven greater degree of financial autonomy and allowed to retain cashsurpluses and make payments out of own resources. During the course of fiveyears, BPC had accumulated a surplus cash balance of K 147.0 million at theend of March 1981. Therefore, BPC was in sound financial position to be ableto meet debts commitments and meet local cost requirements of developmentprojects. A statement of the source and disposition of funds is shown inTable 5.

C. Balance Sheets

5.03 The balance sheet of BPC for the years 1977-81 is shown in Table 6.The accounts are self explanatory except for Account Receivable- and 'Invest-ment.- In the former account is included K 48.1 million temporarily financedby BPC for purchase of dredgers for Waterways Department of the Ministry ofTransport and Communications, for which BPC acted as procurement agent. Thissum was recoverable from Waterways Department and at the time of writing thisreport K 32.5 million had already been recovered. As regards 'Investments-,BPC had accumulated a cash balance out of which a sum of K 130.7 million wasinvested in the purchase of short-term Government Saving Bonds renewableevery three months. The investment yields an interest rate of 1 per cent perannum and can be encashed at short notice.

VI. ECONOMIC RE-EVALUATION

A. Objectives

6.01 Before proceeding with economic re-evaluation, it should be pointedout that since the project was completed only a short time ago, no tentativeeconomic results could be produced with reliable precision. Furthermore, thetime available was too short to be able to collect or frame any useful data

1/ The high rate of return on fixed assets is partly due to BPC practiceof transferring work in progress items to fixed asset account only whenproject items are fully acquired or completed.

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to show any appreciable result arising out of the project. To present infor-mation without reliable data would merely be a conjecture. Therefore, thebest approach would be to assess how far assumptions and forecasts made inthe Appraisal Report had materialized during the short-term interval from thestart to the completion of the project.

6.02 In the Appraisal Report, the proiect benefits had been calculated asdifference in shipping and cargo handling -without" and "with" the project.Savings consisted of the following three components:

(a) reduced ship-waiting times for arriving and departing ocean-goingvessels as a result of the channel deepening;

(b) reduced shipping costs per ton of exports and imports resulting fromthe use of larger ships made possible by the deeper channel; and

(c) reduced cargo handling costs in Rangoon Port as a result of improvedcargo handling equipment.

Reduced Ship-Waiting Times

6.03 Ship-waiting time entering and leaving Rangoon Port were caused, inaddition to the channel depth by volume of traffic, type and size of ships,tidal and seasonal variations in trade. Without the project, it was assumedthe shipping pattern would continue as before and most probably the channelwould deteriorate from the then existing 12 ft below datum, to 10 ft belowdatum. This would result in increased ship-waiting time and increasinglyrestrict use of the existing 10,000 dwt ton vessels which were standard forBurma. With the project, it was assumed that a gradual introduction oflarger and more economical 15,000 dwt vessels would take place and a con-siderable portion of trade would be carried by those ships. By deepening thechannel depth to 15 ft below datum, it was calculated that 10,000 dwt shipswould not experience any difficulty in entering and leaving the port andtheir w&iting time would be zero although waiting time for a 15,000 dwt shipwas estimated to be 0.64 days per arrival and departure. This would resultin considerable saving in daily ship operating cost.

Reduced Shipping Costs

6.04 The cost of shipping per ton of exports and imports would be reducedfor two reasons:

(a) with increasing size, the ship costs increased proportionallyless than the carrying capacity; and

(b) the ship turnaround time in Rangoon Port was reduced because ofimproved cargo loading and unloading rates.

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6.05 With the introduction of larger ships, it was assumed that increasesin annual cargo carrying capacity of ships and annual ships operating costswould be as under:

Increase in Cargo Increase in ShipShipping Route Carrying Capacity Operating Cost

Northern Europe 45% 33%Japan/Far East 38% 33%

From the above, it was calculated that the difference (saving) per ton ofexports and imports would be US$3.00 per ton for Japan/Far East and US$6.75per ton for Northern Europe.

Reduced Cargo Handling Costs

6.06 The average cost of cargo handling per ton of exports and imports inthe Rangoon Port, prior to the project, was estimated to be US$4.00 per ton.With the deteriorating condition of the existing cargo handling equipment,cost of cargo handling was estimated at US$4.50 per ton, without the project.The project included, therefore, a considerable number of equipment, sparesand workshop equipment. With the introduction of the new equipment, cost ofcargo handling would be reduced to US$3.75 per ton thus representing a savingof US$0.75 per ton.

Estimated Project Benefits

6.07 With the expected reductions in ship-waiting times and shipping costsper ton of exports and imports as the result of deepening the channel andimproved cargo handling conditions, the economic rate of return had beencalculated at 37 per cent. It was further qualified that with the assumed20 per cent increase in the project cost (which already included 20 per centin contingencies) and a corresponding decrease in benefits, the economicreturn would still be as high as 25 per cent on the initial project cost ofUS$13.0 million equivalent.

B. Overall Assessment of Project Benefits

6.08 Reductions in ship-waiting times and shipping costs were dependent onthe deepening of access channels in the Outer and Inner Bar areas to 15 ftbelow datum. As has been mentioned in Chapter IV, the depth of water in theOuter Bar channel was naturally deepened to over 15 ft below datum. But inspite of intensive dredging to deepen the Inner Bar channel the requireddepth of 15 ft could not be maintained throughout the year. Therefore, thedraft limitation still existed for larger ships in certain seasons of theyear. However, the affirmative benefit was that the channel had notdeteriorated to 10 ft below datum, as was expected without the project. Onthe other hand, although the number and size of ships entering the port had

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been considerable over the years, only few ships had experienced delays incrossing the Inner Bar in certain seasons of the year which showed a markedimprovement in reducing ship-waiting times.

6.09 Another source of improvement was the increased efficiency in cargohandling which in turn contributed to the quicker ship turnaround. As shownin Table 3, the volume of trade handled in the port had increased from 1.8million tons in 1976/77 to 2.5 million tons in 1979/80 and 1980/81.Similarly, the number of ships entering the port had increased from 591 in1976/77 to around 800 in 1979/80 and 1980/81. In spite of such increases inshipping and trade volumes, the port was working efficiently and only fewships had to wait for berthing facilities. There were practically nocargo-congestion problems throughout the project implementation years. Theactual economic rate of return for the cargo handling component was 53 percent as compared to 50 per cent at appraisal (Annex G).

C. Future Prospects

6.10 As mentioned in paragraph 4.10, it is hopeful that dredging in theInner Bar area by suction dredger TNY, attached with the Electronic positionfinding equipment, would produce the required depth of 15 ft below datumthroughout the year. Presently, over 60 per cent imports and about 25 percent exports are carried by the vessels of Burma Five Star ShippingCorporation (BFSSC). BFSSC had a fleet of 12 foreign-going ships, of which 2were 11,700 dtw ton vessels, and it is understood that 6 more 11,700 tonvessels would be added to the existing fleet between 1982 and 1984. Withthe expected improvement of the Inner Bar channel, these 11,700 dwt tonvessels would be able to cross the Inner Bar channel without difficulty.Moreover, with the introduction of larger ships, the BFSSC fleet would beable to take share of bigger percentage of imports and exports. An appreci-able economic rate of return is, therefore, expected within the next two orthree years.

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VII. BANK PERFORMANCE

A. Project Justification and Objective

7.01 The Port of Rangoon had restrictions to shipping, as the draft ofships entering the port was controlled by the depths of the two access chan-nels which were deteriorating. BPC and the Government sought the assistanceof IDA in solving this problem and in improving port facilities. IDA wasconvinced that the port was important to transportation and a credit ofUS$10.0 million was granted. The major objectives of the project were todeepen the port access channel to 15 ft below datum to permit vessels of upto 15,000 dwt to enter and leave the port at most states of the tide, and toimprove the operating facilities within the port area.

B. Project Implementation and Supervision

7.02 Project preparation requirements were reasonable and BPC had nodifficulties in following them. However, in some cases, IDA's requirementswere not very realistic. For example, the Credit Agreement (Section 3.06)states that the rehabilitation of the dredger -Thaung Naing Yay was to becompleted not later than December 31, 1977. Yet the procedure forrehabilitation of the dredger involved the following steps:

(a) preparation and submission of qualification papers and details ofbidding procedure for Bank's concurrence prior to bid invitations;

(b) invitation of bids for prequalification;

(c) submission of list of prequalified bidders together with the state-ment of their qualification to the Bank for concurrence;

(d) preparation and submission of specifications and bidding documents tothe Bank for concurrence prior to bids invitation;

(e) invitation of bids;

(f) evaluation of bids and submission of detailed report of evaluationfor Bank's concurrence, prior to award of contract; and

(g) award of contract and dredger rehabilitation.

(Please refer to Schedule 3, Part C, of the Credit Agreement).

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It was unreasonable to expect these requirements to be fulfilled within ninemonths. However, BPC took every possible effort to fulfill these require-ments to the Bank's satisfaction.

7.03 Another Bank condition was to employ international purchasing agentsto procure some items in the project. The reasons given for this line ofaction was that it would reduce the administrative burden on BPC and assistin speedy procurement which would minimize the effects of inflation.Although it amounted to under-estimation of BPC's procurement capacities, theBank's sincere intentions and anxieties were very much appreciated. The Bankmight, by experience, find such a thing necessary for some of its borrowersbut it is considered unnecessary for a borrower like BPC.

7.04 There were instances in which differences of opinion existed betweenthe Bank and BPC, but most of the differences were on minor procurementissues which deserved no particular mention. A particular instance was theprocurement of Electronic position finding equipment. BPC had doubts thatsuch equipment was necessary since the Outer Bar channel had been stable overthe past year, and the equipment might be too sophisticated for BPC's needs.However, the Bank rightly pointed out that, from the past experience theOuter Bar channel was subject to cyclical changes of position and consequentdepth and when that occurred close maintenance and prompt dredging would beessential.

7.05 Bank supervision of the project was adequate. Supervision missionsvisited BPC about twice a year to assess progress. Their visits were of helpin discussing important and outstanding issues. Mission advice and guidancewere appreciated.

C. Working Relationship

7.06 The working relationship between the Bank and BPC was good, frank andcordial. BPC received all help and advice it required during projectimplementation. In return, BPC always furnished the Bank all the informationand reports without burden.

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VIII. CONCLUSIONS

8.01 The report started with the background information and series ofsteps taken from time to time for development of port facilities of thewar-torn Port of Rangoon, since the end of Second World War in order to givethe readers a brief description of events leading to the present Second PortDevelopment Project.

8.02 In Chapter III was described the scope of works carried out by theborrower in implementation of the project, with brief discussions on proce-dures to be followed on procurement items as contained in the project. Italso contained problems and delays in the process of procurement, and revi-sions of project items such as additions and omissions, wherever necessary,and the reasons for such delays and revision requirements. Some pertinentcomnmen were also given on the performance of the international purchasingagents-hnd also the effect of exchange rate fluctuations of the US Dollaragainst other international currencies in order to produce lessons,whether tolearn or avoid these in the handling of future projects.

8.03 In Chapters IV and V were described the operating and financialperformances by the borrower during the project implementation years, givinga vivid picture of the trade and shipping pattern in the port and appropriatefinancial figures compared with appraisal expectations, with brief comments'wherever necessary. Chapter VI dealt with economic re-evaluation of theproject, with an overall assessment of benefits derived in the interimperiod, and also promising signs of improvement fairly predictable in thenear future.

8.04 It is clear from the reports and comments discussed in Chapter VIthat partial benefits could be accounted for with respect to savings inship-waiting time costs as a result of improvements in the channel depth inthe Inner Bar area, and also the reductions in cargo handling costs with theintroduction of new cargo handling equipment and spare parts, coupled withincreased efficiency of operation and maintenance personnel, gained throughproper training facilities. The only problem remaining to be tackled was howto maintain the Inner Bar channel to a depth of 15 ft below datum throughoutall seasons The consultant firm which conducted the feasibility study forthe Second Port Project, and which have just completed a study on the newport development, after reviewing the dredging needs in the Inner Bar area,have stated in their draft final report as under:

-Reconsideration of sedimentation rates indicates that annual deposi-tion in a 15 feet dee channel act oss the Inner Bar will be between200,000 and 300,000 m (140,000 mi according to previous study) butto remove this amount effectively it will be necessary to:

1/ For consultant's comments see Annex H.

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(a) concentrate dredging operations in the period November to June;natural scouring due to higher discharges very much reducesdredging needs at other times o)f year; and

(b) restrict dredging to the shallow lengths of the narrowest channelpracticable for shipping to negotiate, rather than over bottomchannel widths presently exceeding 250 m.-

In light of the consultants' above remarks, a further intensive dredgingshould be conducted in the next post-monsoon season on the lines suggested bythe consultants with the Electronic position finding equipment attached tothe dredger. A bright outcome from such intensive dredging is expected verymuch in earnest.

8.05 In any case, the project was of considerable benefit to BPCprimarily, and to the economy in general. As discussed in Chapter VI, thevolume of trade and shipping handled by the port in the years 1979-80 and1980-81 (the latest two years for which figures were available) increased bymore than 30 per cent over the similar volume handled in the pre-projectyears. In spite of such increases, BPC was able to handle them very effi-ciently without employing extra labor force or any other subsidies. This wassolely attributable to the intensive use of cargo handling equipment andcontinuous maintenance of port access channels to a considerable degree madeavailable by the project. This favorable situation resulted an increase inthe earnings of BPC by more than 30 per cent over the appraisal estimates,nuotably without resort to tariff increase envisaged in the Project AppraisalReport. BPC was, therefore, able to maintain sufficient operating surplusesand after meeting loan repayment and debt interest charges,' had accumulated acash rese-ve of K 147 million at the end of 1980-81 for meeting futuredevelopment needs. This was an undeniably approved benefit derived from theproject. Furthermore, the efficiency in the cargo handling operations hadreduced the ship turnround time in the port which in turn resulted saving indaily ship operating cost.

8.06 On the other hand, by continuous intensive dredging by the newlyrehabilitated suction dredger Thaung Naing Yay", BPC was not only able toprevent deterioration in the Inner Bar Channel which would perhaps bedeteriorated to 10 feet below datum, without the project as assumed by theconsultants and IBRD Project Appraisal mission, but also to maintain con-tinuously at an adequate depth (even though the required depth of 15 feetbelow datum has yet to be maintained in all seasons) to allow the prevailingshipping to enter and leave the port without serious difficulty. Thusship-waiting time was considerably reduced and coupled with a significantfaster ship turnround time, which was achieved as the result of improvedcargo handling rates, obviously due to the utilization of new cargo handlingequipment acquired recently under the present Second Port Project, has led toappreciable savings in the daily ship operating cost. The BFSSC, the onlynational shipping line in Burma, has accordingly benefited from the above

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saving in the ship operating cost. With the published depth maintained at 15feet below datum at the Inner Bar Channel by systematic dredging with therecently rehabilitated suction trailer hopper dredger 'Thaung Naing Yay", itis expected that larger ships of 15,000 dwt would be able to call at the Portof Rangoon. As such, it is envisaged that the benefit would be furtherincreased not only by way of saving in ship operating cost but also by way ofreducing shipping cost made available by handling increased tonnage carriedby vessels comparatively larger than the present ships calling at Rangoon.

8.07 While the project brings considerable benefit with the improvementsachieved, further development of the port facilities is considered stillnecessary to meet future medium and long-term demands. If the present trendof trade and shipping continues to take place as expected, the volume ofexports and Imports are expected to increase to a minimum level of 3 milliontons by 1985-86 and to 3.5 million tons by 1990-91 wita the correspondingincrease in the number of ships probably introducing more larger ships toaccommodate increased trade tonnage. With the prospect of expected increasesin trade and shipping, further demand for increased port facilities is boundto occur. A feasibility study for future port development had, therefore,been conducted since January 1981 by a team of consultants, with the assis-tance of UNDP. The study covered the overall medium and long-term needs ofthe port facilities to accommodate future growth. Based on the findings ofthe study, a Third Port Project is currently being prepared for financing byIDA.

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Annex ABURMA

SECOND R&YG'XN PORT PROJECT (Credit 671-BA)

PROJECT CCItPLETION REPORT

Ancuat of tuie Credit and 'tilization

Original Revised AmountCategory Allotment Allotment UtilIsed Remarks

US$ USS US$

1. Rehabilitation and repair of Includes US$466,053.53dredgers, including provision for workshops machineryof spare parts, documentation, and tools. 1/preparation of specificationsand inspection. 1,550,000 1,850,000 2,134,136.84

2. Materials, components and spare Utllized for procurementparts for repairs to survey, of spare parts for dredgersbuoy and pilot vessels 260,000 280,000 275,694.56 and cargo handling equipment. 2/

3. Posltion Finders and Naviga-tional Aids. 740,000 740 000 702,175.94

4. Cargo handling equipment andspare parts for cargo handlingequipment. 3,880,000 3,880,000 4,480,311.38

5. Plant, machinery and equipmentmaterials for construction ofpontoons bridges and ancillaries 1,590,000 2,010,000 1,692,556.26

6. Training 310,000 310,000 281,565.43

7. Accounting machine and associatedequipment and materials. - 400,000 429,685.40

8. Unallocated 1,670,000 530,000 2/ -

TOTAL 10,000,000 10,000,000 9.996.125.81

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Annex U

SECOND RANGOON PONr PRFWU (Credit 671-BA)

PROJECT CaIP1ZTOU REPORT

Project Implementation Scedule

_____________I________________ __ 1 7 76 ULI _ _ 1979 1 7 . 1980 1981

IIILItAlWNOFTSllt~~~IM J _

REHAEILITATION OP DREDGER 7hT

P re q u al if it io nso l uj.. .< a m u * .oc vI_ Speciflcations and Tender Doctu m_nTendering and COS and IDA approvalsContract Awards -Rehabilitation

REPAIRS TO OTHER DREDGZRS

Specfications and Tender Doc ts___-Tendering d GOB and IDA approvals _ _Contract AardsDellvery of spares and materals Repairs

REPAIRS T.) SURVEY. BZ.-- A PILOT VEMSSS

Specification of matarials A spaLre pairtsTenderiUg and GOB ed IDA approvalsContract Aards - _Delivery of m-terialsRepairs

POSITON FINDERS AND NAVIGATIONAL AIDS

Specificatim and Tender DocumentsTendering and GOB and ID approvalsContract AmwadsDelivery

*bInstaltion _ .__.

SPARES FOR CAinO HANDLING EOrUIPN

Specification and Tender DocumentsTendering and COB and ID A approvals Contract hArds I 0 I a= 1 oDelivery

PHOCURDOSIT OF CARGO HANDLING EGUIRHENT

Specifications and Tender DocumentsPrequslificstatioTenderlng and GOB and IDA EpprovalsContract Amwds I 0~ Dalivery

NACEDhflY TOOLS AND zquIPmEN

-Specifications and Tender Doctments

Contract Awards

DeliveryInstallation

POTOORS. MRIDGES AND ANCI1JARIES

Speciications and Tender DocumentsTendering and COB and IDA approvalContract AwardsDelivery of materi ala and fittingscFabrication A-- . 7

TRAINING/TECNIAL ASSISTANCE

Training of Dredger CrewsTraining of Workshops PersonnelTraiUniagl-PI.aig/Pinnc

AccOMRrrIC NACMM A ASSOCIAIEEQUIRTW & MAETERIAS

Procurement

Primary dredgin

-41-

Anaex C

BURKA

SECOND PORT PROJECT (Credit 671-BA)

PROJECT COKPLETION REPORT

Project Items and Costs - Forelgn Exchange Portion

Category Total 1977-78 1978-79 1979-80

US$ Uss US$ USs

A. VESSELS NAVIGATIONAL AIDS 2,550,000 1,700,000 850,000

(1) Rehabilitation, Repairs, Spare Parts,etc., of Vessels. 1,550,000 1,250,00 300,000

a) Overhaul of dredger Thaung Naing Yayand two years spares. 1,015,000 1,015,000 - -

b) Repalrs to and spare for dredgerThaung Naing Yay and grab dredgers. 535,000 235,000 300,000 -

(2) For Survey, Buoy and Pllot Vessel 260,000 100,000 160,000 -

a) Repairs to survey vessel 40,000)b) Repairs to buoy vessel 120,000) 100,000 160,000 -c) Repairs to pilot vessel 100,000)

(3) Position Finders and Navigational Aids 740,000 350,000 390,000 -

a) Positlon finders 300,000)b) Navigational aids 440,000) 350,000 390,000 -

B.(4) Cargo Handling Equipment and Spares 3,880,000 1,238,000 2,096,000 546,000

a) 3,0OO kg. forkllft trucks 32 units 520,000 200,000 220,000 100,000b) 8,000 kg. forklift trucks 3 units 160,000 160,000 - -c) 4,000 kg. side loaders 6 units 215,000 215,000 - -d) 10,000 kg. front loaders 4 units 455,000 455,000 - -e) Mechanical grabs 4 units 25,000 25,000 - -f) 15,000 kg. forkllft trucks 2 units 150,000 - 150,000 -g) 10-ton mobile cranes 4 units 380,000 - 380,000 -h) 40-ton mobile cranes I units 225.000 - 225,000 _i) 2-units 40-ton low loader and

one unit H.D. Tractor 150,000 - 150,000 -j) Bulk grain equipment 375,000 - - 375,000k) Duap trucks 6 units 130,000 - 130,000 -1) Tractors 12 units 145,000 - 145,000 -m) Tralllers (5-ton) 30 units 95,000 - 95,000 -n) Aluminium gangways 5 units 35,000 - 35,000 -o) Spare parts 400,000 183,000 146,000 71,000p) Workshop tools and equipment 420,000 - 420,000 -

C. PONTOONS, BRIDGES, Etc. 1,590,000 1,001,000 520,000 69,000

(5) Plant and Machinery for Construction

of Pontoons and Bridges 1,590,000 1,001,000 520.000 69,000

a) Pontoons and ancIllaries2 units (240 x 40') 600,000)8 units (120' x 20') 680,000) 751,000 460,000 69,000

b) Brldges 60,000 - 60,000 -c) Plant, machinery and equipment 250,000 250,000 -

D. TRAINING 310,000 - 310,000 -

E. UNALLOCATED 1,670,000 782,000 718,000 170,000

TOTAL 10,000,000 4.721.000 4.494,000 785,00

-42-

Annez D

SECOND POBT PROJECT (Credit 671-BA)

PRCJECT COMPLETION BEPORT

1Lst of Cargo Handling Equipment

AppraisalProcured Estimate

1. 3,000 kg. forklift trucks 52 units 32 units

2. 8,000 kg. forklift trucks 3 units 3 units

3. 15,000 kg. forklift trucks 2 units 2 units

4. 10,000 kg. forklift trucks 4 ujits 4 units

S. 4,000 kg. forklift trucks 6 units 6 units

6. Mechanical grabs 4 units 4 units

7. 10-ton mobile cranes 10 units 4 units

8. 40-ton mobile cranes 1 unit 1 unit

9. 7-ton dump trucks 6 units 6 imits

10. 40-ton tractor and low loaders 3 units 3 units

11. 5-ton tractors 33 units 12 units

12. 5-ton trailers 72 units 30 units

13. Articulated gangways 10 units 5 units

14. Ambulance car 1 unit -

15. Fire tender 1 unit -

16. Bulk grain equipment - 1 unit

-43-

Annex I

BURMA

SECOND PORT PROJECT (Credit 671-BA)

PROJECT COMPLETION REPORT

List of Workshop Tools and Equipment

1. Oxygen gas cutting machine 6 nos.2. Electric baking oven 2 nos.3. Portable cylinder boring machine 2 nos.4. Gas cutting torch set 24 nos.5. Engine driven mobile compressor 6 nos.6. Transformer welding plant 12 nos.7. Automatic coil winding machine 2 nos.8. Automatic tapping machine 2 nos.9. High pressure washing plant 10 nos.10. Battery charging set 4 nos.11. Portable cylinder honing machine 2 nos.12. Portable solid spray painting machine 2 nos.13. Steam jet cleaner 6 nos.14. Diesel engine driven welding plant 12 nos.15. Varnish impregnating plant 2 nos.16. Fuel injection pump testing machine 1 no.17. High pressure greasing unit 4 nos.18. Fuel injector pump testing machine 1 no.19. Hydraulic lift ram 1 no.20. Nozzle lapping and reconditioning machine 1 no.21. Tools and equipment 1 lot

-44-

Annex F

BURMA

SECOND PORT PROJECT (Credit 671-BA)

PROJECT COMPLETION REPORT

List of Plant and Machinery

1. Diesel engine driven welding plant 6 nos.

2. Welding transformer 8 nos.

3. Gas cutting and welding set 24 nos.

4. Mobile air compressor 4 nos.

*. Diesel engine driven winch I no.

6. 25-ton ratchet lower Jack 12 nos.

7. Pulling and lifing hoist (35 tons) 12 nose

8. 2" and 3" diameter water pumps 10 nos.

9. Electric drilling machine 4 nos.

10. Electric butt welding machine 2 nos.

11 * Pneumatic tools I lot

Annex GPage I of 3

BURK&

SECOND RANGOON -ORT PROJECT (Credit 671-BA)

PROJECT COMPLETION REPORT

Economic Re-evaluation 1/

1. General

At appraisal, the project's economic evaluation consisted of anoverall view of expected benefits which fell into three categories:

Ca) reduced ship waiting times for arriving and departing oceanvessels as a result of the channel deepening;

(b) reduced shipping costs per ton of exports and importsresulting from the use of larger ships made possibleby the deeper channel; and

(e) rede-ed cargo handling costs as well as improved shipturnaround times in Rangoon Port as a result of improvedcargo handling equipment.

With these cost reductions, the overall economic rate of returnwas calculated over the project life to be 37%. This was a conservativeassessment since it did not include the benefits of avoided lighterage.At this high level, the rate of return was not very sensitive to anyrealistically forseeable variations in basic parameters with an assumed20% increase in project costs and a corresponding 20% decrease in projectbenefits, the return was still calculated to be as high as 25Z. Since theactual project costs did not exceed forecasts (PCR Table 1) it is unlikelYthat interrelated reductions in the economic rate of return will takeplace.

Based on the expected potential benefits, GOB has taken steps totake advantage of reduced shipping costs by including in its Fourth 5-YearDevelopment Programme (1983/84-1987/88), provision for BFSSC to purchase

1/ This annex is based on information from the PCX and Rangoon PortStudy 1981 draft report by Sir Alexander Gibb & Partners (London).

-46-

Annex GPage 2 of 3

four 10,000 dwt cargo vessels and to construct three 15,000 dwt cargovessels. 2/ This means that the percentage of vessels over 10,000 dwt inthe total BFSSC international fleet will increase from 582 to 73%. Thisexpanded capacity would increase BFSSC's share of total traffic throughRangoon Port from its present level of 60X of exports and 25Z of imports.

As mentioned in the PCR, the channel dredging operation was notfully equipped until March 1982 due to various reasons (PCi paras4.08-4.10). Therefore, the target depth of 15 ft below datum has not yetbeen achieved, but it is expected that operations will be undertaken inthe next dredging season (November 1982 to June 1983) to achieve this.Therefore an economic rate of return for this component cannot be calcu-lated at this time. In due course, as the channel is deepened and theshipping industry realizes that adequate depths are available at RangoonPort, it is expected that larger ships will use the port; consequently,economic benefits due to items l(a) and l(b) mentioned above will accruein the coming years as the channel depth of 15 ft is achieved and main-tained.

3. Cargo Handling

The cargo handling improvements have been quantified as follows:

(a) the improvements in cargo handling rates (see l(c) above) whichhave enabled BPC to handle the increased traffic;

(b) to calculate an economic rate of return for the economicbenefits resulting from the investmerit in cargo handling equip-ment and spare parts. 1/

(a) Cargo Handling Rates

(i) At appraisal it was assumed that without the project andits provisions for replacement and repair of cargo handlingmachinery and workshop equipment, cargo handling rates forexports and imports would increase by 10% from the existinglevel (from US$4 per ton to US$4.50). With the project acost reduction of 5% to 10% (to US$3.75) was expected.Therefore the difference in cargo handling costs was

2/ 'Five-Year Development Programme 1983/84-1987/88" Ministry of Planningand Finance, GOB.

1/ At appraisal no separate rate of return was calculated for the cargohandling equipment category.

-47-

Annex GPage 3 of 3

estimated to be between 15% to 20Z with and without theproject, representing a saving of about US$0.75 per tonhandled. 2/

(ii) By 1980/81 cargo handling costs had reduced to US$3.50 whichrepresented a saving of US$1.00 per ton handled and animprovement of 22% as compared to the 15% to 20% improvementhoped for at appraisal.

(iii) Cargo tons handled per 12-hour gang shift improved by 43%for exports (from 125 tons per shift at appraisal to 179tons per shift). Cargo tons handled per 12-hour gang shiftfor imports improved by 20% (from 75 tons per shift to 90tons per shift). Thus the port was able to cope with theincreased traffic throughput (from 1.8 million tons in1976/77 to 2.5 million tons in 1979/80 and 1980/81) withoutneed for port expansion or use of lighterage operations.

The improvement is also reflected in the average servicetime per ship (PCR para 4.04) which fell fLom 111 hours pership in 1976/77 to 106 hours per ship in 1980/81. Thereforethe objective of improved turnaround time per ship has beenachieved.

Cb) Economic Rate of Return

As stated earlier, a separate economic rate of return for thecargo handling component has now been calculated both atappraisal and after project completion. The cargo handlingequipment category comprised 42% of Credit 671-BA's proceeds.Table 7 summarizes the investment costs and stream of benefitsfor the cargo handling equipment category. This leads to anactual economic rate of return of 53Z as compared to the 50%rate of return indicated in the appraisal report.

Compared to the appraisal estimates, actual investment costswere higher due to purchase of more equipment than envisaged atappraisal. This resulted in a larger stream of benefits whichwill further increase as Rangoon's traffic throughput increases.

2/ 1976/77 prices are used throughout the annex.

-48-Annex HPage 1 of 3

BURMA

SECOND PORT PROJECT, Credit 671-BA

PROJECT CONPLETION REPORT

Consultant's Comments

A consultant mentioned in the PCR prepared by the Borrower wasgiven the opportunity to express his views on the points raised by theBorrower. In the following, an edited summary of the consultant's lengthycomments is presented.

"We have been concerned to learn that in the course of preparingthe Project Completion Report (PCR) on the Second Burma Ports Project,the value of the role of the consultant was questioned and his capabilityto fulfill the function for the project was criticised. All ourexperience in working for developing countries convinces us that efficientprocurement, plays a very significant part in a successful project, andfrequently it is not present. It is difficult to judge the accuracy ofthe claim that the Burma Ports Corporation (BPC) had the capability tocarry out the international procurement. However, a number ofdifficulties which we encountered in completing the assignment make usthink that the report may have underestimated the administrative task andexperience involved in the issue of tender documents to some 500 suppliersworldwide, the appraisal of some 200 tenders, the placing of 45 contractsfor capital equipment and 1,000 associated items as well as revising manyof the specifications.

So far as the complaints about performance are concerned, most ofthe events date back to 1977 and 1978. Our investigation shows that inmost cases the specifications which we received were inadequate as a basisfor the preparation of international tendering and we were involved inmuch work outside our terms of reference. This caused delays andmisunderstandings with the BPC. Experience in similar assignments sincethis project, has shown us the desirability for one or two members of ourstaff, with experience of the equipment, to visit the client to determinespecifications before work on tender preparation commences. The fact thatthe specifications were received were inadequate and the need to querythem was not understood by the BPC. There was indeed one case in which wewere unable to proceed with the procurement because we could not obtainacceptable specifications without an on-site survey of the requirement.

Taking the specific cases where the consultant is said to havecaused unnecessary delay:

-49-

Annex HPage 2 of 3

1. Evaluation of Tenders for Fork Lift Trucks

Both the technical evaluation and the commercial evaluation weresent to BPC together with all bid documents received from suppliers. Inthe event BPC opted for the higher-priced alternative, presumably on thebasis of our technical evaluation. We accept that the commercialevaluation taken on its own was misleading, but both documents wereintended to be, and in the event apparently were taken into account inreaching a decision.

2. Specification of 10-ton Cranes

The specification we received was silent on two important points,whether the lifting capacity was 'free on wheels', and what stabilitymargin was required. To have omitted these from the specification wouldbave made a proper comparison of tenders impossible. Our buyeraccordingly prepared the draft tender documents on the basis of thestricter criteria and sent them to BPC and IDA for approval. He receivedconfirmation to proceed from IDA but no comment was received from BPC.We, accordingly, issued the tender as drafted. A copy of our letterexplaining the background to this situation was written to BPC.

3. Fuel Injection Pump Testing Machine

The Buyer handling this item did not appreciate that BPC, unlike many ofour clients, had no funds available to effect prompt payment. Inaccordance with out standard procedure, he pressed the supplier formaximum discounts and was offered 10% for prompt payment and the lowerprice was passed to BPC. In the circumstances of an IDA credit, paymentwithin 14 days was not, of course, possible and the manufacturer insistedon receiving the full price which involved an uplift of a small amount.Once BPC had declined to accept the additional sum called for, we wereill-advised to have pressed BPC for payment, bearing in mind that weshould not have passed on to BPC the lower quotation in the first place.In the event we settled with the supplier and no delay in delivery wascaused by this episode and BPC received the right equipment at the lowerprice.

A general complaint about delays in the opening of certain Lettersof Credit and in shipping is also made. The complaint about delays incertain Letters of Credit is justified. The difficulty arose because ourcountry's exchange control regulations at that time prohibited us fromopening Letters of Credit in favor of foreign suppliers in respect oforders being shipped to non-residents without ourselves having receivedforeign exchange or being the beneficiaries of a back-to-back credit. Toovercome this difficulty we sought and obtained a conditional guaranteefrom IDA following Case VI procedure, only to find that this was

-50-

Annex HPage 3 of 3

unacceptable to our Central Bank who required an irrevocable credit inour favor. We reverted to IDA with a request for this under Case Vprocedure but were told that this procedure was not available in thisinstance and that Case VI should be accepted. In the face of an apparentimpasse the Central Bank was persuaded to accept Case VI procedure andthe Letters of Credit were issued. This episode caused a delay of somefour r-'nths which should never have arisen. The facts were fullyexplained aud our apologies expressed to BPC in our -itter of November 30,1978.

Shipping delays were outside our direct control as we wererequired to place orders on c.i.f. terms in accordance with World BankGuidelines. We were, however, aware of delays and instituted vigorousprogress action, but in spite of this we believe lack of space on vesselsand congestion in Rangoon gave rise to considerable delays.

In spite of the difficulties, most of which arose because ofinadequate integration of the function we were performing with the enduser in the BPC, we believe that we made a significant contribution tothe project. With hindsight, arrangements should have been made forcloser consultation between our engineering staff and BPC. As it was, theattempt to prepare and/or edit specifications to ensure conformity withIBRD guidelines without a proper brief and at a distance of 7,000 mileswas fraught with difficulty and led to unnecessary misunderstanding."

- 51 -

Table IBURMA

SECOND PORT PROJECT (Credit 671-BA)

PROJECT COMPLEtION REPORT

Actual and Appralsal Estimates of Project Costs

Actual Costs Appraisal Estimatesof Costs

Actual cost as aproportion of

Local Foreign Total Local ForeIgn Total appraisal estizateProject Component Currency Currency US$ Currency Currency US$ of cost (Z)

(Kyats) (USS) Eouivalent (Kvyts) fuss) Eauivalent (31-(6) x 10C

Rehabilitation of dredgersincluding spares 3,169 2,134 2,600 6.181 1,906 2,815 92.4

Re.-airs to survey, buoy andpilot vessel 911 276 410 1,292 320 510 80.4

Position finders andnavigational alds 8,065 702 1,o88 3,278 910 1,392 135.6

Cargo handling ecuipmentIncluding spares 14,511 4,480 6,614 15,939 4.650 6,994 94.6

Pontoons, bridges, etc. 10,281 1,692 3.204 14.892 1,900 4,090 78.3

Training 388 282 339 306 310 355 95.5

Accounting m_chine andassociated equipment andmaterials 4,590 430 1,105 - - - -

TOTAv 41 915 9.996 16,160 41,888 9.996 16;156

Note: The estinates of cost were suitably modified incorporating thefollowing Items which were shown separately in the originalappraisal estimates:

(a) 15% Physical contingencies on FE for vessel and equipmentrepairs and replacements;

(b) Cost contingencies of 8 per annum for years 1977/78 through 1979/80;(c) ComGodities and services tax.

-52-

Table 2

BURMA

SECOND RANGOON PORT PROJECT (Credit 671-BA)

PROJECT CONPLETION REPORT

Schedule of Disbursements

Quarterly CumulativeFiscal Year Quarter Estimates Actuals Estimates Actuals

1978 1 80 277.66 80 277.662 120 890.70 200 1,168.363 650 392.96 850 1,561.324 750 376.61 1,600 1,937.93

1979 1 1,100 923.71 2,700 2,861.642 1,500 2,567.87 4,200 5,429.513 1,400 864.93 5,600 6,294.444 1,250 626.94 6,850 6,921.38

1980 1 750 287.94 7,600 7,209.322 950 87.34 8,550 7,296.663 600 419.40 9,150 7,716.064 450 381.82 9,600 8,097.88

1981 1 250 745.28 9,850 8,921.872 150 129.52 10,000 9,051.393 - 580.42 - 9,631.814 - 282.72 - 9,914.53

1982 1 - 81.60 - 9.996.13

- 53 -

Table 3

SBONCD RANOOM POT 1RDJST -(Credit 671-BA)

PROJZCT COMPLErION REPORT

Actual and Forecast Traffic of-Kalor Cocodities

Year of.Commodity Project Appralsal 1977 - 1978 1978 - 1979 1979 - 1980 1980 - 1981

Actual Forecast Actual Forecast Actual Forecast Actual Forecast Actual Forecast

Thousand Tons -

EXPORT

Rice and riceproducts 685 500 651 505 258 530 766 560 753 585

Tlmber 99 io5 141 220 230 235 259 250 210 260

Minerals and ores 8 20 10 25 14 30 11 30 18 35

Pulses, maize andvegetable oll 67 166 86 170 90 175 143 180 110 185

Jute 7 71 9 76 36 75 27 80 86 83

other agriculturalproducts 26 20 42 20 63 21 68 21 57 21

General cargo 148 33 137 34 139 34 206 34 184 36

Subtotal 1,041 1,015 1,076 1,050 830 1,100 1,480 1,155 1,418 1,205

Petroleum, oil andlubricants (POL) 57 50 160 50 227 50 309 50 241 50

Total exports 1,098 1.065 1.236 1,100 1,057 1,150 1789 1,205 1,659 1,255

IKPORT

General cargo 582 450 565 465 825 490 720 515 789 545

Coal 102 150 35 150 64 150 32 150 25 150

Subtotal 684 600 600 615 889 640 752 665 814 695

POL 14 150 23 150 24 150 33 150 23 150

Total Imports 698 750 623 765 913 790 785 815 837 845

Grand Total(Exports+Imports) 1,796 1,815 1,859 1,865 1,970 1,940 2,574 2,020 9.,496 2,100

BURNA

SECOND RANGOON PORT PROJECT (Credit 671-BA)

PROJECT COHPLETION REPORT

Revenue Income and Expendlturo Accounts for the Yeers 1976/77 - 1980/81(Kyatso *all.oo)

BaseI'nirt1cu1ars Year 1976-77 1977-78 1978-79 1979-80 1980-41

1975-76 Forecast Actuals Forecast Actuala Forecast Actumai Forecast Actudls 1Poc"ae t Actualc Rmarki

Reventia lIintCmu

Traffic Kuvenue 30.2 37.4 35.9 38.5 42.5 39.6 39.2 40.8 S5.3 42.1 58.5DuAurrailu 13.9 10.7 9.7 9.7 8.6 8.7 9.9 7.8 15.6 6.8 21.0Othiur 1n..oi 9.8 10.8 10.3 10.8 15.4 10.8 26.6 11.0 32.4 11.2 25.8(ffetL .af TdrIff Increadus - - - 5.9 - 12.4 - 16.1 - 0.0

Trotal Ruvonlue IncoMes 53.9 58.9 55.9 64.9 66.5 71.5 7 75.0.1 105.

FALLumdWisI,ibnlur coat 15.4 18.0 15.3 19.3 17.5 19.9 18.4 20.5 18.4 21.1 17.2 'nMLlIitena.ice and Repalrm 6.4 6.4 6.0 6.5 6.3 7.3 7.8 8.2 7.6 9.0 9.0OLIIOr Exp.nuaes 5.3 5.1 5.9 5.3 7.1 5.3 7.5 5.3 8.0 5.3 9.5Duprec fal1un 8.0 8.7 7.9 11.7 9.0 16.7 8.9 19.7 8.7 21.7 11 6

Oper.ating Expenses 35.1 38.2 35.1 42.8 39.9 49.2 42.6 53.7 42.7 57.1 47.IAdmlaiistristive Expenses 7.7 9.3 8.3 9.4 9.8 9.5 11.0 9.6 11.3 9.7 12.1'101,1CnW Expiensus 1 3.0) - ) ( 0.5) 1.2) 0.1 4.3) 0.2 5.8) 0.3 5.9) 0.3InturusI Charges 0.5 ) 0.3 ) 0. 4) 1.3 ____) A4 62

Totul pensu. 4.2.3 47.5 43.2 53.4 50.2 63.0 55.1 69.1 587 72.7 65.9

Nut Surpi3ius 11.6 11.4 12.7 11.5 16.3 8.5 20.6 6.6 44.6 7.4 39.4OpIuraLtim Hiitlo I * 78.4 80.6 77.2 80.4 75.4 82.1 72.5 83.6 56.5 83.3 62.3OleriLtiig4 Surlilus hefore Interust 12.1 11.4 13.0 12.7 16.7 12.8 21.9 12.4 49.0 13.3 45.6Average NuL F1xud Asuets 125.2 125.2 122.5 147.0 137.9 185.2 172.7 200.1 180.8 188.0 172.9 .Nuctirn un Not Fixed AusaLs of

tOperutting Surplus before FIlntruast 2 9.7 9.1 10.6 8.7 12.1 6.9 12.6 6.2 27.0 7.1 26.3

Lipur.atitii Hstlio worked out Including interest chargen.

- 55 -

Table 5

BURMA

SECOND RANGOON PORT PROJECT (Credit 671-BA)

PROJECT COMPLETION REPORT

Sources and Dispositlon of Funds 1977-1981

Yeat ending March 31 1977 1978 1979 1980 1981(Kyats Mlllion) -

Sources of Funds

Net surplus 13.0 16.7 21.9 49.0 45.6

Depreciation 7.9 9.0 8.9 8.7 11.6

20.9 25.7 30.8 57.7 57.2

Less:

Debt se_vice 0.3 0.4 1.3 4.4 6.2

Debenture Redemption - - 3.5 - 0.3Repayment of IDA Credit - - - - 5.8

20.6 25.3 26.0 53.3 44.9

Less:

Contribution to Government 2.4 3.3 4.1 13.4 11.8

18.2 22.0 21.9 39.9 33.1

Other cash adjustment 1/

Increase/Decrease 3.3 (61.3) (31.5) ( 0.4) 13.2

Net cash generation 14.9 83.3 53.4 40.3 19.9

Proceeds of IDA Credit - 1.9 17.6 28.7 11.5

Proceeds of ADB Loan - 1.6

14.9 85.2 71.0 69.0 33.0

Application of Funds

Capital Expenditure 8.7 45.3 39.9 19.1 13.1

Increase/Decrease in ~>tsh 6.2 39.9 31.1 49.9 19.9

Cumulative cash balance 6.2 46.1 77.2 127.1 147.0 2/

1/ Increase in Credltors/Decrease in Debtors create increase incash. Decrease In Creditors/Increase in Debtors create

decrease In cash.

2/ Includes Kyats 130.7 million in short-term bank deposits.

BURMA

SECOND RANGOON PORT PROJECT (Credit 671-BA)

PROJECT COMPLETION REPORT

Balance Sheet 1977-1981(Kyata in million)

1977 1978 1979 1980 l18lParticulars Forecast Actuals Forecast Actual. Forecast Actuals Forecast Actuals Forecast BudRet

Current Assets less Current Liabilities

Stores and Works In Progress 17.1 37.6 17.1 15.1 17.1 22.7 17.1 26.4 17.1 20.1Receivable less Provision for Bad Debts 4.2 24.8 4.2 42.1 4.2 50.7 4.2 61.1 4.2 103.4Cash in Hand 8.7 6.2 12.7 46.1 8.1 77.2 28.5 127.1 47.4 16.3

30.0 * 68.6 34.0 103.3 29.4 150.6 49.8 214.6 68.7 139.8Less Security Deposits ) 14.7) 9.3) 15.7) 25.6) 25.1)

Creditors ) 31.3 8.8) 31.3 45.2) 31.3 60.3) 31.3 46.8) 31.3 62.4)Miscellaneous Credit Balance ) 33.2) 60.0) 73.2) 65.6) 73.9)

Excess/(Deficiency) of Current Assetsover Liabilities 1.3) 11.9 2.7 (11.2) (1.9) 1.4 18.5 76.6 37.4 (21.6)

Fixed Assets

At cpst less Depreciation to date 125.3 119.8 166.8 156.0 203.6 189.4 196.6 172.1 179.4 173.6Investments 0.3 0.3 0.3 - 0.3 - 0.3 - 0.3 130.7

Total Net Assets 124.3 132.0 169.8 144.8 202.0 190.8 215.4 248.7 217.1 282.7

Financed by

Propriety Interest of Government (Equity) 102.5 9.0 102.5 8.7 102.5 20.0 102.5 19.9 102.5 19.9Accumulated Surplus 11.4 115.0 22.9 126.2 31.4 146.8 38.0 176.1 45.4 203.1Foreign Loans

- V)A Credit - - 34.0 1.9 61.2 1 19.5 68.0 48.2 62.3 53.9- ADS Loan - - - - - - - - - 1.6- Aid fron UNDP 2.4 - 2.4 - 2.4 - 2.4 - 2.4 -

- Outstanding Debentures 8.0 8.0 8.0 8.0 4.5 4.5 4.5 4.5 4.5 4.:

Total Capital Dnployed 124.3 132.0 169.8 144.8 202.0 190.8 215.4 248.7 217.1 282.7

-57 -

TAKEZ 7BUMI PORTS CORPORATION

POROCAST ISONE AND ZUPUIDITURE STATUIMIT

1981/82 1982183 1983/84 1954185 1985/86 1986/87 19437/84 1988/89 1989/90For.cast Trenod(Thouands a! toan)

Seaborne - RWaqoos / 2.435 '.180 3.565 3.780 3.966 4.130 4. 35 4.308 4.490Outwort.ii/ 362 516 553 578 642 679 *20 761 800

Inland - Rangoon 1.400 1.500 1.W , 1.700 1.760 1.830 1.920 t.990 2.100Outport. 165 173 160 180 195 199 204 230 213

Income (IliUlone of Ryat.)a. Dues on goods and vessels

- Seborne (x25 ky"c/ton) 69.9 92.4 102.9 109.2 115.2 120.2 123.9 126.7 132.3- Inland (x1.7 kyats/ton) 2.7 2.8 3.0 3.2 3.3 3.5 3.6 3.7 3.9

b. Daurraqe 21.0 20.0 20.0 20.0. 20.0 20.0 20.0 20.0 20.0

c. nut. and Oth-r Inco _ 26.0 28.0 32.0 35.0 35.0 35.0 35.0 35.0 35.0

Total Income at Current Ratec 119.6 143.2 157.9 167.4 173.5 178.7 182.5 184.4 191.2

Ci) Inrer= wIth 2Sof e all. 119.6 143.2 189.5 200.9 208.2 214.4 219.0 221.3 229.4

rates in 1983/84

(IL) Increaae with further 301In tariffs and ratee la 119.6 143.2 189.5 200.9 270.7 278.2 284.7 287.7 298.2

in 1995/86. 119.6 143.2 189.5 200.9 270.7 278.2 284.7 374.0 387.7

(IlL) Increae with anotber 301 Intariffs and rates increaeein 1988189.

Expediture

d. Operating (Seaborne tons x 15 kyats/ton) 42.0 55.4 61.7 65.5 69.1 72.1 74.34 76.0 79.4

-. Administrative 14.0 15.0 15.0 15.0 15.0 15.0 15.0 15.0 15.0

f. tepreciaton 17.0 19.0 22.0 24.0 24.0 24.0 24.0 24.0 24.0

X. Zuxftins Intereut Paynents 6.5 7.0 7.0 9.0 9.0 8.5 8.0 S.0 7.5

h. Zecalation In (d) and (e) (6S *.a.) - 4.2 9.2 15.3 .1.9 36.6 44.7 53.7 65.1

79.5 100.6 114.9 128.8 139.0 156.2 166.0 176.7 191.0

Repayment ad Ieterea on -rv LonJ

- Rangoon - - - - - - 17.0 72.0 72.0- Outports - 22.0 22.0 22.0 22.0 25.0 25.0 25.0 34.0

Total Expenditure 79.5 122.6 136.9 150.8 161.0 181.2 208.0 273.7 297.0

Debt *ervlce coer accordfing to Ci) 9.7 2.4 3.6 3.4 3.3 2.7 1.7 0.7 0.6

Debt servil ca r ccerding to (II) 9.7 2.4 3.6 3.4 5.3 4.6 3.0 1.4 1.2

Debt ervwic cover according to (iiL) 9.7 2.4 3.6 3.4 5.3 4.6 3.0 2.2 2.0

- S8 -

TAMLE 8

BURNA

SECOND RANGOON PORrT PRJECr (Credit 671-BA)

PROJECr COMPLErION REPORT

Aetual and Appraisal Estimates of Costs and Benefitsin Cargo Handling Couponent

ACTUAL 21

TRAFFI C REDUCTION TRAFFC REDUCTEIESIMENT VOLUM IN KADJLING ETr STMNT VOUDI IN UAILURC Ner

TEAR (US S a.) (OOD IORS) CoSTS BENEFITS (US $ i.) (000 TOMR) COSTS B2n9TrS

1976177 1726 16151977/78 0.2 1666 -0.2 1.24 1680 -1.241978/79 2 Z.82 1690 -2.82 2.10 1751 1.31 -0.791979/80 1.41 1861 1.86 40.45 0.55 1828 1.37 40.821980181 2007 2.01 +2.01 1906 1.42 +1.421981/82 2151 2.15 +2.15 1985 - 1.56 41.561982/83 2296 2.30 +2.30 2047 1.6 41.61983/84 2469 2.47 +2.47 2118 1.65 +1.651984/85 2640 2.64 +2.64 2193 1.70 +1.701985/86 2773 2.77 +2.77 2270 1.75 41.751986/87 2910 2.91 +2.91 2350 1.81 +1.811987/88 3041 3.04 +3.04 2433 1.87 +1.871988/89 3178 3.18 +3.18 2518 1.93 +1.931989/90 3311 3.31 +3.31 2605 1.9" +1.991990/91 3520 3.51 +3.51 2698 2.05 +2.051991/92 3710 3.71 +3.71 2785 2.11 +2.111992/93 3910 3.91 +3.91 2785 2.11 +2.111993/94 4110 4.11 44.11 -2785 2.11 +2.111994/95 4300 4.30 44.30 2785 2.11 +2.111995/96 4600 4.60 +4.60 2785 2.11 +2.111996/97 4900 4.90 +4.90 2785 2.11 +2.111997/98 5200 5.20 +5.20 2785 2.11 +2.111998199 5600 5.60 +5.60 2785 2.11 +2.11

Results of Return CalculationsEconomic Rate of Retunn equals 53Z Economli Rate of Return equals SO1

1U From 1981/82, traffic figures are derived from "Rangoon Port Study" 1981 by Sir Alexander Gibb and Partners (U.K.).P.O.L. figures are excluded.

2/ Figures used in this calculation are derived from 'Burma: Appraisal of a Second Port Project" Dcecber 1976by ASPTR.