Document of The World Bank

FOR OFFICIAL USE ONLY

Report No: 27044

IMPLEMENTATION COMPLETION REPORT(SCL-40800 SCL-40801)

ON A

LOAN

IN THE AMOUNT OF US$33.5 MILLION AND DEM49.5 MILLION

TO THE

REPUBLIC OF POLAND

FOR THE

PORT ACCESS AND MANAGEMENT PROJECT

February 18, 2004

Infrastructure and Energy UnitEurope and Central Asia Region

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

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CURRENCY EQUIVALENTS

(Exchange Rate Effective September 2003)

Currency Unit = Zloty (PLN) PLN 1 = US$ 0.25

US$ 1 = PLN 3.80

FISCAL YEARJanuary 1 December 31

ABBREVIATIONS AND ACRONYMSAIS Automatic Identification SystemCAS Country Assistance StrategyCOMECON Council for Mutual Economic AssistanceEDI Electronic Data InterchangeERR Economic Rate of ReturnGDDKiA Ministry of Infrastructure Road AdministrationICB International Competitive BiddingILP Internet Logistic PlatformMoI Ministry of InfrastructureMST Ministry of State TreasuryNCB National Competitive BiddingPLN Polish Zloty PMU Project Management UnitSAR Seach and Rescue SOLAS Safety of Life at SeaVHF Very High FrequencyVTMS Vessel Traffic Management Sytem

Vice President: Shigeo Katsu, ECAVPCountry Director Roger Grawe, ECCU7Sector Manager Motoo Konishi, ECSIE

Task Team Leader Michel Audigé, ECSIE

IMPLEMENTATION COMPLETION REPORTREPUBLIC OF POLAND

PORT ACCESS AND MANAGEMENT PROJECT

CONTENTS

Page No.1. Project Data 12. Principal Performance Ratings 13. Assessment of Development Objective and Design, and of Quality at Entry 14. Achievement of Objective and Outputs 55. Major Factors Affecting Implementation and Outcome 96. Sustainability 107. Bank and Borrower Performance 118. Lessons Learned 139. Partner Comments 1310. Additional Information 14Annex 1. Key Performance Indicators/Log Frame Matrix 15Annex 2. Project Costs and Financing 16Annex 3. Economic Costs and Benefits 18Annex 4. Bank Inputs 20Annex 5. Ratings for Achievement of Objectives/Outputs of Components 21Annex 6. Ratings of Bank and Borrower Performance 22Annex 7. List of Supporting Documents 23Annex 8. Beneficiary Survey Results 24Annex 9. Stakeholder Workshop Results 25Annex 10. Environmental Review 29Annex 11. Borrower Contribution

Map: IBRD Nos. 27435, 27436, 27437, 27438, 27439, and 27440

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Project ID: P036061 Project Name: PORT ACCESS AND MANAGEMENTTeam Leader: Michel Audige TL Unit: ECSIEICR Type: Intensive Learning Model (ILM) of ICR Report Date: February 19, 2004

1. Project DataName: PORT ACCESS AND MANAGEMENT L/C/TF Number: SCL-40800; SCL-40801

Country/Department: POLAND Region: Europe and Central Asia Region

Sector/subsector: Roads and highways (80%); Ports, waterways and shipping (18%); Central government administration (2%)

Theme: Infrastructure services for private sector development (P); Regulation and competition policy (S)

KEY DATES Original Revised/ActualPCD: 02/07/1994 Effective: 12/06/1996 12/06/1996

Appraisal: 09/28/1995 MTR: 12/01/1999 12/01/1999Approval: 08/01/1996 Closing: 06/30/2002 06/30/2003

Borrower/Implementing Agency: GOVERNMENT OF POLAND/NINISTRY OF TRANSPORTOther Partners:

STAFF Current At AppraisalVice President: Shigeo Katsu Johannes LinnCountry Director: Roger W. Grawe Jean-Michel SeverinoSector Manager: Motoo Konishi Hans ApitzTeam Leader at ICR: Michel Audigé Marc H. JuhelICR Primary Author: Robert Kietlinski & Jacques Bure

2. Principal Performance Ratings

(HS=Highly Satisfactory, S=Satisfactory, U=Unsatisfactory, HL=Highly Likely, L=Likely, UN=Unlikely, HUN=Highly Unlikely, HU=Highly Unsatisfactory, H=High, SU=Substantial, M=Modest, N=Negligible)

Outcome: S

Sustainability: L

Institutional Development Impact: SU

Bank Performance: S

Borrower Performance: S

QAG (if available) ICRQuality at Entry: HS S

Project at Risk at Any Time: No

3. Assessment of Development Objective and Design, and of Quality at Entry

3.1 Original Objective:

The origins of this project go back to 1992-1993, at a time when a Polish port reform and modernization

study financed under a Dutch consultant trust fund was initiated. Polish port policies, inherited from the former system, had to be reformed to introduce more opportunity for competition and to decrease centralization in the decision making process. Also, Polish ports needed to increase their competitiveness as well as the quality of services they provided. The legal and regulatory framework had to be updated in order to split the functions of policy setting, ownership and operations management for the sector (ports handled more than 55% of Polish foreign trade tonnage). Other key elements to the development of the three main Polish ports were reliability and efficiency of connections with other land transport networks and safety at sea.

The project was set up to address these challenges by targeting two main objectives: first, to update the legal and administrative framework of the three main ports and second, to improve accesses to the three main seaports -- both from the sea and the hinterland.

Updating legal and administrative framework: The project aimed at helping the Polish maritime administration implement the provisions of the new law with respect to the following challenges:

The Port Law -- under preparation since 1991 and dated December 20, 1996 -- introduced key principle towards modernization of the sector: namely, to restructure state-owned enterprises to make them act as ‘landlords’ of the facilities. According to the new law, commercial activities were to be carried out by private operators independent from port authorities, with the regulating role being bestowed upon the Ministry of Infrastructure (MOI). The law provided a status to new entities managing the port, it granted them the responsibility to manage the land, while the Ministry of State Treasury (MST) remained the legal owner on behalf of the State Treasury. For each of the three main ports, a joint stock company had to be created, according to the provisions of the Commercial Code. In order to bring local authorities (i.e. the municipalities) into closer cooperation, the municipalities were given between 24% and 34% of shares in these companies. The new authorities’ main responsibilities were (i) to manage the land and port infrastructure, (ii) to plan and modernize the infrastructure and (iii) to provide services related to infrastructure (e.g. maintenance dredging along the key walls). Sources of income for the companies were to be from lease of land, port dues and other revenues from services they would provide. Other major infrastructure to access the ports were still to be managed, maintained and financed from the Budget. The municipalities, as new port stakeholders, were asked to provide capital either through contributions in kind (the land) or in cash. The control structure of the port authorities was supposed to consist of a general assembly, a supervisory board and a management board. Two amendments to the law have been issued (the first amendment on June 18, 1999; the second one on September 6, 2001): they required joint stock companies to sell all shares of the operating subsidiary companies they owned by December 31, 2003, and to regulate management of the land and capping port dues.

Investment in ports’ accesses from the sea and from the hinterland: As train transport was historically the major land carrier within the COMECON framework, there was a lot to be done with respect to the road network, which is why the project focused on improving road access to the ports. The project was expected to contribute significantly to the development of services offered to unitized cargo, such as containers, and goods shipped on ro-ro and ferry carriers. It would also contribute to improve safety by diverting heavy trucks away from the city centers. Implementation of vessel traffic management systems was expected to improve navigation safety, especially for dangerous cargo (on average, about 60 percent of ships were reported transporting hazardous goods).

The two above-mentioned main objectives were set to increase competitiveness of the entire transport chains going through Polish ports, thanks to increased port capacity in terms of providing efficient services, and more effective connections with domestic inland transport networks. The project was also seen as the

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first step of a long-term assistance to the Polish port sector, given the fact that a second project -- Port Modernization Project, to overlap with the first one -- was announced during project preparation. This second project is currently under implementation; it deals with a set of the most urgent investments for Maritime Offices and Ports, now that the framework financed under the first project has been established.

Project design was consistent with the 1994 CAS objectives as well as with the revised 1997 CAS objectives in terms of facilitating further participation of private sector in port operations by financing missing infrastructure links which were not likely to attract private financing. Competitiveness of the three main Polish ports and support for Poland’s integration with the EU were also clearly addressed by the project.

Project development impact monitoring was based on both qualitative and quantitative indicators regarding port traffic and modal split statistics for land transport. There were no milestone targets described in the Loan Agreement. Data was provided mainly by port authorities and attached to quarterly reports issued by the PMU. Although this information is relevant, it is difficult to measure the real impact of the project as the economy of the sector has declined steadily during implementation, which might offset the gains to be attributed to the project.

3.2 Revised Objective:

The Project objectives were not revised, and there was no amendment to Loan Agreement during implementation.

3.3 Original Components:

Project design was two-fold, as it includes two components: (i) a policy and institutional component; and (ii) an investment component.

(i) Policy and Institutions: The project provided technical assistance to the sector all along the port management structure reform (base cost of US$1.5 million, including unallocated). In July 1994, a Transport Policy Paper issued by the Government spelled out three main priorities for the subsector of maritime transport: (i) to improve competitiveness of ports and shipping services; (ii) to develop ferry connections between Polish ports and other ports around the Baltic sea and; (iii) to ensure greater navigation safety and ecological protection of coastal environment. This Policy Paper also considered the completion of the ongoing institutional reform process (e.g. shifting away from monopoly situation and completing the split between port ownership, management and commercial operations). Technical assistance under the project was designed to provide institutional advice and training related to regulation of port activities, management of public assets and, last but not least, the transfer of commercial activity of ports to the private sector so as to accompany the reforms set forth in the Transport Policy Paper. The framework for technical assistance was paired up with the port law. It was designed to help the central ministerial unit and port management teams to translate the provisions of the law into practical working relationships between the main players of the maritime economy. Later, on top of the actions that had been appraised during the preparation phase, an Electronic Data Interchange (EDI) study was also financed during the second half of project implementation period as the first stage of a more ambitious Internet Logistic Platform (IPL). ILP was foreseen as the common platform for all maritime sector data exchanges to be developed further in the medium term.

(ii) Investments: The second component of the project was to develop priority infrastructure that would improve access to the three main ports. Given the fact that road and maritime accesses had long been

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neglected due to the predominance of rail transportation, the project focused on bridging this gap by financing civil works for roads. A new access to Gdansk Northern port areas and a new access to Szczecin port were appraised, together with the removal of narrow bends and the widening of the national road no. 3 from Szczecin to Swinoujscie. Regarding the access from the sea, the project financed a Vessel Traffic Management System (VTMS) for Szczecin- Swinoujscie ports, as well as the entrance and protection of the Wisla Smiala river in Gdansk (base cost: US$125.3 million for road access, US$5 million for maritime access and US$13.8 million for coastal protection).

3.4 Revised Components:

The components have not been revised. However, as a result of a rather extensive competition among contractors during the stage of works procurement, savings of about 5% of the total loan amount were made, thus allowing additional subcomponents to be financed during the second half of the implementation period. Those additional items were (i) Vessel Traffic Management System for Gdansk and Gdynia ports area (similar to Szczecin VTMS); and (ii) modernization of the Search and Rescue Department headquarters in Gdynia (data monitoring and record keeping, plus more modern transmission capacity). Since the nature of those new components is fully compatible with the original project objectives, these modifications, rather then being reported to the Board, were approved by the Bank management in a letter dated June 18, 2002.

During the second half of project implementation period, the Borrower was also considering two other components: (i) an Automatic Identification System to locate vessels within 30 miles from the shore and provide core information on their activities (International Convention SOLAS requires such system to be implemented as of July 1, 2002, and to be fully operational in 2008); and (ii) a sub-module of EDI system (e.g. for hazardous materials), following the EDI study mentioned above. Both proposals would have contributed to the implementation of the unified Maritime Safety System required by the EU Council Directive No 93/75/EEC of 13 September 1993 and Council Directive 98/41/EC of 18 June 1998, but as technical specifications were not available, they were not considered for financing under the project. MoI has secured other means to finance both systems.

3.5 Quality at Entry:

There was no previous Bank project aimed at financing Polish maritime sector. The project was a timely and relevant response to growing needs for modernization of main Polish ports. From the very beginning, project preparatory work was well advanced, and quality at entry was satisfactory. The status of the Port Law, along with financial and commercial practices of each of the main Polish ports, were at the center of fruitful policy dialogue with the Government; necessary amendments to the law were spelled out in great detail during preparation phase. The selection of investments -- accesses to the ports -- was based on the study financed through a Dutch grant mentioned under paragraph 3.1 (the study started in 1992 and was updated in 1995).

Project objectives were consistent with CAS objectives and with Government priorities for the maritime sector. Combination of investment components with port reform technical assistance was well-balanced. Bank's safeguard policies, with special emphasis on environmental considerations, were taken into account during preparation phase. Project design appropriately identified and addressed risks involved. Economic analysis was done in a very competent manner, and the final results have proven to be consistent with those expected before the project began (with the exception of the Parnica bridge in the city of Szczecin: in this case, postponement of new dockyard construction in the port significantly decreased the density of traffic on the bridge until the docks have been completed -- it is therefore too early to reassess the rate of return

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for this investment). There was no Quality Assurance Group assessment of this project.

Project design proved to be well adjusted to the priorities the ports had to face during the implementation period. The two-fold objectives (i.e. improvement of physical accesses side by side with supporting the transformation of institutional framework) were well-perceived and provided the new port authorities -- now the landlords of the ports -- with an incentive to manage port assets in a more efficient way. The project took into account Bank’s experience with Poland at the time of appraisal, with respect to issues such as (i) combined transport; (ii) the pace of policy reforms; (iii) procurement of large works; and (iv) disbursement mechanisms.

Project design was also well-suited to both administrative and financial capacity of various implementation agencies involved: the Department of Shipping and Seaports at the MoI (for TA component), GDDKiA (for road access) and Maritime Offices (for TMS and for Wisla Smiala investments). Implementation arrangement, using a Warsaw-based Project Monitoring Unit (PMU) in the Ministry of Infrastructure as the main partner for the Bank, proved to be a very efficient solution. The PMU was well prepared to monitor the progress under the project and to manage reporting on technical and financial matters.

4. Achievement of Objective and Outputs

4.1 Outcome/achievement of objective:

The project had two very distinct goals: (i) institutional development; and (ii) financing new accesses to the ports (major share in the financing total). Major institutions involved and timing of the implementation of these respective goals were different, so there was very little overlap between the two sets of activities.

The project had three distinct phases: (i) preparation phase (from 1994 to 1996), when in fact most of the objectives regarding the development of the institutions were achieved (thanks to a very fruitful cooperation with the authorities); (ii) the first phase of works implementation (from 1996 to 2001), when the majority of physical accesses to the ports were procured and implemented; and (iii) the second phase of implementation (form 2001 to 2003), when little was happening on the instructional side apart from the completion of remaining works, delayed due to slow availability of counterpart financing during phase two. As a result, one-year extension of the closing date was granted to allow for completion of Szczecin port access.

Institutional objectives: The Borrower and the Bank agreed to organize a seminar before the closing date, with the purpose of a more thorough evaluation of component’s results. The following paragraph outlines findings of the seminar with respect to the institutional component.

By and large, objectives under this component have been achieved. The whole process of project implementation should be looked upon from the perspective of Poland undergoing major economic and social reforms in the second half of the 90’s. Once the legal framework for the ‘landlord-type’ port authorities was established in 1996, the ports started to assume new duties and began to operate as market players. It was agreed that priority would be given to the adjustment of existing capacity to new trends in foreign trade and traffic structure rather than to the increase of the global output. At present, the three Port Authorities are smaller organizations with limited tasks (infrastructure development and maintenance, lease management and renting agreements with the operating companies), since most commercial activities have been transferred to operating companies.

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Despite those positive developments, the results are not fully matching the expectations. There are several issues which emerged during implementation of the reform and need to be further addressed:

- First and foremost, MoI (responsible for transport policy) and MST (representing the owner) did not manage to agree on a comprehensive policy regarding management and supervision of port authorities. The consequences of such lack of coordination have negative effect on port authorities, which are unable to obtain, in a timely manner, decisions which are absolutely necessary for proper port management.

- With rapidly evolving competition, the pace of implementation of the principles described in the law should be faster. As this is not the case yet, ports competitiveness for non-captive cargo remains rather low.

- Many operators still use common tariff policy and distribute business through oligopoly schemes. MST did not succeed in making the ports sell the shares in the operations company before the 2003 deadline, so it has been extended until the end of 2005. Operating companies are still undercapitalized and thus cannot maintain their assets properly.

- Port authorities only manage part of the land (from 25% in Gdansk to 45% in Szczecin) within the administrative boundaries. Large portion of the land is neither owned nor controlled by the ports. Such an arrangement contradicts the law, which says that any ground in a port should be equally accessible to all users. Such fragmentation of land makes it very difficult, if not altogether impossible, for the port authorities to fulfill their mandate, i.e. to forecast, program and plan, to maintain construction and reconstruction, and to modernize port infrastructure.

- Municipalities did not acquire ownership of shares in such percentage that was stipulated at the time of the law. The reason behind this is the long process of assets inventory and value estimate. This resulted in weaker day-to-day ties between ports and municipalities, and in the fact that port authorities have been unable to manage the assets owned by municipalities.

Improvement of physical accesses: Objectives included in this component have been fully achieved. To a great extent, the project participated in the improvement of navigation safety and in better ecological protection of costal environment. The VTMS (which comprises VHF communication, information, pilotage and vessel traffic organization) of the Szczecin-Swinoujscie waterway was the first physical item implemented and operated under the project. Commercial traffic to and from the port of Szczecin clearly benefits from this early investment. The system increases shipping safety in the seaway by minimizing the risks of collision and grounding. Additionally, it provides protection against pollution.

All physical investments were completed successfully and have already proven their value in practical terms to road users, company operations, and local municipalities. There is one exception, though: the access road to Szczecin, whose completion date was delayed by one year due to lack of counterpart financing during construction stage. This unfortunate situation lead to an extension of the closing date by one year to allow for completion of works. The extension was considered and granted on the basis of an extensive review of work schedule and availability of counterpart financing until the end of the project. Implementation of works resulted in strengthening managerial, administrative and commercial practices of GDDKiA. Competitive bidding was successfully implemented and is now a well-accepted practice. Contractors are familiar with ICB and NCB, which are now used not only for the projects financed by the Bank, but for most works carried out in the port sector.

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The output of investment components was also reviewed and discussed during the seminar on port sector reform (stakeholder seminar) on July 3-4, 2003. Seminar findings are outlined in Annex 9.

4.2 Outputs by components:

Implementation record is as follows:

(i) Technical Assistance

This component was supposed to provide institutional advice with regard to regulating port activities and training about 100 people from MoI staff. After one and a half years of implementation, MoI and the Bank agreed that this component’s financing could be reduced without adversely affecting the outcomes (most of the changes in the business environment associated with the new port law were going in a good direction without further financial assistance from the project). Consequently, financing under this component was reduced from US$1.5 million to about US$330,000. As a result, the component mainly focused on providing support to (i) seminars (about 50 staff members took part in international technical seminars); (ii) Electronic Data Interface study, which paved the way for sector data management by the port community under the leadership of the MoI; (iii) small ports revitalization study, which helped to design the strategy of further institutional development in view of recent economical and political changes; and (iv) a short sea shipping study, focused on defining a strategy for the adaptation of Polish ports to new demands and duties linked to the short sea shipping promoted by the EU.

Stakeholder seminar participants discussed the pros and cons of the fact that 80% of Technical Assistance under the project was actually cancelled during implementation phase. Most of the participants noticed that more could have been achieved if this assistance had been utilized to the full during project implementation. Technical Assistance would have helped to (i) clarify the respective roles of MST and MoI; (ii) implement the provision of the new law, particularly in the field of separation between landlord and commercial activities; (iii) specify the type of support that the Budget would provide to Port Authorities; (iv) define the contribution of the Port Authorities to the Budget; (v) set up market management regulation for commercial port activities; and (vi) define the working relationship between the Maritime Offices and the Port Authorities more accurately (e.g., maintenance of port accesses, navigation aids management and information management system).

By the end of the project, MoI mentioned that the Port Law was to be amended to increase Government control and regulatory powers over Port Authorities. The Bank emphasized the fact that the law was definitely not the right target to address this issue, as the Government, through a majority ownership in the three Port Authorities, was already equipped with all means to control and regulate public sector policy and to get it implemented by the management of these three establishments. The Bank recommended that administrative decision be taken to distribute the roles between relevant Government agencies in monitoring the sector through their representation in the Boards of Port Authorities instead of amending the Law itself. This matter was discussed at the stakeholder seminar organized in July 2003. The recommendation emerging from the seminar was that there should be only one ministry responsible for the policy and programming, and that MoI was better equipped for this assignment.

(ii) Physical Component

Road accesses to the ports: The accesses to Gdansk northern port area, alongside with rehabilitation of road no. 3 from Szczecin to Swinoujscie, were completed on time. The Martwa Wisla Bridge (access to Gdansk northern port area) turned out to be -- at the time of it’s completion -- the largest cable stayed

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bridge in Poland. Environmental mitigation measures, implemented by GDDKiA on road no. 3 through the Wolin National Park, were considered one of the best practices by the Bank environmental cluster. Completion of Szczecin access was delayed by one year as a result of lack of counterpart financing, but then all investments were operational by the new Closing Date of June 2003. Infrastructure was successfully transferred to municipalities, which are now in charge of operations and maintenance. Sixteen civil works contracts were successfully procured under ICB, and this procurement method clearly resulted in lowering the costs of the works. Final costs remain within the estimate made at appraisal -- thanks to the economic situation at the time of bidding process and to the low risk that bidding documents imposed on contractors. Quality of works was very high. The revised rates of return for these investments are specified in Annex 3.

Access to the port from the sea and safety at sea: The VTMSs in Szczecin and Gdansk are operational. Prior to their launch, staff at the monitoring centers have been trained to operate these systems in a professional way. Systems improved safety for the maritime routes to and from the ports, and allowed more precise monitoring of vessels movements across the Eastern maritime border of Poland -- an EU accession requirement. The Search and Rescue Communications Center in Gdansk was also completed on time, with modern communications equipment and related office facilities fully operational. The Bank suggested that search and rescue functions and maritime traffic monitoring and surveillance functions -- now operated by Maritime Offices -- be eventually merged. During the stakeholder seminar, it was confirmed that Maritime Offices are going to consider this issue. In addition, they are planning to complement VTMS with a number of additional system applications (SAR, ILP, AIS etc.).

4.3 Net Present Value/Economic rate of return:

Economic re-evaluation has been completed for Gdansk northern port access and Szczecin and Swinoujscie port access. At appraisal, the ERRs for works were between 15% and 25% (average ERR for the project was estimated at the level of 18%), always above the opportunity cost of capital in Poland considered at 12%. At completion date, the ERRs of the above-mentioned components varied between 20% and 35%, resulting in an average ERR for the Project of 25%.

4.4 Financial rate of return:

No financial rates of return were calculated during project preparation since none of the borrowing institutions were revenue earning entities.

4.5 Institutional development impact:

The most visible institutional impact can be observed at the level of Port Authorities, which are now acting as port landlords. The project also affected the development of Maritime Offices and Ministerial Departments, as well as the behavior of local governments responsible for maintenance of large physical components. Institutional development is expected to continue after the closing date. Bank staff will monitor those developments during supervision of the follow-up project in Szczecin area, also financed by the Bank.

As far as the legislative aspect of the project is concerned, the preparation stage of the project has contributed significantly to maritime changes and assisted MoI and MST in port activities regulatory policy reform. As early as in 1993, the Bank and the Government launched fruitful dialogue, which focused on core elements of a new port law. Those discussions, which by far exceeded the actual scope of standard project preparation, made it possible to build a consensus concerning the new law. The law was being

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drafted in parallel to project appraisal, but in fact this draft could be considered as an output of the project. Project preparation has helped to change the mentalities of local governments and other partners involved in port sector development.

5. Major Factors Affecting Implementation and Outcome

5.1 Factors outside the control of government or implementing agency:

There were two factors beyond Government's control that had impact on the project:

(i) Administrative reform, adopted by Polish Parliament and introduced on January 1, 1999, delegated some of the responsibilities from the central government to the local governments. As an immediate result, several infrastructure components under the project became the responsibility of Gdansk and Szczecin municipalities. It took them some time to assume their new responsibilities and to understand the environment typical for implementation of the projects financed with World Bank assistance.

(ii) The foreign currency exchange rate factor influenced negatively the level of funds available under the project, as the variation of PLN/US$ and PLN/EUR exchange rates resulted in a loss of about US$8-10 million (about 6% of the total amount of the Project). Despite this negative impact, thanks to savings during contract procurement of works, it was possible to complete all the components in compliance with the plans made at the time of appraisal.

5.2 Factors generally subject to government control:

The Borrower complied with all covenants set under Sections 3 and 4 of the Loan Agreement. Project implementation progress and development objectives have always received at least satisfactory rating. However, allocation of central budget resources and transfer to local governments were constantly delayed. As already mentioned before, administrative reform of 1999 transferred some responsibilities to the level of local governments. This reform had to provide a transitory financing mechanisms (until the time when the investments started prior to the reform would be completed). Each year, on a exceptional basis, there would be special allocation of funds from the central Budget with relation to ongoing works financed within the city limits -- which was the case with all the investments under the project. Lengthy discussion between the central and local governments in 2001 and 2002 ultimately delayed final allocation by about six months. This situation created tension and confusion on the contractors’ side. At the end, thanks to proper contracting party, the problems were mitigated and no investment was stopped.

Environment and right-of-way acquisition were properly managed, with the exception of Dargobadz bypass (along road no. 3 Szczecin-Swinoujscie itinerary) where, due to the lengthy process of land acquisition, the component was delayed by two years. However, the bypass was completed before the Project closing date. Environmental clearances were properly managed, with the exception of Wolin road section clearance (the same itinerary as Dargobadz bypass). In this case, it took some time to obtain clearance because the section is located within the boundaries of Wolin National Park, and administrative procedure took much longer than anticipated at the time of appraisal.

5.3 Factors generally subject to implementing agency control:

Performance of the three main implementing agencies -- GDDKiA and Maritime Offices in Szczecin and Gdynia -- was found to be satisfactory. Employer representation was delegated to the staff from the regional offices under very high professional standards. It should be mentioned that the procurement of civil

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works for the access to Szczecin and Gdansk ports has been broken down into too many contracts (14 different bidding processes for a total of US$95 million). It was partly due to the delayed transfer of counterpart financing, and partly due to phasing imposed by construction methods. At the stakeholder seminar, road administration representatives admitted that fragmentation was too extensive and that such approach should be avoided in the future.

Preparation of investment components was costly and slow because of numerous clearances and permits required prior to the launch of works. For example, the preparation of the VTMS for Gdansk and Gdynia required about 280 different assessments, documents, technical opinions, permits etc.

The PMU in the MOI showed high professional standards in the way they managed various duties under the project -- they contributed substantially to successful implementation of the project. Replenishments of Special Accounts have been mentioned by the PMU as particularly cumbersome, since there were five different Special Accounts to be managed under the project. Expenditure programming for each account was quite difficult, and available funds on each account were not fungible.

5.4 Costs and financing:

There was no significant deviation as far as costs are concerned. Competitive bidding resulted in lower costs than engineers’ estimates. Availability of the counterpart financing for the central Government components (Wisla Smiala outlet protection, VTMSs, Wolin Road) was always satisfactory. As for the financing of other infrastructure components (access to Gdansk and Szczecin ports), the availability of local governments counterpart financing were very often delayed due to the lengthy process of transfer of funds from central to local government budgets. Cumulative disbursement curve indicates that the project was, in principle, implemented according to the original pace but stretched by about 12 months because of the difficulties mentioned above.

6. Sustainability

6.1 Rationale for sustainability rating:

It is very likely that the outcome of the project will be sustainable. The project was instrumental in successful transformation of the management of port activities. At present, landlord functions are clearly distinct from commercial activities carried out in the three main ports. Moreover, the project clearly contributed to the elimination of physical bottlenecks in port access infrastructure, and to the introduction of an integrated (IT based) navigational traffic management systems, which controls access from the sea. Since future prosperity of Polish ports is contingent upon the maximum use of existing handling capacity, components financed under the project contribute very well both to present and future needs of the ports.

Introduction of the new port law and the new system of port assets management provides a platform to enforce the Government’s transport sector policy, which aims at making better use of Polish ports. It is especially important in view of the fact that currently Polish ports utilize less than 50% of their maximum capacity. Circumstances change in the course of time, so the Government needs to react accordingly. The project has been an excellent opportunity to assist -- via a fruitful dialogue during the Project preparation phase and thereafter through Technical Assistance -- in the process of adjusting practices to the changing environment.

As a consequence of the changes introduced by law, municipal authorities gained more responsibility as

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regards making efficient use of port infrastructure. In the absence of direct incentives, this responsibility does not translate into more aggressive policy of the main municipalities involved (Gdansk, Gdynia, Szczecin, Swinoujscie), meant to provide better management of port assets. Given the fact that prosperity of municipalities is directly related to prosperity of their ports, this issue needs to be addressed in the nearest future (please refer to the conclusion of the stakeholder seminar, summarized in Annex 9).

6.2 Transition arrangement to regular operations:

Although it is likely that the assets developed under the project will be properly maintained, three issues should receive particular attention from the Borrower:

First of all, the debate on the necessity of further amendments to the port law still continues. The Government needs to resolve a number of issues regarding management of land assets by the port authorities in order to maximize the benefits to Polish ports and Polish economy.

Secondly, it is important that new access infrastructure is properly maintained by municipal authorities. Road assets constructed under the projects fall into a much wider range of municipal infrastructure assets, all of which need proper maintenance. Unfortunately, recent years have shown that municipalities lack the ability to secure adequate level of maintenance resources. The Polish Government is currently tackling the issue of public finance reform, which ultimately ought to establish a stable system of dividing public tax revenues proportionally and adequately to the needs and responsibilities of local governments.

Thirdly, integration of all safety/navigation maritime subsystem needs to be ultimately achieved in order to provide compatibility and exchangeability of data between a wide variety of users. It is understood that until full integration happens, systems like VTMS and SAR will have to operate in different physical locations, while providing data access to the others. But once the overall architecture is completed, all those various systems should be placed under a “single roof”.

7. Bank and Borrower Performance

Bank7.1 Lending:

The project was thoroughly appraised by experienced Bank staff in close cooperation with the Borrower, whose staff contributed extensively to priority identification and appraisal. It took about two years from the initial identification mission to Board approval. As this was the first World Bank port project in Poland, preparation included intensive work for both sector and project related matters. The objectives were clear, specific and adequate staged. Institutional and physical components supported project objectives and addressed the most urgent topics. All constructions were identified and agreed upon with the Borrower during preparation. Considering all factors, the Bank’s performance during the lending stage is rated as satisfactory.

7.2 Supervision:

Supervision of the projects was performed in a professional and comprehensive manner. Supervising efforts started with a formal project launch, which was necessary for a project targeting a new sector and multiple beneficiaries. Then, the Bank team efforts focused on the implementation of the physical component, with special attention given to procurement matters, quality, and timely completion of the works and counterpart financing issues. Each construction site was visited twice a year. Since the works were located around the

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three main port cities, project sites were grouped geographically, thus allowing solid supervision of the works by Bank staff. Assorted skills exhibited by the Bank team contributed to establishing an efficient and professional cooperation with the Borrower. The team was adequately reacting to problems arising during the implementation period on the side of the Borrower, the Bank, and third parties.

At the stakeholder seminar held in Warsaw in July 2003, representatives of the Borrower raised the issue of lengthy Bank procurement procedures affecting the progress of the project. While the complexity of some standard Bank procedures is not a problem any more, the lengthy process of providing “no-objections” to either draft bidding documents or evaluation reports is still perceived in a negative way. Notwithstanding this element, the Bank’s performance during the supervision stage is rated satisfactory.

7.3 Overall Bank performance:

The Bank's overall performance was satisfactory for the reasons outlined above.

Borrower7.4 Preparation:

Project preparation by the Government was conducted in an efficient manner. Selection of components reflected the reform agenda. The Government was equally committed to the policy reform, and experienced staff members were designated as the main partners of the Bank team during preparation. For the above reasons, Government performance during preparation is rated as satisfactory.

7.5 Government implementation performance:

Overall, Government implementation performance was satisfactory. Although decisions regarding project matters were always taken in an appropriate and timely manner, the resolution of the complex counterpart financing issue (transfer to local governments) took some time, and ultimately resulted in a one-year extension of the closing date. At the end, MOI managed to successfully follow a tight timetable to implement the remaining works between 2002 and 2003.

7.6 Implementing Agency:

Performance of the road administration was rated as satisfactory, although land acquisition and cooperation with municipal governments over counterpart financing issue delayed implementation of some components. Performance of Maritime Offices in Szczecin and Gdynia was highly satisfactory and can be considered a good practice among projects financed by the Bank. All factors considered, both the physical components and the Technical Assistance were completed before the closing date.

Two of the components -- the Wisla Smiala outlet protection and Wolin national road rehabilitation -- were subject to a very detailed design regarding environmental mitigation measures. Supervising teams demonstrated high professional skills during the implementation period. These two components are now considered by the Bank as best practices regarding implementation of environment mitigation measures. For more details, please refer to the Environmental Review of the project presented in Annex 10.

7.7 Overall Borrower performance:

Borrower performance has been satisfactory for the reasons outlined above.

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8. Lessons Learned

There are four lessons to be learned from this project:

Efforts deployed at appraisal to set up a policy dialogue with the Borrower yield high outcomes. It also limpacts the implementation of the Project in a very positive manner. The preparation phase allowed for the establishment of a new port law in Poland. The dialogue with Bank port experts during preparation is seen as a best practice by the Borrower. Stakeholders meetings were held both at the identification phase and by the completion of the Project. All main participants in the Polish ports economy were able to express their views and the institutional setup improved as a result. Nonetheless -- and despite the involvement of the various ministries, the municipalities and the port authorities -- there was no real leadership in the implementation of the reform and it was not clear who was in charge of the institutional changes at the implementation phase. In the future one ministry only should be identified as the champion of a reform.

Two best practices regarding environment were implemented under the project and sample mitigation lmeasures are available for consideration by other Bank teams or other Borrowers: (i) Wolin National Park road rehabilitation included state of the art mitigation elements that could inspire decision makers elsewhere (e.g. the road passes through the Biebrza National Park in Eastern Poland); and (ii) the construction of Wisla Smiala outlet protection can also be regarded as a best practice for future breakwater constructions in a fragile biotope (both materials used and work design and implementation focused on minimizing the impact on a bird-nesting sanctuary in the vicinity of the construction site).

Polish roads and bridges are often over-designed, and MOI should oversee the designers more. Savings lcould be obtained if the standards for roads and bridges were optimized and economic evaluations were introduced as key elementw of the process. A cluster of senior specialists is much needed at the MOI to monitor the preparation of construction design standards and norms applicable nation-wide. MOI should also pay more attention to (i) design review training; (ii) issuing guidelines concerning clearance of designs; and (iii) adopting proper design standards as described above.

When a Technical Assistance (TA) component is part of the initial design of a project, it should never lbe dropped unless robust justification is provided. In the case of the present project, technical assistance was foreseen to accompany the port reform. Some studies, training and seminars were conducted, but to a much lesser extent than anticipated. Actually, the Government was somewhat reluctant to use foreign currency for procuring technical expertise, conveyed the message that the reform was going well, and cancelled some 80 percent of the original funds allocation for this component. It turns out that the port community itself now recognize that this TA would have been essential to implement the provisions of the law (see Annex 9 Stakeholders Workshop). In particular, TA would have helped clarify the respective roles of the ministries and separating landlord and commercial activities more clearly.

9. Partner Comments

(a) Borrower/implementing agency:

The borrower provided comments to draft ICR (full text under Annex 11).

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(b) Cofinanciers:

There were no cofinanciers.

(c) Other partners (NGOs/private sector):

There were no other partners.

10. Additional Information

Not applicable.

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Annex 1. Key Performance Indicators/Log Frame Matrix

Outcome / Impact Indicators:

Indicator/Matrix

Projected in last PSR1

Actual/Latest Estimate

(ii) Modal split statistics to and from the Ports by road. [Szczecin]

9.2% 5.5% (a)

(iii) Average dwelling time in Port for time-sensitive cargoes. [Szczecin]

35.9 hours 33 hours

(a) The investment also benefits largely Szczecin town traffic (not necessarily related to the port activities) and this is not accounted for in this figure . Output Indicators:

Indicator/Matrix

Projected in last PSR1

Actual/Latest Estimate

Institution building: Port Authorities become the landlords of the Ports and the operating companies become commercial enterprises

(i) 3 out of 3 port authorities created and operated as the landlords of the ports, but they only manage 35% of the total surface.

(ii) Still 40% of the operating companies are not commercially oriented.

(i) status quo. Prospect of improvement if an amendment to the Port law is passed to provide more flexibility for the port authorities to be involved in land management of larger portions of the port.

(ii) the deadline for selling the state-owned operators has been extended from 2003 to 2005. Progress is monitored under the ongoing port project financed by the Bank.

Physical output (i): New access to Gdansk north port operational

Physical output (ii): New access to Szczecin port operational

Physical output (iii): Vessel traffic monitoring system Szczecin operational

Physical output (iv): improvement of the RN3 road connection between Szczecin and Swinoujscie

Physical output (v): rehabilitation of the entrance to the Wisla Smiala river

Opening to traffic November 2002.

Opening to traffic June 2002.

Operational by end of 2001.

Wolin park and Dargobadz bypass operational end of 2002.

Works completion : 2002.

Opening to traffic November 2002.

Opening to traffic June 2003.

Operational July 2002.

Opening to traffic of the Wolin park section November 2002. Opening to traffic of the Dargobadz bypass June 2003.

Works completed end of 2001.

1 End of project

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Annex 2. Project Costs and Financing

Project Cost by Component (in US$ million equivalent)AppraisalEstimate

Actual/Latest Estimate

Percentage of Appraisal

Component US$ million US$ millionPolicy and Institutions 1.50 0.48 32Road Access 125.30 120.80 96Maritime Access 5.00 14.95 290Coastal Protection 13.80 9.83 71

Total Baseline Cost 145.60 146.06Total Project Costs 145.60 146.06

Total Financing Required 145.60 146.06

Project Costs by Procurement Arrangements (Appraisal Estimate) (US$ million equivalent)

Expenditure Category ICBProcurement

NCB Method

1

Other2 N.B.F. Total Cost

1. Works 120.70 0.00 0.00 18.40 139.10(60.50) (0.00) (0.00) (0.00) (60.50)

2. Goods 5.00 0.00 0.00 0.00 5.00(5.00) (0.00) (0.00) (0.00) (5.00)

3. Services 0.00 0.00 1.50 0.00 1.50(0.00) (0.00) (1.50) (0.00) (1.50)

4. Miscellaneous 0.00 0.00 0.00 0.00 0.00(0.00) (0.00) (0.00) (0.00) (0.00)

5. Miscellaneous 0.00(0.00)

0.00(0.00)

0.00(0.00)

0.00(0.00)

0.00(0.00)

6. Miscellaneous 0.00(0.00)

0.00(0.00)

0.00(0.00)

0.00(0.00)

0.00(0.00)

Total 125.70 0.00 1.50 18.40 145.60(65.50) (0.00) (1.50) (0.00) (67.00)

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Project Costs by Procurement Arrangements (Actual/Latest Estimate) (US$ million equivalent)

Expenditure Category ICBProcurement

NCB Method

1

Other2 N.B.F. Total Cost

1. Works 114.40 0.00 0.00 15.70 130.10(54.32) (0.00) (0.00) (0.00) (54.32)

2. Goods 14.88 0.00 0.00 0.00 14.88(12.20) (0.00) (0.00) (0.00) (12.20)

3. Services 0.00 0.00 0.48 0.60 1.08(0.00) (0.00) (0.48) (0.00) (0.48)

4. Miscellaneous 0.00 0.00 0.00 0.00 0.00(0.00) (0.00) (0.00) (0.00) (0.00)

5. Miscellaneous 0.00(0.00)

0.00(0.00)

0.00(0.00)

0.00(0.00)

0.00(0.00)

6. Miscellaneous 0.00(0.00)

0.00(0.00)

0.00(0.00)

0.00(0.00)

0.00(0.00)

Total 129.28 0.00 0.48 16.30 146.06(66.52) (0.00) (0.48) (0.00) (67.00)

1/ Figures in parenthesis are the amounts to be financed by the Bank Loan. All costs include contingencies.2/ Includes civil works and goods to be procured through national shopping, consulting services, services of contracted staff

of the project management office, training, technical assistance services, and incremental operating costs related to (i) managing the project, and (ii) re-lending project funds to local government units.

Project Financing by Component (in US$ million equivalent)

Component Appraisal Estimate Actual/Latest EstimatePercentage of Appraisal

Bank Govt. CoF. Bank Govt. CoF. Bank Govt. CoF.Policy and Institutions 1.50 0.00 100.00 0.48 0.00 100.00 32.0 0.0 100.0Road Access 53.60 71.70 42.00 50.80 67.70 43.00 94.8 94.4 102.4Maritime Access 5.00 0.00 100.00 10.82 4.13 72.00 216.4 0.0 72.0Coastal Protection 6.90 6.90 50.00 4.90 4.90 50.00 71.0 71.0 100.0

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Annex 3. Economic Costs and Benefits

Economic Evaluations UpdateSources: (i) Rotterdam Maritime Group port sector study Poland May 1995; (ii) Survey of traffic volume around the cable-stayed bridge across the Martwa Wis³a by Technical University of Gdansk Department Of Highway Engineering November 2002; and (iii) recent data provided by GDDKiA

This reevaluation is limited to readily available data. Detailled calculation sheets are in the files.

ERR at Appraisal

ERR by Completion Date

Sensitivity Analysis

Martwa Wisla 15.3% 20% From 19% to 21% (traffic 10% decrease/increase)

Dargobadz 13.3% 28% From 25% to 30% (traffic 10% decrease/increase)

Volin Road 48% 29%Regalica Bridge 34% 34% From 31 to 36% (traffic 10%

decrease/increase)Parnica 9% No calculation made N.A.Other investments financed under the Project

Not available No calculation made N.A.

Average ERR by completion date 25%.

Martwa Wisla Bridge Economic Reevaluation

This update does not take into consideration the analysis of the long-term development perspectives of the North-East port area (e.g., the possibility of completing the tri-cities bypass that would generate a significant traffic increase on the new bridge). It is mainly based on updates on actual traffic and actual cost for the investment. Cost savings per vehicle are based on the Rotterdam Maritime Group study issued on May 1995. Savings are mainly related to time saving due to distance and congestion costs that are now reduced thanks to the completion of the investment. The Martwa Wisla bridge was completed in 2002, and therefore the new economic benefits are calculated from 2003 and until 2027 i.e., for a 25 years period. Benefits from 2002 and onwards are applied. The average vehicle occupancy is set to 1.30 for passenger cars and 1.50 for vans (see Gdansk Technical University Study mentioned below). Cost savings from cargo were known to be a low portion of the benefits from passenger time saving and thus they were disregarded. VOC savings are also disregarded for the reasons stated in the Rotterdam Group analysis dated May 1995 (too short difference in cost of traffic with/without the investment). The higher IRR is due to higher benefits from time savings than the ones described in the Rotterdam Maritime Group study.

The new traffic calculation is based on a November 2002 traffic survey. Traffic is adjusted from 1995 to 2002 (that does not affect IRR as the new itinerary is not passable until 2002, and from 2002 to 2010 the Rotterdam Group traffic growth rates were still used. The percentage of traffic on the Martwa Wisla bridge is set to vary because of the congestion that will increase with time to the alternative route. According to calculation, the congestion on the alternative route would be reached by 2008, and the percentage of traffic to the Martwa Wisla bridge has been set accordingly (25% of total traffic from 2003 to 2005; 35% from 2006 to 2008, 50% from 2008 to 2012 and 60% from 2013 to 2020 at which date the bridge would reach it capacity and would need additional investment to allow two more lanes). Sensitivity analysis has been carried out on a traffic increase/decrease by ten percent.

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RN 3: Dargobadz Bypass and Wolin National Park Rehabilitation

The Rotterdam Group Study dated April 1994 processed an economic evaluation of the all RN 3. The IRR for the appraised the economic Dargobadz bypass and Wolin national park rehabilitation were 13.3% and 48.5% respectively (the latest being a rehabilitation of an existing road). The study assumed that the cost for the construction of the bypass was US$1.9 million, in line with the actual cost for the construction. The IRR for this investment, depending on various hypothesis for traffic forecast (+10% / -10%) varies from 25 to 30 percent, taking into consideration time saving for the users of the bypass (buses were not accounted for as it was assumed they would still enter the city) and VOC (based on a 12% average reduction of the costs thanks to the new investment). It seems that the impact of time savings were underestimated for this component at the time of appraisal, thus the higher actual IRR.

As for the Volin park road section, the same remark applies. Actual cost of the rehabilitation (PLN 11.9 million) is to be compared to the 9 million at the time the study was conducted. The IRR actual calculation is based on time saving (50 seconds along the 6.1 km) and a 15% VOC saving. The new IRR for this investment, depending on various hypothesis for traffic forecast (+10% / -10%) varies from 26 to 31 percent. The lowest IRR is mainly due to the highest cost of investment and to the investments for mitigation measure associated to the national park that are not taken into consideration in the economical reevaluation at this stage and that do not participate in travel time reduction or VOC reduction.

Access to Szczecin Port Areas -- Regalica Bridge

The proposed investment was to replace the existing Clowy bridge itinerary (2.6km of dual carriage way) with a new itinerary across the Regalica river (2.5km of four lanes highway). Travel times at peak hours before the investment was 22 minutes, whereas is it now 2.6 minutes on the new itinerary. Distance saving is negligible, and travel time savings and reduction of VOC because of the more fluid traffic are the two main factors that were taken into consideration during the IRR update. VOC savings are assumed to be made every day and therefore the annum factor was set to 360, whereas the time savings depend on the peaks of traffic and thus the annum factor was set to 250 in the IRR update. As the cost of the investment is about the same as the one foreseen at appraisal, and because traffic forecast made in 1994 matches the current situation, new IRR is in line with the appraisal (from 31% to 36% based on a 10% variation of the traffic assumptions until 2027).

Access to Szczecin Port Areas -- Parnica Bridge

The calculation of the IRR for this investment would be vain as the traffic that is expected to use the investment is almost inexistent at the complementary investment in the port have been delayed.

Other Investments Financed under the Project

There were no other economical analyses per se conducted under the project by qualitative. The appraisal of the benefits of the Wisla Smiala renovation concluded that the direct benefits were difficult because of a lack of clarity on the repartition of the cost of the various components, and it concluded that the project was beneficial, but only mentioning qualitative parameters. As for the Vessel Traffic Management System, the benefits were mainly associated with the reduction of potential accident in the seaway, but the associated value of this reduction of the risk was not mentioned. As a result, the present analysis does not address the update of these various studies.

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Annex 4. Bank Inputs

(a) Missions:Stage of Project Cycle Performance Rating No. of Persons and Specialty

(e.g. 2 Economists, 1 FMS, etc.)Month/Year Count Specialty

ImplementationProgress

DevelopmentObjective

Identification/Preparation02/19/1995 2 PORT ENGINEER (1);

SR.TRANS ECONOMIST (1)

Appraisal/Negotiation10/11/1995 4 PORT ENGINEER (1);

SR.TRANSPORT ECONOMIST (1); ENVIRONMENTAL SP (1); FINANCIAL EXPERT (1)

04/22/1996

Supervision

03/19/1998 2 SR. PORT SPECIALIST (1); TRANSPORT ENGINEER[ (1)

HS HS

10/30/1998 2 HIGHWAY ENGINEER (1); OPERATION OFFICER (1)

S HS

09/20/2000 2 HIGHWAY SPECIALIST (1); TRANSPORT SPECIALIST (1)

S S

04/27/2001 2 TRANSPORT ENGINEER (1); TRANSPORT OPERATION SP (1)

S S

04/27/2001 2 TRANSPORT SPECIALIST (1); OPERATION OFFICER (1)

S S

06/14/2002 2 TRANSPORT SPECIALIST (1); OPERATION OFFICER (1)

S S

12/12/2002 4 PTL (1); CON (1); FMS (1); TTL (1)

S S

06/05/2003 2 CONSULTANT (1); TTL (1) S S

ICRFebruary 2004 3 TTL (1); SR. OPER

OFFICER (1); CON (1)S S

(b) Staff:

Stage of Project Cycle Actual/Latest EstimateNo. Staff weeks US$ ('000)

Identification/PreparationAppraisal/Negotiation 48 252,516Supervision 50 220,624ICR 5 20,000Total 103 493,141

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Annex 5. Ratings for Achievement of Objectives/Outputs of Components(H=High, SU=Substantial, M=Modest, N=Negligible, NA=Not Applicable)

RatingMacro policies H SU M N NASector Policies H SU M N NAPhysical H SU M N NAFinancial H SU M N NAInstitutional Development H SU M N NAEnvironmental H SU M N NA

SocialPoverty Reduction H SU M N NAGender H SU M N NAOther (Please specify) H SU M N NA

Private sector development H SU M N NAPublic sector management H SU M N NAOther (Please specify) H SU M N NA

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Annex 6. Ratings of Bank and Borrower Performance

(HS=Highly Satisfactory, S=Satisfactory, U=Unsatisfactory, HU=Highly Unsatisfactory)

6.1 Bank performance Rating

Lending HS S U HUSupervision HS S U HUOverall HS S U HU

6.2 Borrower performance Rating

Preparation HS S U HUGovernment implementation performance HS S U HUImplementation agency performance HS S U HUOverall HS S U HU

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Annex 7. List of Supporting Documents

Annex 9: Stakeholder Seminar, Warsaw July 10, 11, 2003, FindingslAnnex 10: Environmental Reviewl

Annex 11: Borrower Contributionl

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Annex 8. Beneficiary Survey Results

No beneficiary Survery was conducted. A stakeholder workshop was held in Warsaw early July 2003 and the summary of this workshop is attached (Annex 9).

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Annex 9. Stakeholder Workshop Results

Seminar on the Port Sector ReformWarsaw, July 3-4, 2003Summary of Discussions

The seminar was held at the World Bank Warsaw office from July 3 at 9 AM to July 4 at 2 PM. The goal of this stakeholder workshop was to discuss recent trends in Polish port sector, alongside with the contributions of Polish Parliament, the Ministry of Infrastructure, the World Bank and other stakeholders dealing with the three main ports toward higher competitiveness and better institutional and regulatory framework. There were four sessions during the two-day seminar and over 40 participants (see the full list attached), representing a large variety of institutions involved in the port sector in Poland.

1. Progress of the Port Sector Reform in Poland

This subject was being discussed by a Panel consisting of the main institutions in charge (Members of Parliament, Ministry of Infrastructure, municipalities, port authorities, port operators). The discussion followed a presentation of the World Bank’s Port Reform toolkit, which provided an excellent overview of current practices and good background for further debate. The following issues were raised:

a. Insufficient perception of ports as transport hubs: Managers of various modes of transport (for inland connections) do not coordinate their efforts, and institutions in charge of various sectors do not cooperate with one another when planning maintenance or investment. Maintenance of the railway tracks linking port areas to the PKP network is very poor. Complex land management regulations also hamper inter-modal or multi-modal integration. Lastly, and most importantly, transport infrastructure management within ports is not business-oriented. b. More competition for operations is a key element of port competitiveness: Naturally, there is a risk of social disruption for those companies which are to be restructured or phased out. On the other hand, however, if the ports are not competitive enough in the short term -- if they continue to support some of the existing oligopolies -- the market itself will impose restructuring in a very dramatic way. The ports should face current challenges of rapid restructuring of operators on a commercial basis so as to benefit from higher productivity and from better positioning on the market. As for the competition between Polish ports themselves, on the one hand it appears to be necessary in order to avoid stepping back, but on the other it should remain at a level acceptable to the ports. Also, it must be understood that the overriding role of the Government is to make sure that the positioning of Polish port sector in the European maritime network is not disrupted.

c. Respective roles of various actors should be clarified: This is particularly important with respect to the responsibilities of the Ministry of Treasury and the Ministry of Infrastructure. At present, cooperation between the two Ministries is not close enough. Only one of the two Ministries (preferably MoI) should be in charge of organizing the sector and act as the main partner for the other players. By the same token, cooperation between Maritime Offices and Port Authorities should evolve towards closer ties of cooperation and joint programming. Last but not least, although the municipalities realize how important the ports are for the economy of their cities, they do not participate enough in the management of the ports.

d. Programming new infrastructure and maintenance activities is vital to the operators: Quite often, the operators do not know whether there is a plan to build or maintain a facility, and they perceive this

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situation as a major impediment to their business. Some monopolies (such as PKP, for example) show limited interest in port activities. They neither maintain their assets nor do they not inform their partners about their medium-term plans. As a result, operators do not have enough insight to conduct their own investments. This is particularly important under the present situation, when most operators do not have enough resources to maintain their assets or extend their capital. They need to program and perform their activities very carefully, in some cases including maintenance of the infrastructure that does not come under their responsibility.

e. Re-defining port and access infrastructure: Clear functional division and definition has to be in place in order to properly allocate responsibilities to port authorities (responsible for port assets management) and to maritime administration (responsible for maintenance of access infrastructure and navigation safety), so that overall utility for Polish economy is maximized.

f. EU port policies: When preparing its strategy, Poland has to take into account EU access pricing policies alongside with the principle of pricing for use of the infrastructure. That way, port assets will be used as efficiently as possible and will provide a good instrument in the hands of ports authorities to attract operators and cargo owners.

2. World Bank Financed Port Access and Management Project: The Outputs and Lessons Learned

Physical outcomes of Port Access and Management Project (including technical assistance component) were presented, followed by the comments from representatives of implementation agencies on the lessons learned (based on the questionnaire covering project outputs). The following issues have been raised:

a. Bank assistance during the preparation of the Port Access and Management Project was of crucial importance to the Port Sector Reform: In 1992, the Bank and the Government launched a fruitful cooperation concerning the necessary elements of the new Port Law. Those discussions by far exceeded the actual scope of standard project preparation and made it possible to reach consensus regarding the new law. In fact, even though the law was drafted in parallel to project appraisal, this draft could be considered an output of the project. Project preparation has also helped to change mentalities of local governments and all partners involved in the sector.

b. Contribution of the Project: Implementation of physical components was assessed as an extremely positive contribution to the improvement of port competitiveness. Existence of proper infrastructure to access the ports creates higher demand from the entities interested in starting new operations, but it also allows port authorities to negotiate better rates for land lease. Joint implementation of project components contributed in a very positive way to stakeholder integration and closer cooperation between the entities involved in commercial activities and trade exchange in the ports. So-called corporate web portals are now being considered to allow quicker and more efficient exchange of travel and commercial information.

c. Use of Technical Assistance available under Poland Port Access and Management Project: A large portion (about 80%) of Technical Assistance initially provided under Port Access and Management Project was cancelled. In 1999, the Borrower and the Bank agreed that the new port law was being implemented in a satisfactory manner, so no additional external assistance was needed. Nevertheless, a majority of seminar participants noticed that more could have been achieved had this assistance been called upon during project implementation. Technical Assistance might have been used to (i) clarify the respective roles of the Treasury and the Ministry of Infrastructure (MoI); (ii) help the three main ports implement the provisions of the new law, particularly with respect to the separation between landlord and commercial activities; (iii)

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set up the type of support that the Budget would provide to Port Authorities; (iv) define the contribution of the Port Authorities to the Budget; (v) design market management regulations for commercial port activities; and (vi) help with a better definition of the working relationship between the Maritime Offices and the Port Authorities (e.g., maintenance of port accesses, navigation aids management and information management system). The participants agreed that the new law is a good law, but a lot still remains to be done to implement the law following a holistic approach.

3. Legal Framework of Port Reform in Poland

Findings of the report of the Supreme Chamber of Control (NIK), regarding the implementation of the port law, were presented to the audience. The following issues were raised during the discussion:

a. Port Authorities do not manage enough of the land within the boundaries of their port and land property is too fragmented: On average, Port Authorities manage only about 35% of the land within the boundaries of the port. They have no levy on other owners’ land management decisions. Such players as shipyards or PKP have their own policies regarding land management, which are not compatible with the overall strategy for the ports.

b. The role of municipalities is too limited and Port Authorities are left with a limited choice in terms of organization planning in a very demanding regulatory framework (land acquisition, construction permit etc.): The law should promote more cooperation among various players within the context of a “master plan” for the ports, e.g. tackling the perpetual usufruct concept against development pre-emptive rights.

c. The Supreme Chamber of Control (NIK) report, dated April 2003, concluded that large portion of the land within port limits is not owned by the State and that this is in contradiction with the law, which states that the port terrain should be equally accessible to all users. It seems impossible for management utilities to fulfill their mandate, i.e. to forecast, program and plan port activities, maintain construction and reconstruction, and modernize port infrastructure. NIK report also pointed out that the Ministry of State Treasury made extensive use of the law, which in the course of time led to fragmentation of the use of land around port facilities.

d. The Ministry of Treasury did not manage to make the ports sell the shares in the operating company by the deadline of 2003 (now extended to 2005): NIK reports that municipalities did not acquire the ownership of the shares in the percentage that was envisaged at the time of the law, the reason being the lengthy process of inventory and evaluation of land assets value.

e. There is no need to amend current law to increase Government’s control and regulatory powers over port authorities, as the Government, through a majority ownership in the three Port Authorities, already has all means to control and regulate public sector policy and get it implemented by the management of these three establishments. The Bank recommended that administrative decisions should be taken to clearly distribute the roles between relevant Government agencies to monitor the sector through their representation in the Boards of Port Authorities rather than to amend the Law itself.

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4. Polish Ports in Integrated Europe

An expert panel discussed the challenges that lie ahead with regard to EU integration. Introduction to the discussion focused on the presentation of trans-European transport corridors, linking Polish ports with Northern and Southern Europe. Conclusions resulting from the work of EU high level TEN working group (Van Miert Group) were presented, especially with reference to identified priority projects on North-South axes and the concept of Sea Motorways. Discussion focused on the following:

a. Competitiveness of Polish ports: The challenge that has yet to be faced by Polish ports is their potential ability to become competitive hubs to land -- sea transport chains. In order to achieve such competitiveness, further investments to access the port (especially from the land) have to be financed. Another important matter at stake is creation of incentives for exporters to use domestic maritime operators.

b. Public-Private Partnership: There is high demand to establish better cooperation with the private sector. The participants mentioned the need to strengthen public entities so that they could become a strong partner, able to bring more private partners to port-related activities.

c. Definition of public support: In view of current EU policy, it is important to define and structure public support to develop infrastructure-related projects (ports, accesses, logistic centers). These programs are necessary to stimulate transport and trade along corridors, ports included. Programming should be encouraged.

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Additional Annex 10. Environmental Review

REVIEW OF WORLD BANK SAFEGUARD POLICIES

Project: POLAND – Port Access and Management ProjectProject ID: P036061Loan No.: 4080-PL

Review period: May 8-11, 2001

Information gathered in accordance with questionnaire, as attached.

Background Information

The Project aims at strengthening the capacity of the ports of Gdansk, Gdynia, and Szczecin-Swinoujscie to provide efficient services and to connect more effectively with domestic inland transport networks. In order to achieve this goal the project includes the following investment components: (a) construction of the Martwa Wisla access bridge to Gdansk North-East Port; (b) protection of the Wisla Smiala outlet in Gdansk; (c) construction of the new Regalica and Parnica bridges allowing access to Szczecin central port area; (d) improvement of road connection between Swinoujscie and Szczecin through Wolin; and (e) first modernization of the Szczecin-Swinoujscie fairway through implementation of a vessel traffic management system.

Of the activities mentioned component (a), (b), and (d) include activities which lead to concerns in relation to Bank’s safe guard policies. The project was approved in August 1996, and was at that time rated as a B-project, even if component (d) was separately rated as an A activity.

The environmental/social concerns are related to the following project components:

(a) construction of the Martwa Wisla access bridge to Gdansk North-East Port. The building of the bridge required resettlement of about 20 families to give space for the bridge foundation on land.

(b) protection of the Wisla Smiala outlet in Gdansk. Dredging in order to increase the depth to 4 m, and disposal of the dredging material.

(d) improvement of road connection between Swinoujscie and Szczecin through Wolin National Park. Large part of the road goes through the National Park, which will cut off the passage for animals between different parts of the park.

Question 1: What applicable safeguard policies of the World Bank and any other donors were in effect at the time of project approval?

The applicable IBRD safeguard policies which are relevant for the project are the World Bank’s OD 4.01, related to Environmental Issues, and OD 4.30 related to Resettlement. No other donor is involved in project financing.

Remark. It is amazing that the resettlement issue is not mentioned anywhere in the project documentation before appraisal. Reason might be that the resettlement was not regarded as involuntary. However, it has

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been brought up as an issue in the Progress report for July 31, 1997. The solution provided was obtaining newly built homes at the water front of Martwa Wisla, and it is completely clear that the new homes must be regarded as a large up-grade of living standards for the concerned families. It was also confirmed by the Technical director Mr. Andrzej Cieslak that none of the resettled families raised any complaints. I would not expect that a better solution could have been achieved even if the issue would have been reviewed during project preparation.

Task Manager’s Comment. This is actually something yet to be clarified, since during project appraisal the question was of course raised, and the answer was that the only building which would have to be removed would be the Yacht Club facility on the North side of the Martwa Wisla. Not any dwelling quarters whatsoever were to be touched, and the site visits did not show anything different. At first sight, only some changes in the access design to the bridge could have brought about the need to relocate some housing quarters. Whatever complementary action had then to be taken in the meantime by the Polish side, which led to those unforeseen resettlements, must have been taken so quickly that the Borrower did not inform the Bank team. But as you have noticed, everything was properly and satisfactorily handled by the Project Implementation Team, which demonstrates full awareness and adequate capacity on the Borrower's side to address these issues when they arise. Anyway, we are planning to look into this matter during upcoming supervision mission to document what has actually happened and to straighten out the records.

The project is rated as a category B in accordance with OD 4.01, and as such the following is required: (i) an environmental analysis (EA); (ii) consultation with different stakeholders; and (iii) disclosure of documents.Note that according to OD 4.01, there is no requirement for a conditionality in the legal documents.

For an A-rated project there is in addition a requirement to submit an Environmental Management Plan (EMP), and it is recommended that there is also a linkage to the legal documents.

Separate EAs have been prepared for all components. They have been reviewed by the Bank and found fully satisfactory.

Question 2: What were Borrower environment policy/regulatory requirements for the project?

According to Polish law there is a requirement for all projects that before start, a presentation and public discussion about all involved activities must be carried out. In June 1994, the Ministry of Transport and Maritime Economy arranged a seminar in Gdansk including 67 of representatives from different ministries, agencies, and NGOs. The seminar had a large impact on the final design of the project. Besides this fundamental activity there were separate public consultations for each component.

It should be noted that at time for project preparation there was no legal requirement for public participation. This requirement was incorporated in the Environmental Law by January 1, 2000. As a result, the of the lacking legal requirements quite limited efforts were made in order to disclose the project documentation.

Polish Law requires the preparation of EAs, and as mentioned above they were regarded to be of high quality by EMTEN staff.

It should also be mentioned that the review of the EAs resulted in several measures to be incorporated in the components in order to safe guard the environment.

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Question 3: Did the project preparation satisfy Bank/Donor and Borrower requirements? Was there any input from QAG (QAE)?

No input from QAG/QAE.

The efforts from the involved Polish consultants preparing the EAs, and the Team’s presentation of the SAR obviously satisfied all involved review organizations. It is clear that the recommendations from all agencies involved in reviewing the project documentation were incorporated.

Question 4: What environmental/social requirements (conditions) were incorporated into the project documentation (loan/project agreements, PAD/SAR, side letters, etc.)? Were institutional capacity and institutional arrangements for implementation evaluated?

There are no covenants in the legal documents.

Environmental/Social Requirements.

(a) Construction of the Martwa Wisla access bridge to Gdansk North-East Port As already mentioned under Question 1, there was no special requirements, but the issue related to the resettlement was resolved in a fully acceptable way.

(b) Protection of the Wisla Smiala outlet in Gdansk

All the dredging material has been used for beach nourishment, and the result is quite remarkable. The dredging material has been used to widen the beaches on both sides of the Wisla Smiala outlet, and on the northern side of the outlet also widen the beach. This latter measure has resulted in saving a bird sanctuary which was seriously threatened by erosion of the beach. In addition special plants (grass and bushes) have been planted to strengthen the dunes. In order to protect future beach erosion, also the breakwaters on both sides of the outlet have been strengthened.

(d) Improvement of road connection between Swinoujscie and Szczecin through Wolin National Park

The review of this component lead to a number of additional requirements, such as: tunnels under the by-pass road to enable both large and small animals to migrate between the parts of the Wolin National Park cut off by the access road, plantation of special plants to attract the different animals to the tunnels, temporary relocation of special flowers and plants during road construction, special collection system for run-off water and pretreatment of that water in regard to oil, grease, and suspended solids before it is diverted to special areas for infiltration to avoid pollution along the whole length of the by-pass road.

Institutional Capacity: The overall responsibility for project implementation rests with the PMU within the Ministry of Transport and Maritime Economy. The PMU is supported by local offices under General Directorate for Public Roads and the Maritime Office Gdynia. The PMU as well as the local PMUs are well organized and their documentation about the project implementation is impressing. The PMU was established already under a previous project, the First Transport Project, and its experience form that project has helped largely in order to carry out the current task and obligations.

The opportunity of using already experienced staff must be regarded as good judgment of team.

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Question 5: Is there a detailed monitoring program to assure proper compliance with environmental and social requirements (conditions)/performance indicators?

Separate monitoring programs for the different components are in place related to the environmental issues. Concerning social issues there is nothing to monitor.

It should however, be mentioned that the director for Wolin National Park would like to have an additional monitoring program in place, in order to be able to record the migration of animals between the now separated parts of the park.

Question 6: What is the level of compliance with environmental/social requirements (conditions) as agreed?

The review shows clearly that the implementation of the project fully complies with the environmental requirements identified during project preparation. In addition, it should be mentioned that the team and the PMU, including the local PMUs, have actually added more environmental mitigation measures than anticipated. This actually demonstrates that even if not everything was included during preparation, an efficient team and PMU can go beyond the existing legislation, and as in this case mentioned to bring the project up to a level in regard to environmental issues which is highly satisfactory.

In view of the environmental facets, which are quite dominating in the project, this particular project should be included in ECA’s reference list over good performing environmental projects

PEOPLE MET

Jaroslaw Waszkiewicz, Director PIU, Division Chief, Ministry of Transport and Maritime Economy

Marek Rolla, Director of Office for Road Networks, General Directorate for Public RoadsFeliks Gilewski, Director, Szczecin District, General Directorate for Public Roads

Henryk Smentek, Head of Department for Land Acquisition, Szczecin District for Public Roads

Roman Siemczyk, Consultant

Andrzej Cieslak, Technical Director, Maritime Office GdyniaWojciech Drozd, Chief Inspector, Maritime Office Gdynia

Ireneusz Lewicki, Director, Wolin National Park

Jerzy Wilczak, Resident Engineer for Wolin By-Pass Road Construction

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QUESTIONNAIRE FOR SAFEGUARD/EA REVIEW

1. What applicable safeguard policies of the World Bank and any other donors were in effect at the time of project approval?What were the requirements under each of the policies?

- Documentation/Documentation review- Consultation- Disclosure- Conditionality

2. What were Borrower environment policy/regulatory requirements for the project?- Documentation/Documentation review- Consultation- Disclosure

3. Did the project preparation satisfy Bank/Donor and Borrower requirements? Was there any input from QAG (QAE)?

- Fully satisfy requirements?Provide details: hard, easy, lessons learned, cost (report preparation, sources of finance, etc.)

- Partially satisfy requirements?Which parts complied with, why? Provide details: hard, easy, lessons learned, cost (report preparation, sources of finance, etc.)

- Which parts not complied with, why? Provide details: hard, easy, lessons learned, cost (report preparation, sources of finance, etc.)

4. What environmental/social requirements (conditions) were incorporated into the project documentation (loan/project agreements, PAD/SAR, side letters, etc.)?Were institutional capacity and institutional arrangements for implementation evaluated?

- If lacking, were appropriate components/arrangements- Incorporated into the project?

5. Is there a detailed monitoring program to assure proper compliance with environmental and social requirements (conditions)/performance indicators?

6. What is the level of compliance with environmental/social requirements (conditions) as agreed?- As reported (PSR, BTOR, Aide Memoire, etc.)- As witnessed (site visit)

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Additional Annex 11. Borrower Contribution

PORT ACCESS AND MANAGEMENT PROJECTLOAN NO. 4080-0-1 POLDATED 9 SEPTEMBER 1996

BORROWER’S CONTRIBUTION TO ICR

Foreword

The purpose of this document is to present the Borrower’s rationale behind the Port Access and Management Project and the understanding of facts, lessons learned as well as evaluation of implementation performance. Therefore, the background part of this document is limited to brief inventory of objectives, projects components and implementation arrangements (more appropriately described in the Bank’s ICR). Instead, we decided to focus our attention on the project’s more general context, lessons learned, factors affecting implementation and coordination of activities as well as the outcomes.

This document is produced on request of the World Bank and is subject to approval of the Management of the Ministry of Infrastructure.

1. Context

As early as in the beginning of the 1990s the discussion was started on sectoral developments strategies for Polish transport. The discussion came from the review of transport priorities regularly taken by the Bank and the Ministry. Consequently, the need to develop port sector study was identified.

Financing for the study was arranged by the Bank in cooperation with the Dutch authorities. The study was carried out in two stages by the Rotterdam Maritime Group consulting team in 1993-5. The first stage included review of port development priorities and bottlenecks -- the results were presented during the first Port Seminar, which was held in Gdañsk on 22-24 June 1994. The seminar was a form of social consultations on the priorities and needs. It led to a general consensus on top priority actions, which needed to take place in the near future.

The priorities generally fell into two categories: port access improvements and internal development schemes. Access to Polish seaports was obstructed or even blocked from all sides. The top priority was improvement of road access to the Gdynia Seaport. This priority was addressed under the Roads I Project -- construction of Kwiatkowski Road (stage 2) was included as additional component under the project (savings on procurement of civil works were not enough to cover related costs therefore two originally planned contracts had to be cancelled). The road, which was opened for traffic on 13 November 1998 provided the port with high capacity connection with the municipal system of streets. In addition, the Roads II Project (another vehicle for financing) included another component improving access to the port of Œwinoujœcie, i.e. construction of a Wolin bypass.

Other port external needs included:- improvement of road access to the Gdañsk North Port- improvement of road access to Szczecin port areas- modernization of access road to Œwinoujœcie port- anti-flood protection of Gdañsk

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- improvement of traffic management on Szczecin-Œwinoujœcie seaway- improvement of railway access to the Szczecin-Œwinoujœcie seaport

All of the above priorities with the exception of one made it into the project. The exception was improvement of railway access to the Szczecin-Œwinoujœcie seaport, which was dropped from the governmental loan due to institutional problem (responsible for implementation would be the Polish State Railways, entity legally independent from the state).

More or less at the same time new legislation for Polish seaports was taking shape. The law on seaports and harbours was enacted on 20 December 1996 and provided for separation of port operations from management. Under this legislation, new “landlord” type seaport authorities were established in Gdañsk, Gdynia and Szczecin-Œwinoujœcie, which were supposed to divest shares in operating companies. Responsibilities of the seaport authorities included among other things:

- management of port areas and infrastructure- forecasting, programming and planning of port development- construction, extension and modernization of port infrastructure- purchase of land for port development purposes

Port internal priorities (such as construction of port reception facilities, development of port areas and terminals or improvement of existing facilities) were supposed to be addressed in a set of three separate loans (one for each seaport authority), the preparation of which was delayed due to late adoption of the new port law. Of the three seaport authorities only one decided to take the loan from the Bank -- the Szczecin-Œwinoujœcie Seaport Authority.

One of the longer term priorities identified by the Dutch consultants and not included into the scope of the Port Access and Management Project was physical modernization of the Szczecin- Œwinoujœcie seaway -- an inland waterway connection between the ports of Szczecin and Œwinoujœcie. This priority was addressed in the second operation of the Bank -- Szczecin- Œwinoujœcie Seaway and Port Modernisation Project. The second project includes two loans -- the governmental loan signed on 15 December 2000 (modernization of the seaway -- reconstruction of breakwaters and strengthening of banks) and the loan taken by the Szczecin and Œwinoujœcie Seaports Authority (development of port areas at Kwiatkowski Peninsula and Grabowski Island).

Other major longer-term priorities of the port sector have been proposed for financing during the post accession period by the European Union under the European Regional Development Fund. Currently, a strategic document for ERDF is being finalized. Under priority 1 -- intermodally balanced development of Polish transport system -- the document among other things calls for improvement of port access infrastructure. Under this heading three types of actions would qualify: actions aimed at (i) improvement of access to the seaports from the sea; (ii) improvement of port internal infrastructure; and (iii) improvement of access to the seaports from the hinterland. Activities proposed thereunder include: second stage of Szczecin-Œwinoujœcie seaway modernization, monitoring and tracking system for Search and Rescue vessels (savings under the Port Access and Management Project financed modernization of the SAR center in Gdynia), construction of Kwiatkowski Road in Gdynia (stage III -- connection with the bypass).

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The above description of the project wider context serves the purpose of better understanding the decisions on original components of the projects, additional components that were financed from the savings and the pipeline of port related projects proposed for the EU support under ERDF. And the seed money for all the above actions were two grants of the Dutch Government arranged by the Bank to finance the Port Sector Study almost ten years ago -- the highest value for money you could imagine.

This, together with early consensus on the priorities and most cost-effective measures, resulted in a long-term vision of the Government, which have been pursued since the beginning of the 1990s with great consequence.

2. Project Goals and Objectives

The considerations made at the time of the first Port Seminar led to the definition of the following project goals:

Improvement of accesses to three main seaports

This objective is quite straightforward and does not need any more explanation. Major objectives behind included: diverting of heavy road traffic away from the city centers, improving navigability and safety of traffic on the seaway and anti-flood protection.

Increasing capacity to manage the three main seaports

The Project originally included a significant component of technical assistance (USD1.2 million). Its objective was to support the government and the port authorities in implementation of the new port legislation. However, in 1997, the value of the technical assistance component was reduced to only USD0.2 million and the scope was limited to training and small studies. This had significant consequences on implementation of the second goal.

3. Project Components

Original components of the projects were (the list of contracts with values is attached to this document):Road access to the Gdañsk North Port -- construction of the cable stayed bridge over the Martwa Wis³a river in Gdañsk with accesses;Wis³a Œmia³a outlet protection -- reconstruction of breakwaters at the outlet of the Wis³a Œmia³a river plus dredging works to protect the areas of Gdañsk against flooding and provide for navigability of the third riverway access to the port of Gdañsk;Road access to the Szczecin central Port Area -- construction of the Regalica bridge replacing old and heavily deteriorated C³owy bridge (the only access to the Szczecin municipality from the hinterland) plus construction of a Parnica bridge providing access to the port areas;Road access to the Œwinoujœcie port -- modernization of a section of Road No. 3 (connecting Szczecin with Œwinoujœcie) running across the Wolin National Park, plus construction of a Dargob¹dz bypass;VTMS system for the Szczecin-Œwinoujœcie seaway -- supply and installation of a multi-radar system for vessel traffic management along the seaway connecting the two ports of Szczecin and Œwinoujœcie; and

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Technical Assistance and Training for the sector -- a comprehensive technical assistance support for implementation of the provisions of the new port legislation and training program in order to increase management capacity in the ministry and the seaports.

Due to savings first on reduction of the technical assistance components and then on procurement of large civil works, the following new components were proposed:VTS system for the Gulf of Gdañsk -- supply and installation of a vessel traffic management system covering the area of the Gulf of Gdañsk with approaches to the ports of Gdañsk and Gdynia;Modernisation of the SAR Center -- supply and installation of equipment for new center of the Search and Rescue Service in Gdynia; andRehabilitation of another two sections of Road No. 3 between Szczecin and Œwinoujœcie -- together with original components and the bypass of Wolin this improved traffic in almost all bottleneck sections along the itinerary.

As already said, the composition of the project was agreed and widely consulted at the time of the first port seminar. The only priority, which was compromised was the railway access to the port of Szczecin- Œwinoujœcie. Due to the a number of difficulties and slow progress in arranging for financing of this component, it was dropped from the original list of priorities and is still not resolved.

During the implementation of the project, the original list of project components was changed twice with funds reallocated accordingly. First VTS for the Gulf of Gdañsk was added to the list and financed from the savings on reduced TA component. Secondly, savings on ICB of roads components made it possible to extend the list even further. The table below presents original and final allocation of loan funds to the components.

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Component Original Final CW GO CS TOTAL CW GO CS TOTAL

Part A. Martwa Wis³a 15,7 - - 15,7 16,4 - - 16,4Bridge Part C. Regalica 33,4 - - 33,4 24 - - 24and Parnica Bridges 4 Part D. Wolin Road 4,5 - - 4,5 4,3 - - 4,3 Subtotal GDDKiA 53,6 - - 53,6 44,7 0,0 0,0 44,7Part B. Wis³a 6,9 - - 6,9 3,6 - - 3,6Œmia³a Outlet Protection Part E. VTMS - 5,0 - 5,0 - 0,3 10,7 11Szczecin-Œwinoujœcie VTS Gdynia SAR center Part F. TA&T - - 1,5 1,5 - 0,17 0,19 0,36 Subtotal MI 6,9 5,0 1,5 13,4 3,6 0,47 10,89 14,96TOTAL 60,5 5,0 1,5 67,0 48,3 0,47 10,89 59,66

For conversion purposes the following exchange rate was used 1 USD = 4,0234 PLN (of 31 October 2003).

4. Project Implementation

First Port Seminar -- 22-24 June1994Date of Signature -- 9 September 1996Date of Effectiveness -- 6 December 1996First Repayment of Principal -- 15 November 2001Original Closing Date -- 30 June 2002Final Closing Date -- 30 June 2003Second Port Seminar -- 3-4 July 2003

Three factors had significant impact on the implementation of the project:

Firstly, on the request of the Ministry of Finance the loan was taken in two equivalent in value tranches: USD tranche and EUR tranche (formerly DEM tranche). This had a number of implications in terms of allocation of funds -- each component was financed from both tranches; number of special accounts -- there were three special accounts (one USD account for roads components, one EUR account for roads components, and one USD account for maritime components replenished from both tranches of the loan; value of money -- over the implementation period the value of the loan dropped from USD67

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million equivalent to USD60 million equivalent (see the table above); exchange rate risk needed to be taken into account for almost all contracts (majority of contract was signed in PLN); debt service arrangements, etc.

Secondly, due to a long list of components and complexity of competencies the project required extensive efforts in terms of implementation arrangements and coordination. Special purpose Project Management Unit was established in the Ministry of Infrastructure headed by the Project Coordinator. The PMU reported progress under the Project to the Bank and coordinated activities of different beneficiaries: the General Directorate of National Roads and Motorways (formerly the General Directorate of Public Roads) originally competent for implementation of all roads components, the Maritime Office in Gdynia responsible for Wis³a Œmia³a Outlet Protection and VTS for the Gulf of Gdañsk, the Maritime Office in Szczecin responsible for VTMS for the Szczecin-Œwinoujœcie seaway, the Maritime Search and Rescue Service responsible for modernization of SAR center in Gdynia, departments of the Ministry of Infrastructure responsible for implementation of TA and Training component.

Thirdly, the reform of the administrative structure of the country -- on 1 January 1999 the number of provinces (voivodeships) in Poland was reduced from 49 to 16 and the government introduced a new classification of roads significantly reducing the number of national roads (within the competence of GDDKiA). To adapt to the new administrative structure of Poland GDDKiA needed to restructure its regional branches. Three major project components originally within the competence of GDDKiA needed to be transferred to local authorities: construction of Martwa Wis³a bridge in Gdañsk, construction of Regalica bridge in Szczecin and construction of Parnica bridge in Szczecin. This immediately caused problems in arranging for counterpart financing. A special state budget reserve was established for continuation of investment projects transferred to local authorities, however the procedure to programme and allocate the funds was time-consuming and complicated, which often resulted in delayed payments and slowed down progress of works. It is estimated that total delay in project implementation attributable to the reform is 12-18 months.

5. Achievement of Goals and Objectives

Improvement of accesses to three main seaports

The implementation of this Project as well as the construction of Kwiatkowski Road (stage II) under Roads I Project significantly improved access to the seaports by road.

The Regalica bridge in Szczecin improved access to the municipality in general, and together with the Parnica bridge opened up new development areas of the port. Heavy traffic was diverted from the city center and the road access is no longer considered a bottleneck. Additionally, the design of the Parnica bridge provides for extension when traffic builds up.

The construction of the Martwa Wis³a bridge in Gdañsk opened up access to the North Port and provided a second bridge connection of the Stogi Island with the rest of the municipality and the road to Warsaw. Also in this case heavy traffic was diverted from the city center. The construction however took care only for the most pressing need of the port. Logical consequence should be further modernization of the Sucharskiego Road to link the bridge with the bypass and future A1 motorway. According to the development plans of the port the Sucharskiego Road is composed of the following elements: (i) proposed tunnel under Martwa Wis³a; (ii) modernization of the existing Sucharskiego Street section between the proposed tunnel and the cable stayed bridge; and (iii) extension of the

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Sucharskiego Street to connect the bridge with the proposed southern bypass of Gdañsk (souther link). Additionally, in the long term the plans provide for a road connection with the Tricity bypass (northern link to complete the ring).

Modernisation of various sections of National Road No. 3 linking Szczecin with Œwinoujœcie eliminated almost all bottlenecks for traffic along the route and improved protection of the environment in the Wolin National Park (environmental mitigation measures included in the design are considered by the Bank a best practice).

In Gdynia, construction of the second stage Kwiatkowski Road unclogged traffic around the port, however heavy goods vehicle still need to transit the city center in order to get to the bypass. Construction of III stage Kwiatkowski Road (extension to the bypass), expected to be financed by ERDF, would solve this problem.

Installation of VTMS for the Szczecin-Œwinoujœcie seaway and VTS for the Gulf of Gdañsk increased maritime traffic safety, improved navigability conditions and traffic management at approach ways to the ports of Szczecin, Œwinoujœcie, Gdañsk and Gdynia.

Reconstruction of breakwaters at the Wis³a Œmia³a Outlet increased anti-flood protection of Gdañsk, opened up the third river access to the Port of Gdañsk, opened up the river for recreational and fishing vessels and improved protection of the nearby birds sanctuary.

Increasing capacity to manage the three main seaports

The original technical assistance component was supposed to strengthen institutional capacity of the seaports and the ministry in connection with implementation of the new port legislation. The ministry’s decision to reduce the scope of TA to training and small studies was very unfortunate and highly criticized by the maritime industry. It left the port authorities at own devices without proper guidance for the ministry. It is important to note that although the reasons for the decision were quite complicated, the division of responsibilities between the Ministry of Infrastructure (competent for maritime transport sector policy) and the Ministry of State Treasury (competent for the commercialized seaport authorities) played vital role.

It is also difficult to say what could have happened had the TA been implemented in full scope. Potentially, this might have ameliorated problems even currently faced by the port authorities with ownership of port areas (port authorities are unable to implement strategic development plans due to the fact that on average they control less that 50% of port areas), delays in selling shares in port operating companies, a number of unresolved issues such as lack of framework for state aid in the maritime sector (creating huge problems in shipyards, shipping companies and to some extend also in port operating companies) and lack of institutional building programmes to prevent experts from leaving the sector and improve their skills and knowledge through training and improved image of the trade, etc.

However indirectly, implementation of maritime components (VTMS, VTS and SAR) -- some of the financed from the savings on reduced TA -- paved the way for better cooperation of maritime administrations.

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6. Project Outcomes

Beside achievement of the goals and objectives the project brought some expected and unexpected outcomes, which include:

on a positive side:- the project enabled implementation of a well thought sectoral strategy for development of the port

sector;- the project opened up development areas within the ports, which now can be included in

development strategies of the port authorities;- the project enabled implementation of operating strategies, opening of new shipping connections

and development of new and existing port terminals;- the project equipped Polish maritime administrations with modern management tools and platforms

opening wide range of cooperation opportunities;- the project enabled management and monitoring of sea traffic at approach ways and provided

software platforms for offering scheduling services to shippers and vessels;- the project reduced the risk of flooding Gdañsk municipal areas, enabled development of

recreational and fishing traffic as well as improved protection of the “Ptasi Raj” birds sanctuary at the Wis³a Œmia³a outlet;

- savings on the tendering of roads components made it possible to implement new project components and extend modernization of National Road No. 3;

- implementation of SAR component is connection with the EU grant upgraded management of SAR operations at sea;

- selection of additional maritime components financed from the savings was very fortunate; security standards improved, which became of particular importance after the events of November 11;

- environmental mitigation measures for roads used under the project are considered best practice;- protection of the maritime environment increased due to installation of vessel traffic control

systems (VTS and VTMS);- the project was followed up by the Szczecin-Œwinoujœcie Seaway and Port Modernisation Project

and activities proposed for financing by the post-accession funds of the European Union; and- the project provided a platform for sharing views, opinions and the dialog of all involved entities --

this was particularly reflected during the first and the second port seminars.

and on a negative side:- the project did not manage to solve the problem of railway access to ports and reclamation of

railway areas -- both issues remain to be solved;- the project was supposed to provide the seaport authorities with tools to manage port areas in the

reality of new port legislation -- due to the decision on the reduction of TA components this was not delivered;

- the division of responsibilities between the Ministry of Infrastructure, Ministry of Finance and the Ministry of State Treasury continued throughout the project, the project failed to involve the Ministry of Finance and the Ministry of State Treasury into the dialog on port problems and solutions -- the need to establish an inter-disciplinary policy coordinating unit is clearly visible; and

- the project should have helped to resolve the problem of the division of responsibilities between the seaport authorities and the maritime administration for management and coordination of traffic within ports and on seaways, to a larger extent.

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7. Lessons Learned

The lessons learned from implementation of the project can be easily grouped into project related and general lessons confirmed by the project. They are interconnected and often a project related lesson leads to a deeper problem or complexity. On top, there are some project specific lessons coming out of the implementation.

The project was a component of well thought development strategy, which was started with the Port Sector Study back in 1993. The strategy had two legs: port external leg (everything, for which port authorities were not responsible -- practically all comprised within the Project) including legislation, institutional strengthening, management systems and physical components (accesses); and port internal leg. The puzzle of port internal strategy was solved quite well with only two pieces missing or inadequate -- comprehensive technical assistance and cooperation between various authorities. All in all, we rank implementation of the project and achievement of the objectives as satisfactory, although the obvious lesson we draw from it is that the cooperation needs to be strengthened -- maybe it is a right time to establish a new coordinative body.

The other lesson is that the decision to reduce the TA component was overhasty to say the least. This decision by the way points to a deeper conviction among decision makers that money spent for TA programmes bring little value to the economy and that money borrowed from IFIs should be used rather for physical investments. We consider this wrong, which is particularly seen through the context of the Port Sector Study done by the Dutch consultants hired by the World Bank. This is the perfect example of how relatively small seed money contributes to development of the important sector of the national economy.

The conviction of the decision makers may come from the fact that entities implementing TA programmes (especially in the public sector) lack experience and knowledge in handling complicated TA assignments and enforcing high value on consultants. Consultants usually outwit and outnumber their counterpart staff, which is unable to make the best use of available assistance and results of studies.

The other leg of the strategy worked much worse. Please remember that the Port Sector Study identified also port internal priorities. Of the three seaports only the Szczecin-Œwinoujœcie Seaports Authority decided to follow-up and take a loan from the Bank to develop new port areas. The authorities of the Gdynia port decided to finance its development strategy internally, while the Gdañsk port authority decided not to take any loan from the Bank.

Implementation of maritime components went very well without any major disturbance. The infrastructure as well as organizational frameworks of the VTS system received high notes from community auditors, including representatives of British MCA. The system meets the requirements of the EU Directive 2002/59/EC and will provide a backbone for creation of a regional traffic monitoring system (to be financed by ERDF under the Sectoral Operational Programme for Transport).

Three major factors influenced implementation of the project: (i) complex structure of the loan; (ii) implementation arrangements; and (iii) reform of administrative structure of Poland. They are described in more detail in the section on Project Implementation. There are however other factors, which need to be mentioned.

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Lengthy preparations: The first component to be completed was reconstruction of breakwaters at the Wis³a Œmia³a outlet. The component was realised very early into the Project implementation because the preparation stage was completed even before the effectiveness of the Loan. This was not the case of roads components -- the table below presents the delay in preparations of projects.

Project Component Invitation to Tender

Regalica Bridge

Parnica Bridge

Wolin Road

Dargob¹dŸ Bypass

Martwa Wis³a Bridge

Third quarter of 1998 – ca. 19 months after effectiveness.

February 29, 2000 – 38 months after effectiveness

June 16, 1999 – 30 months after effectiveness

January 31, 2002 – 61 months after effectiveness

January 25, 1999 – 25 months after effectiveness

The reasons for this situation are complex but typical for road administration. One of them is of course changing and complicated legislative framework to receive all necessary permits for construction works and to exhaust the appellation procedure. In some cases this was brought to extreme with appellations going on for years (e.g. Dargob¹dz bypass). In the case of VTS for the Gulf of Gdañsk changing legislation (inter alia on the environment) required the implementing authority to produce 280 various expert’s opinions, reports, technical clearances and permits.

Another reason may be money for preparation of projects (its is a valuable cost item often forgotten during budgeting procedures). But some of the delays are attributable to institutional inefficiencies, unrealistic plans, lack of coordination and insufficient management. Similar lesson came out of implementation of the Bank’s Roads I Project and from other projects financed by other IFIs. In order to address the issues and in connection with the proposed Roads III Project of the Bank, institutional capacity to prioritise expenditures of the road administration and prepare projects will be strengthened.

Implementation of roads projects highlighted the wider problems of road construction and road construction and designing industry nature in general. Firstly, the design of road structures completed under the project was a result of a compromise between the road administration and local authorities. For municipal components implemented in Gdañsk and Szczecin GDDKiA was acting in the capacity of a project manager often under pressure of local designers and port authorities. Theoretically, GDDKiA could enforce on the designers and authorities more cost-effective design solution, however in practice there was no time for such lengthy discussions, which would delay project implementation.

In terms of procurement, the project drew from experience gained during implementation of Roads I and II projects. However, over the implementation period performance of the Bank in terms of procurement approvals deteriorated. With this exception, we rank performance of the Bank’s staff as highly satisfactory.

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Secondly, in terms of planning and supervision of works the road administration pursued two apparently contradictory objectives. In order to protect the local market of road construction companies (many of which originated from the road administration, when they were separated from GDDP in early days of institutional reforms in Poland) components were often split. Splitting of components into contracts was logical albeit resulted in large number of difficult to coordinate and relatively small contracts. The implementation period required by the road administration was often unnecessarily long. This resulted in relatively slow progress of works during first 6-12 months of implementation.

In conclusion, we are very glad that the Project enjoyed high support of the maritime industry throughout the implementation. It stem from early consensus of the priorities, which was confirmed during reallocations and the second port seminar. The project benefited from continuation of staff in the Ministry and implementing units -- institutional history, without which inter alia writing of this ICR would not be possible.

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8. Project Statistics

Allocation of the loan proceedsUSD Tranche4080-0 POL

Category Original Loan Allocation

Loan Allocation I

Current Loan Allocation

Disbursed Amount

1. (a) Works:· Construction of Martwa Wis³a Bridge· Road Access to Szczecin Port· Improvement of Wolin Road

24,100,000 USD 24,100,000 USD 23,540,783.70 USD

27,419,126.24 USD

1. (b) Works:· Wis³a Œmia³a Outlet Protection

3,100,000 USD 2,050,000 USD 2,123,708.36 USD 2,123,708.36 USD

2. Goods: · Vessel Traffic Management System· VTS for the Gulf of Gdañsk· Search and Rescue Center

2,250,000 USD 4,430,000 USD 7,180,000.00 3,282,639.07 USD

3. Consultant Services and Training:· Design of Martwa Wis³a Bridge· MT&ME Training Program

650,000 USD 550,000 USD 655,507.94 USD 655,507.94 USD

4. Unallocated 3,400,000 USD 2,370,000 USD 0 USD -5. Special Account A (max. USD 2,250,000)

- 0.00 USD

6. Special Account B (max. USD 750,000)

- 0.00 USD

TOTALS 33,500,000 USD 33,500,000 USD

33,500,000 USD 33,480,981.61 USD

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DEM Tranche4080-1 POL

Category Original Loan

Allocation

Loan Allocation I

Current Loan Allocation

Disbursed Amount

1. (a) Works:· Construction of Martwa Wis³a Bridge· Road Access to Szczecin Port· Improvement of Wolin Road

35,559,000 DEM

35,559,000 DEM 32,711,130.71 DEM16,724,935.55 EUR

16,541,527.58 EUR

1. (b) Works:· Wis³a Œmia³a Outlet Protection

4,578,000 DEM

3,029,080 DEM 3,211,989.29 DEM1,642,264.05 EUR

1,642,264.05 EUR

2. Goods:· Vessel Traffic Management System· VTS for the Gulf of Gdañsk· Search and Rescue Center

3,320,000 DEM

6,549,200 DEM 12,764,200.00 DEM6,526,231.83 EUR

7,047,177.71 EUR

3. Consultant Services and Training:· Design of Martwa Wis³a Bridge· MT&ME Training Program

959,000 DEM 812,680 DEM 812,680.00 DEM415,516.69 EUR

77,978.78 EUR

4. Unallocated 5,084,000 DEM

3,550,040 DEM 0 EUR -

5. Special Account D - 0.006. Special Account C (max. USD 750,000)

- 0.00

TOTAL 49,500,000 DEM

49,500,000 DEM

49,500,000 DEM25,308,948.12 EUR

25,308,948.12 EUR

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List of Contracts

Lp No

PROJECT COMPONENT CONTRACT No VALUE OF IMPLEMENTED WORKS / PLN*

Maritime components1 Vassel Traffic System of the Gulf of Gdañsk IRM01-001/10/98-0

224 626 446,05

2 Search and Rescue Center N.A. 1 871 865,883 Technical Assistance - EDI Study N.A. 400 000,004 Wis³a Œmia³a Outlet Protection N.A. 29 315 315,365 Vassel Traffic Management System N.A. 18 079 689,926 Technical Assistance - EDI Port Study TM-6/1/98 39 121,007 Technical Assistance - Small Port Study TM-4/4/98 58 410,008 Technical Assistance - Short Sea Shipping Study BUN-1/99 30 000,009 Training Courses and other expenses N.A. 914 258,44

Maritime components SUBTOTAL 75 335 106,65GDDP components

10 Regalica Bridge - Flyovers WD-1 and WD-2 41.3 19 185 104,4611 Regalica Bridge - Northern Bridge M-3 41.4 31 813 515,9812 Regalica Bridge - Flyovers WD-2 and WD-4 41.5 20 263 804,1613 Regalica Bridge - Southern access roads 41.6 12 499 036,5314 Regalica Bridge - Northern access roads -

Leszczynowa flyover41.7 17 024 470,33

15 Parnica Bridge - Brigde Construction 42.1 21 261 536,7416 Parnica Bridge - Access Roads 42.2 26 479 343,6317 Wolin Road - Dargob¹dz bypass 43.2 12 185 829,8818 Wolin Road rehabilitation 45 8 821 042,6319 Regalica Bridge Southern Bridge M - 1 41.1 35 022 983,2820 Regalica Bridge - Flyovers E-1 and E-2 41.3 9 455 274,6621 Wolin Road 43.1 13 720 247,7322 Martwa Wis³a Bridge - Access Roads 44.1 16 660 246,8423 Martwa Wis³a Bridge - Bridge Construction 44.2 81 912 022,0124 Martwa Wis³a Bridge - Access Roads 44.3 32 119 051,6225 Technical Assistance - Martwa Wis³a Bridge Design bpbk 1 785 695,00

GDDKiA SUBTOTAL 360 209 205,48(VAT is not included) TOTAL 435 544 312,13

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