Document of

The World Bank N M g

FOR OFFICIAL USE ONLY

Report No. 3666-BD

STAFF APPRAISAL REPORT

BANGLADESH

CHITTAGONG PORT PROJECT

April 16, 1982

South Asia Projects DepartmentTransportation Division

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

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Currency Equivalent

The Bangladesh Taka (Tk) is fixed in relation to a basket ofreference currencies, with the Pound Sterling serving as interventioncurrency. On December 30, 1981, the exchange rate was set at Tk 37.9568buying and Tk 38.0568 selling per Pound Sterling and the US Dollar, theTaka/Dollar crossrate is subject to change. In recent months, this ratehas fluctuated between Tk 18 and Tk 20 per US dollar. Throughout thisreport the rates shown below have been used:

/w US$ 1 = Tk l8Tk 1 = US$ 0.0555

u Tk 1 million = US$ 55,556

Weights and Heasures

1 foot = 0.305 meters1 mile = 1.609 kilometers

Abbreviations

ADB Asian Development BankBADC Bangladesh Agricultural and Development CorporationBIWTA Bangladesh Inland Water Transport AuthorityBIWTC Bangladesh Inland Water Transport CorporationBR Bangladesh RailwaysCCJ Cement Clinker JettyCPA Chittagong Port AuthorityERR Economic Rate of ReturnGCB General Cargo BerthGDP Gross Domestic ProductGOB Government of BangladeshGSJ Grain Silo JettyICB International Competitive BiddingIFAD International Fund for Agricultural DevelopmentLCB Local Competitive BiddingMPB Multipurpose BerthMTC Ministry of Transport and CommunicationsMTFPP Medium Term Foodgrain Production PlanOED Operations Evaluation DepartmentPCA Port of Chalna AuthorityPCR Project Completion ReportRHD Roads and Highways DepartmentTEU Twenty Foot Equivalent UnitsTSP Triple Super PhosphateTPY Tons Per YearUSAID United States Agency for International Development

FOR OFFICIAL USE ONLY

BANGLADESH

STAFF APPRAISAL REPORT

CHITTAGONG PORT PROJECT

Table of Contents

Page No.

I. THE TRANSPORT SECTOR .......................................... . 1A. Introduction ..B. Major Determinants of International Trade . . 1C. The Transport System.. . 2D. Transport Administration and Planning ................ 5E. Past IDA Assistance to the Transport Sector. 6

II. CHITTAGONG PORT ............ . 7A. General.... 7B. Organization and Administration ............. . 8C. Existing Facilities ........................................ 10D. Operations .............................................. . 12E. Development Strategy ........................................ 16

III. THE PROJECT ..... 18A. Project Objectives and Composition ....... .................. 18B. Project Description ........................................ 19C. Technical Evaluation ....................................... 21D. Cost Estimates ............................................. 21E. Financing Plan .......................................... 22F. Execution of the Project ................................... 23G. Procurement .............................................. 24H. Disbursements .............................................. 24I. Monitoring .............................................. 25J. Port Efficiency Indicators ..... 25K. Environmental Impact ....................................... 26L. Uncertainties in the Project . ............................... 26

IV. ECONOMIC EVALUATION ............................................. 26A. Traffic Forecasts .......................................... 26B. Port Capacity Considerations ............................... 28C. Economic Justification ..................................... 29D. Sensitivity Analysis ....................................... 31

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

V. FINANCE AND EARNINGS ........................................... 32A. Introduction ............................................... 326. Improveraents in Accounting System ........... .. ............. 32C. Budgets and Audits .................... ..................... 33D. Tariffs ......................... ......................... . 34E. Past Performance ........................................... 35F. Future Prospects ...... ............... .................... . 37G. Financial Resources ................. .. ..................... 39H. Financial Aspects of Container Facilities ........ .......... 40

VI. AGREEMENTS REACHED AND RECOMMENDATIONS .... ..................... 41

Annexes

Annex I - Port Efficiency Indicators ................................ 45Annex 2 - Assumptions Made in Preparing Financial Forecasts ......... 48Annex 3 - Selected Documents and Data Available in the Project File . 51

Tables

Table 1 - Cost Estimates ........................................... 52

Table 2 - Implementation Schedule .................................. 54Table 3 - Estimated Schedule of Disbursements ...................... 55Table 4 - Traffic Through Chittagong Port .......................... 56Table 5 - Economic Costs and Benefits .............................. 57Table 6 - CPA Revenue and Expenditure Accounts FY1977-81 .... ....... 58Table 7 - CPA Balance Sheets, 1977-81 .............................. 59Table 8 - Key Cost Items as Percentages of Total Working Expenses .. 60Table 9 - CPA Income and Expenditure Forecasts FY1982-88 .... ....... 61Table 10 - CPA Balance Sheet Projections FY1982-88 .................. 62Table 11- CPA Investmemt Program FY1982-87 . ........................ 63Table 12 - CPA Sources and Application of Funds Forecasts FY1982-88 . 64Table 13 - Effect of Alternative Investments on Effective Port

Capacity . ................................................ 65

Charts and Maps

Chart 1 - CPA's Organization .. 66Chart 2 - Port Capacity Supply and Demand .67Map IBRD - 16051R - Port FacilitiesMap IBRD - 16052R - Multipurpose Berth Lay-out

Map IBRD - 12279R1 - Transportation Network

This report is based on information provided by the Governmentof Bangladesh and the Chittagong Port Authority and on the findings ofan appraisal mission in July 1981 consisting of Messrs. R.N. Vinekar(Port Engineer), M. Pulgar-Vidal (Economist), M. Alikhan and S. O'Humay(Financial Analysts).

I. THE TRANSPORT SECTOR

A. Introduction

1.01 Bangladesh is a 55,000-square mile country nested between Indiaand Burma, and comprising the fertile alluvial plains of the Ganges-Jamuna(Brahmaputra)-Padma-Meghna rivers as they tlow towards the Bay of Bengal.The deltaic nature of Bangladesh's geography results in complex developmentproblems. about one third of the country's surface is normally floodedannually during three to six months; there are few areas that are not liableto serious tlooding every two or three years, and the flooding potential hasgrown in recent times as a result ot increasing river siltation. Thesefeatures make access to the various regions of the country difficult sincetransport infrastructure is generally expensive, river channels are fre-quently shifting and roads have to be built to high standards and recon-structed periodically.

1.02 At the time of independence in 1971, the Government of Bangladesh(GOB) inherited a country devastated by war and climatic calamities, much ofthe physical infrastructure had been destroyed, managerial and financialresources had flecd away, and the economy was in a state of disarray. Duringits first ten years of existence, however, the country witnessed a degree ofeconomic improvement, particularly in the late 1970's when GNP grew at about6%. per annum.

1.03 With a population of approximately 94 million, and growing at about3% per annum, Bangladesh is one of the most densely populated areas in theworld; about 1,700 persons per square mile of total area or alternativelyabout 2,580 persons per square mile of cultivable land. The populationpressure is also reflected in the annual per capita income which stood atUS$120 in 1980, among the lowest in the world. Despite recent improvements,life expectancy is still short, child mortality remains high, and humanfertility has only begun to be checked by population planning measures. Themajority of the population is illiterate, ill-fed and under-employed. In1979, per capita toodgrain production and average nutrition levels were stillbelow the levels attained in 1970, and it is estimated that per capitafoodgrain consumption will not increase in the near future much over itspresent level of 15 ounces per day. The country remains critically dependenton foreign aid, which finances about 75% of public investment and representsroughly one-tenth of GNP.

B. Major Determinants of International Trade

1.04 Agriculture dominates the Bangladesh economy, accounting for about55% of GDP, 75% of all employment and 75% of all exports. The agriculturalproductivity is, however, among the lowest in the world. Rice, which

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accounts for about 80% of the cropped area, has an average yield of about 0.5ton per acre, barely half that of Asia as a whole. Until recently, agricul-tural production has grown at a rate lower than that of population, and largefoodgrain imports (mainly wheat) have been needed to make up for domesticproduction shortfalls. In FY80, for instance, despite a record harvest ot13.3 million tons, an all-time high 2.7 million tons of foodgrain wereimported of which over 2 million tons were handled at Chittagong. A promis-ing development in the foodgrain sector in recent years has been the rapidincrease in annual wheat production from about 100,000 tons in the early1970's to over 800,000 tons in FY80. Also, GOB and IDA have recentlyprepared a Medium Term Foodgrain Production Plan (MTFPP), whereunderfoodgrain production is expected to reach the 18-20 million tons range inFY85. If reached, this ambitious but attainable target would significantlyreduce the need to import foodgrains.

1.05 Large amounts of fertilizer will be needed to reach the MTFPPtargets. Three fertilizer plants are currently in operation, and a fourth,the IDA-assisted Ashuganj plant, will soon come in operation. Local demandwill still exceed supply and significant amounts of fertilizer will have tobe imported for a long time to come. The Port of Chittagong handles about

60% of fertilizer imports.

1.06 Jute, which only covers 6% of the country's cropped area, is thesingle most important export, and contributes about 25% of Bangladesh'sforeign exchange earnings. About 90% of raw jute exports, as well as 60% otjute goods, are handled at the Port of Chalna. Other major components ofinternational trade are imports of cement, cement clinker, coal, iron andsteel products, POL and general cargo mainly handled at Chittagong (Table 4).

C. The Transport System

1.07 The transport sector suffered considerable damage during the war ofindependence in 1971. More than one-third of trucks and buses were lost;about 600 road and railway bridges were damaged or destroyed; railwayworkshops, motive power and rolling stock were severely hit; airfields andports were damaged; and sunken ships blocked important waterways. Duringthe 1970's, Bangladesh made a significant effort to reconstruct and expandits transport sector.

1.08 Traditionally the main transport modes have been the inland water-ways and the railways. however, there has been a steady change in favor ofroad transport, which now carries about 20% of freight and about 50% ofpassenger traffic, in spite of the poorly developed highway network, withonly 4,000 miles of paved roads, many unbridged gaps and inadequate ferryservices. Among the reasons for the underdevelopment of the road system isthe very high cost of road construction resulting from the poor engineering

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characteristics of soils, the flooding potential that makes high embankmentsnecessary, and the scarcity of construction materials. The main road systemis administered by the Ministry of Transport and Communications (MLC) throughits Railways, Roads, Highways and Road Transport Division, while minor roads,mostly unpaved, are under the responsibility of local authorities. Overalllack of financial resources, compounded by policies favoring constructionover maintenance, have resulted in poor road maintenance standards and prac-tices throughout the country. Road maintenance and rehabilitation would bethe object of a possible Third Highway Project now being discussed with GOB(para 1.22).

1.09 Bangladesh Railway (BR) is state-owned and managed, and has asystem of about 1,200 route miles of meter gauge track located mainly in theeastern part of the country and about 600 route miles of broad gauge track inthe west. The two halves of the system are connected by two ferries acrossthe Jamuna(Brahmaputra) River. The track is of low standard and most of itis poorly maintained. Since independence, employee productivity and utiliza-tion rates of locomotives and rolling stock, have all fallen, thus reducingthe railway's carrying capacity. Freight traffic is below pre-independencelevels while passenger transport has increased considerably due to low pas-senger fares and an implicit GOB policy of priority to passenger traffic.Bangladesh Railway receives considerable assistance from the Asian Develop-ment Bank (ADB), Britain, Saudia Arabia and Canada. The economy wouldbenefit if some ralway bridges, with few rail movements were provided withpermanent decking to permit their use by road transport also.

1.10 The length of navigable inland waterways ranges from 3,245 miles inthe dry season to 5,240 miles during the monsoon. 1/ The Bangladesh InlandWater Transport Authority (BIWTA) controls the inland waterways, regulatestraffic and fares and maintains certain facilities such as inland ports andnavigation channels. Mechanized inland water transport is provided by theBangladesh Inland Water Transport Corporation (BIWTC) and by privateoperators, the latter carrying about 90% of passengers and 50% of freighttraffic. The mechanized fleet is supplemented by about 90,000 country boatsof one or two ton average capacity. Of the BIWTC fleet of some 600 vessels,with a static capacity of about 180,000 tons, some 70% will require extensiverepairs within five years, and a program of repair and replacement is beingprepared with the help of specialists financed by IDA (Credit 735-BD). Theprivate mechanized sector, comprising about 600 vessels of 155,000 tonsstatic capacity, is currently undergoing expansion with GOB's help. Theinland water transport subsector is also receiving assistance from theNetherlands and Norway.

1/ Bangladesh Transport Survey Update 1978.

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1.11 International trade is handled at the maritime ports of Chittagongand Chalna, which are operated by the Chittagong Port Authority (CPA) and thePort of Chalna Authority (PCA) respectively. Chittagong is Bangladesh's mainport and has experienced a steady growth since partition when Calcutta ceasedto be the preferred port for the East Bengal hinterland. Port facilities andthroughput grew from four berths handling about 0.5 million tons in 1947 tothe present 17 general cargo berths, several jetties and moorings whichhandled about 6.2 million tons in 1979/80 (Table 4). The operations atChittagong Port are characterized by labor intensive handling techniques,slow cargo clearance and overcrowded storage and transit sheds. The Port ofChalna, located in the west on the Pussur River about 50 kms south of Khulna,was established as an anchorage in 1950. It serves as a major outlet forjute exports and is currently handling over 2 million tons per year.Recently, alongside facilities comprising 5 berths with transit sheds andwarehouses have been constructed with financial assistance from Yugoslaviabut their use is seriously affected by draft restrictions; it is hoped thatthe studies of the Pussur River which have been financed under the SecondTechnical Assistance Credit (872-BD), will provide when completed in late1982 some insight into the siltation problem and suggest economic ways toovercome draft restrictions.

1.12 The state-owned Bangladesh Shipping Corporation (BSC) providescommercial services linking Bangladesh to India, Pakistan, the Middle East,the United Kingdom, Europe and the United States. In late 1979, BSC owned23 vessels with capacities ranging from 2,000 DWT coasters to 20,000 DWT drycargo vessels and a 90,000 DWT tanker. The fleet's total capacity was over330,X000 DWT. Most vessels are 10 to 20 years old and the average age isabout 15 years. Under Credit 424-BD, BSC acquired second hand two tankers ofabout 20,000 DWT to provide lighterage services between sea-going tankers andthe petroleum refinery at Chittagong. The bulk of shipping services is forcargo transport (about 1.5 million tons in 1978/79) though some passengerservices are also provided (about 8,000 passengers in the same year). BSC'sshare of international cargo traffic now amounts to about 15%.

1.13 One of the salient features of Bangladesh's transport sector is theco-existence of modern and traditional technologies. In road transport forinstance, motorized vehicles (trucks, buses, vans, cars, auto-rickshaws and.motorcycles) and non-motorized ones (bicycles, cycle rickshaws andanimal-drawn carts) ply on and compete for the use of road space, both inurban areas and intercity stretches. The relative importance of traditionalmeans of transport is evidenced by traffic counts suggesting that even onmajor (national and regional) highways, non-motorized traffic easily accountsfor about 90% of vehicles. About 30 different types of locally-made boatsranging all the way from small dugouts and canoes to large boats capable ofcarrying up to 20 tons are used for passenger and goods transport. Thesetraditional transport modes are largely uncontrolled and unregulated. GOB iscurrently encouraging efforts to improve the technology of cycle rickshaws,

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bullock carts and country boats, but the impact of these efforts has so farbeen negligible, partly because of poor financing and inadequate orientation.

1.14 The air transport subsector is of limited relevance to Bangladesh'seconomy, in 1979, domestic air traffic amounted to about 1,800 tons of cargoand 350,000 passengers. The state-owned airline, Bangladesh Biman, is theonly domestic operator and it also flies international routes in competitionwith foreign airlines. Biman has four F27's for domestic routes and four707's for international operations, it hopes to purchase or lease F28's fordomestic services and wide-bodied aircraft for international operations. Inaddition to Dacca's Kurmitola International Airport, there are eight domesticairports: Takurgaon, Saidpur, Jessore, Ishurdi, Sylhet, Comilla, Cox's Bazarand Chittagong (which also receives a few international flights fromCalcutta). About eight additional airports now in disuse could be put inoperational condition with some minor investment. GOB's policy is to keepdomestic fares low, but since it does not provide direct subsidies to Biman,there is cross-subsidization of domestic passengers by internationaltravelers.

D. Transport Administration and Planning

1.15 Most transport activities fall under the responsibility of eitherthe Ports, Shipping and Inland Water Transport Division or the Railways,Roads, Highways and Road Transport Division of MTC. These divisions havecontrol over staff appointments and promotions, wages and salaries andbudgets of operating agencies and relevant private sector activities undertheir respective jurisdiction. The civil aviation and airports subsectorcomes under the Ministry of Defense. The Ministry of Finance and Planning isresponsible for coordinating transport investments and policies through itsTransport Section, on the basis of information collected and analyzed by itsTransport Survey Section.

1.16 Within the ministries, control is highly centralized, and coopera-tion among the various ministries and agencies is largely informal. Invest-ment priorities are not clearly. Experienced specialists have tended to seekemployment in the private sector and in the Middle East.

1.17 Several sector-wide issues have been identified in recent years.First, capital investment tends to be seen by GOB as the principal remedy tothe ills of the sector. This attitude was encouraged in the early 1970's bythe urgent need to reconstruct the infrastructure badly damaged by war, andmilitates against the allocation of resources for maintenance purposes.Second, the large potential benefits to be gained trom improved operation andmanagement of public agencies in the sector have been overlooked. Third,scarce funds, equipment and staff have frequently been spread over a largenumber ot projects, and the ensuing dilution of resources has contributed to

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slow project implementation. Finally, although the private sector plays animportant role in the road and inland water transport subsectors, its accessto foreign exchange and even local credit has been severely limited in recentyears.

1.18 GOB is struggling to resolve the above investment issues. Moreattention is beginning to be given to the rehabilitation and maintenance ofexisting transport facilities. Also, because of the shortage of resources, anumber of projects have been by necessity indefinitely suspended and invest-ment plans are becoming more selective with more emphasis on quicker yieldingprojects. Finally, GOB policy is changing to encourage greater privateparticipation in the transport sector.

1.19 Bangladesh is well endowed with natural gas, but has to import itscrude oil and petroleum products requirements. The retail prices for motorgasoline and high speed diesel in September 1981 were Taka 51.75 (US$2.88)and Taka 24.31 (US$1.35) respectively per imperial gallon. Duties and taxesincluded in the retail price amounted to 10% of the former and 6% of thelatter. The international prices, per imperial galon, based on August 1981quotations CIF Chittagong, were estimated at US$1.32 for motor gasoline andUS$1.35 for high speed diesel. GOB policy is to pass on all price increasesto consumers.

E. Past IDA Assistance to the Transport Sector

1.20 Given the extensive involvement of the Asian Development Bank (ADB)and bilateral financing agencies in Bangladesh's transport sector, IDA assis-tance has been limited to the highway and inland water transport subsectors.The First Highway Project (Credit 408-BD, US$25.0 million), approved in 1973,reactivated a 1964 road project (Credit 53-PAK). Execution was very slowbecause of the lack of suitable materials, poor performance of govern-ment-supplied equipment, the inexperience of domestic contractors, and delaysin agreeing on the design and location of the new Highways Department head-quarters building. Because of rapid price escalation, the scope of theproject, originally planned for upgrading the whole of the Dacca-Chittagongroad, had to be drastically curtailed. Of the three major components of theproject, one, the Sitalakhya Bridge, was completed and opened to traffic inDecember 1977, the second, Feni Bypass, was completed and opened to trafficin July 1979; and the third, the RHD headquarters building, was completed andready for occupancy by the end of 1979. Pavement failures on the FeniBypass, shortly after opening to traffic, have resulted in extension of theCredit closing date to December 31, 1982 in order that unexpended projectfunds may be utilized in necessary remedial works. GOB is currently con-sidering alternative means of carrying out the necessary strengthening. TheSecond Highway Project (Credit 964-BD, US$10.0 million), approved in December1979, provides for the construction of bypasses round the congested towns of

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Comilla and Chandina on the Dacca-Chittagong road. Delays in award of bothequipment supply contracts and construction contracts have resulted in theloss of at least one construction season, but completion of construction bythe credit closing date of June 30, 1984 may be achieved.

1.21 The First Inland Water Transport Project (Credit 424-BD, US$4.1million), approved in 1973, provided for acquisition of urgently needed spareparts and equipment, and a supplementary credit (US$4.6 million), approved in1975 financed an alternative oil transfer system at Chittagong, this projecthas been successfully completed. A Project Completion Report (PCR) has beenprepared and the Operations Evaluation Department (OLD) is auditing theproject. The Second Inland Water Transport Project (Credit 735-BD, US$5.0million), approved in July 1977, provides for acquisition of spare parts,materials and equipment, and for technical assistance to strengthen theplanning, accounting and operational capabilities of agencies involved in theinland water transport subsector. All the studies included in the projecthave been completed and the implementation of the recommendations is cur-rently in progress. The credit closing date has been extended to December31, 1982.

1.22 The Fertilizer Transport Project (Credit 1096-BD, US$25 million),approved in early 1981, will improve the availability of fertilizer tofarmers by expediting fertilizer handling and distribution, increasing theefficiency and capacity of the transport sector, and encouraging privatesector participation in fertilizer distribution and transport. The project'sphysical components, which have been designed to remove major bottlenecks inthe transport sector, include river port improvements, dredging at ChittagongPort and unit block/train operations. IDA-assisted projects in other sectorsalso occasionally include transport-related components, such as minor roadsin agricultural and fisheries projects.

1.23 Projects currently under discussion with GOB include a possibleThird Highway Project which would finance components to be identified underthe IDA-assisted Road Maintenance, Improvement and Rehabilitation Study. ASecondary Roads Project, which would help improve rural and intercity com-munications in selected districts and support GOB's production targets underthe MTFPP, is also being considered.

II. CHITTAGONG PORT

A. General

2.01 Chittagong has served as a maritime port for the northeastern partof the Indian sub-continent for many centuries. Known to the Arabs andYemenis as "Chatigram" in the 9th century and to the Portugese as "Porto

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Grande" in the 16th century, it played a long and active role in the maritimetrade of the region in the era of sailing vessels. With the construction ofjetties towards the turn of the century, Chittagong prepared itself to servethe needs of the steamship. Although its function during the British rulewas subordinated to that of Calcutta, Chittagong became, after the partitionin 1947, the principal maritime port of East Pakistan. The port sufferedbadly during the War of Liberation in 1971 but recovered rapidly to becomethe premier port of Bangladesh.

2.02 Chittagong is located on the right bank of the Karnafuli Riverabout 15 km upstream from its mouth on the Bay of Bengal (Map IBRD 16051).The access to the port is restricted by a bar at the river mouth and by asharp bend in the river. The former places a limit on the draft and thelatter on the length of the vessels that can use the port. Average depthover the bar below chart datum varies from 4.5 m in the dry season to 5.2 min the wet season. As the mean high water level reaches 3.80 m and 2.90 mabove the chart datum at spring and neap tides, the range of draft for ves-sels entering the port on flood tide is 7.5 to 8.4 m during wet season and6.8 to 7.7 in the dry season. The maximum length of the ship that can clearthe bend is 184 m. During night hours, permitted lengths of vessels are 160m for outward and 138 m for inward movements respectively. The draft limita-tion results in substantial amounts of bulk cargo (mainly grain, fertilizersand oil) having to be lightered in the outer anchorage. Despite these con-straints, the port's traffic has grown steadily from 3.58 m tons in 1973-74to 6.2 m tons in 1979-80.

2.03 Pilotage is compulsory for ocean shipping. The ship movementscommence about 4 to 5 hours before day/night high water. The access channelsin the sea and the river are adequately buoyed and equipped with rangemarkers. The VHF international calling/safety channel and the port opera-tional channel are constantly monitored. The port's services are availableround the clock and seven days a week. Chittagong is well connected to thecapital city of Dacca by road (260 km) and by rail (320 km).

B. Organization and Administration

2.04 Prior to 1947, Chittagong was administered by Commissionersappointed under the "Chittagong Port Commissioners Act" of 1887. With parti-tion of India in 1947 and formation of Pakistan, the port came under thecontrol of Minister of Railways and Communications and the berths and shoreinstallations were administered by the Railways and the Commissioners actedas Conservators (in charge of harbor, navigational aids and pilotage, a sortof dual control). This arrangement continued till 1960, when the ChittagongPort (Amendment) Ordinance created the "Chittagong Port Trust" which heldcharge of the port for a decade. After independence from Pakistan and withthe creation of Bangladesh (1971), GOB being convinced that more autonomy

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should be given to the port, created the Chittagong Port Authority (CPA)under Ordinance No. Lll dated 1976. CPA is managed by a Board, comprisinga Chairman and three members, which reports to the Secretary, Ports, Shippingand Inland Waterways Division of MTC. The Government has in consultationwith CPA appointed an Advisory Committee of port users to voice their viewsand expectations regarding the port's services. This Committee is headed bythe CPA Chairman and includes ten other members.

2.05 The Chairman of the Board is the chief executive, who is respon-sible for supervision and control of all port activities. The three membersheac the departments of (i) engineering and development, (ii) operations, and(iii) finance. In addition ,the Secretary of the Board heads a secretariatwhfih is responsible for a number of administrative functions (Chart 1).

2.06 The powers and functions of the Authority are laid down in theordinance (1976) which authorizes the CPA: (i) to manage, maintain, improveand develop the port; (ii) to provide and maintain adequate and efficientservices in the port and in the approaches of the port; (iii) to regulate andcontrol berthing and the movements of vessels and navigation within the port,(iv) to construct and maintain facilities, (v) to be responsible for thefinancial consequences of its activities, (vi) to borrow funds with prior GOBapproval, and (vii) to set tariff rates, but prior Government approval isrequired before the rates are officially published.

2.07 While the above provisions indicate delegation of considerableautonomy and independence to CPA, in practice they are applied only to itsday-to-day operations, since decisions of any major consequence cannot betaken without reference to GOB. This is especially true in matters of staff-ing and finance. The Chairman is appointed from the Civil Service cadre andhis tenure is for three years. This system, especially the short tenure ofthe Chairman, is not conducive to good management as it does not provide forcontinuity, which is needed in operating a large and complex organization asthe port. The advisability of increasing the Chairman's tenure has beenbrought to the attention of the Secretary MTC.

2.08 Staff and Labor: There are 150 otficers and about 7,000 otheremployees which is high, especially since about another 6,000 laborers arehired from local contractors for handling of cargo on the quays and in thesheds. Almost all employees are members of one of the four unions, not allof which are recognized. The practice is to recognize that union as a bar-gaining agent which has been successful in getting the largest number ofemployees as members. Unions are politically affiliated and are strongenough to be able to challenge or forestall the management's decisions ondisciplinary action.

2.09 There is ample evidence that CPA is over-staffed andunder-officered. A number of studies e.g., Bangladesh Transport Survey(1973), Louis Berger (1974), NEI (1978), have recommended organizational and

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other changes, and have also stated that the port is overstaffed. Duringnegotiations, agreement was reached that CPA will make a careful assessmentof the manpower requirements in the different categories of staff and byDecember 31, 1983 implement a program satisfactory to IDA for correcting theimbalances.

2.10 CPA's organizational framework is satisfactory to cope with thevariety of present activities. A general weakness in the present organiza-tion is that there is inadequate delegation of authority and responsibilityto lower levels in the organization. This in part, has to do with the lackof skilled and experienced staff. Many of those who do attain the skilledlevel leave for the Middle East. An effective training program covering alllevels of staff will go a long way to improve the operations and managementof CPA. Recognizing the need for such a program CPA has recently started aTraining Institute, but it will have to be properly housed, staffed andequipped before it can fulfill its objective.

2.11 Planning: In CPA planning activity is weak because of lack ofcoordination between engineering and development, traffic and financeactivities. There is a planning unit under the engineering and developmentdepartment but its function is geared mainly towards meeting the Government'sreporting requirements relating to works under annual and five year plans.While potential projects under the present system get identified, financingand execution of the projects do not get the required attention. Forexample, traffic and financial forecasts for five year periods are notprepared, and it could be stated that planning is limited to the preparationof the annual budget. Clearly defined objectives and the means to achievethese are not planned ahead ari; determina_`on of prioritles seems absent.

2.12 In the past the need for formal planning may not have been felt,because there was enough rehabilitation work to be done as a consequence ofdamages caused to the port facilities during the war of independence. Asresource constraints, especially the lack of foreign exchange, become moreacute, the need for more formal planning has been recognized. Accordingly,CPA agreed to strengthen and expand the functions of the Planning Cell.Agreement was reached during negotiations that the Planning Cell would bereorganized in a manner satisfactory to IDA by January 1, 1983.

C. Existing Facilities

2.13 The facilities available at the port fall under three main groupsviz. (i) general cargo berths, (ii) specialized berths and (iii) barge andcoaster wharves (Map IBRD-16051)-

2.14 The general cargo berths include 13 marginal berths (Nos I to 13),2 pontoon berths (Nos 14 and 15) and 2 light deck wharves (Nos 16 and 17).

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Berths 1 to 6, which were originally constructed at the turn of the century,have been replaced by new ones built during the seventies, while berths 7 to13 are between 30 and 40 years old. Pontoon berths 14 and 15, which werebuilt in 1952 as an emergency measure have no vehicular access, and berths16 and 17 built in 1953 are subject to loading restrictions due to structuraldeterioration. Berths 1 to 13 are equipped with 39 rail mounted electricportal wharf cranes. Other equipment available for handling general cargoincludes 28 mobile cranes, 20 tractors, 49 trailers, 31 scammels, 22 trucks,45 forklifts and 28 battery operated trucks. Except for berths No 11 and 17,all the general cargo berths are provided with transit sheds (86,000 m2).Under the reconstruction program, new sheds are nearing completion at berths1, 2, 4, 5, and 6. Nine of the transit sheds are served by railway sidingsboth at the front and the rear and six at the rear only. A program of pavingthe sidings in the port area is underway to facilitate movement of roadvehicles and cargo handling equipment. The port has 16 warehouses (about82,000 m2) of which one is reserved for vehicle imports, one for hazardousgoods, and two for exports and the remaining twelve for imports. In addition.there are six warehouses (50,000 m2) outside the port area.

2.15 The specialized berths are built and operated by public sectorcorporations under license from the CPA which owns the river front. Thecement clinker jetty, the grain silo jetty, the TSP jetty and oil jetties areoperated respectively by the Bangladesh Cement Corporation, Food Corporation,TSP factory and Petrobangla. In addition to the dues levied on the vesselsusing these berths, CPA recovers from the corporations half the regularlanding charges on the bulk cargo handled across them. The cement clinkerjetty can receive vessels upto 170 m in length. It is equipped with a bucketwheel unloader but due to mechanical problems, the machine has been hardlyused. At present, clinker is discharged with grabs operated by ships gearand unloaded on the jetty from which it is fed to the conveyor belt by manuallabor. The grain silo jetty has two berths, the large one capable of dis-charging 184 m vessels with a draft of 8 m and the small one for dischargingor loading barges/coasters. The former berth is equipped with two mobilegrain elevators of 100 tons per hour nominal capacity. Two conveyor beltstransport the grain to a silo complex with a storage capacity of 100,000 tonsand equipped with facilities for bagging and for bulk loading of grain intotrucks or railway wagons. The small jetty has a fixed elevator/loader whichis served by a reversible conveyor belt. The TSP jetty, which can servicevessels up to 160 m in length is equipped with 4 hoppers discharging over aconveyor belt leading to the factory storage. Bulk fertilizer is dischargedinto the hoppers using semi-automatic grabs operated with ships gear. Bulkmineral oil is handled at two lighter jetties and four river moorings, all ofwhich are provided with pipelines for transferring crude and petroleumproducts to the storage tanks. Another river mooring is used for dischargingvegetable oil, tallow and molasses.

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2.16 Barge and coaster berths for dry cargo other than coal are locatedmainly at the Inland Water port at Sadarghat, upstream of the general cargoberths. Coal, which comes mostly from Calcutta in small vessels, is handledat a river mooring located near the oil berths.

D. Operations

2.17 Throughput: During 1979/80, Chittagong port handled some 6.2million tons comprising 1.8 m tons of liquid bulk (crude, POL), 2.8 m tonsof dry bulk (grain, fertilizer, cement clinker and coal) and 1.6 m tons ofgeneral cargo including 2,235 containers. The port's traffic includes nearly3.0 m tons of liquid and dry bulk cargo lightered in the outer anchorage andrehandled at Chittagong port. Of the dry bulk cargo, 2.1 m tons were handledat the specialized berths and moorings, and the balance of 0.7 m tons of drybulk together with 1.6 m tons of general cargo or a total of 2.3 m tonsthrough the general cargo berths. A total of 942 vessels were servicedduring the year at the general cargo berths and the average berth occupancywas as high as 92%. The average detention to shipping was 4 days per shipbringing the total of shipdays lost in waiting time to 3,768, during theyear. These delays resulted in surcharges of 10% and 20% being levied byvarious shipping conferences during three periods between June and December1979. The high berth occupancy and the projected growth of traffic, par-ticularly containerized cargo, highlight the urgent need for suitably improv-ing the port's throughput capacity to match the needs not only of theexpected increase in the traffic but also of the growing trend of con-tainerization and the recently introduced ro-ro service.

2.18 Cargo Handling: The ship-shore transfer of general cargo iseffected mainly with ships gear and wharf cranes but manual labor is largelyused for the movement of cargo to transit sheds and for delivery to trucks orrailway wagons. Extensive use is made of rail wagons for intra-port move-ments. This operation is slow and inefficient, because of unrealiableavailability of wagons and locos, and compares unfavorably with the use oftrucks. There is a good case for curtailment and eventual phasing out ofrail movement within the port area. The average throughput per berth perannum in 1979-80 was 144,000 tons while in the past throughputs of more than190,000 tons have been achieved at these berths. Although at first glancethese throughput figures appear very satisfactory, they are in fact con-siderably lower than what could be expected, it due allowance is made for thesubstantial tonnage of bulk (grain) and semi-bulk (bagged fertilizer)included in the tonnage and the two shifts working which is normal practice.Analysis of available statistics indicates that the output of break-bulkcargo is about 261 tons per ship-day, while that of grain (discharged withvacuators) and bagged cargo (handled with ships gear and manual labor) was1,300 tons and 582 tons per ship day respectively. The average output pergang hour is 3.2 tons. Clearly there is much scope and need for improvementin cargo handling rates. Use of pallets for transit storage of general cargo

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has been tried and found to speed up cargo movement and also to make effi-cient use of transit shed space. Experiments of importing fertilizer in bulkand bagging it on the wharf have shown encouraging results both as regardsthe cost of fertilizer and tons handled per ship-day. These improved methodsshould be continued and brought into regular usage. During negotiations,assurance was obtained that CPA would; (i) extend the palletization scheme tomore berths as additional fork lifts are acquired; and (ii) take up a phasedprogram for reducing railway movement and tracks in the port area, and thatGOB would arrange that import of fertilizer at Chittagong would be in bulkto the extent possible and that it would be bagged locally.

2.19 Poor performance and low availability of cargo handling equipmentare major contributing factors to the low handling rates. The performance ofthe wharf cranes is so unreliable that vessels prefer to use their own gear,even though they have to pay hire charge for wharf cranes whether used ornot. Records show that on average the handling rate with ships gear ishigher than that with the wharf cranes. Electrical power failures, operatordelays and poor maintenance are the main causes for the high down time ofthese cranes. Battery operated trucks also have similar poor record but thechief problem in this case is the excessive time lost in charging of bat-teries and non-availability of spare parts. Condition of other items ofequipment like mobile cranes, fork lifts, tractors etc. is also well belowthe required standard. High proportion of overaged equipment, lack of main-tenance, shortage of spares, faulty operation and misuse of equipment, inade-quate capacity and distant location of repair workshops have been identifiedas the main factors which have contributed to the low performance of equip-ment. To remedy this situation, provision has been made in the proposedproject for: a) replacement of overaged equipment; b) technical assistancefor developing a proper maintenance program and inventory control system forspares and training of operators, and c) central and zonal workshops. Sinceprocurement of spares will be critically dependent upon the availability offoreign exchange, assurance was obtained from GOB during negotiations thatadequate amount of foreign exchange for this purpose will be provided to CPAon a regular basis. The proposed repair facilities will be equipped mainlyfor preventive maintenance and servicing of equipment, but not for majoroverhaul or renewal, for which CPA should use the services of privateworkshops in Chittagong. Agreement in this regard was reached with CPAduring negotiations. Assurance was also obtained that CPA would completenecessary improvements to the port's electrical network by December 31, 1983.

2.20 For improving the cargo operations, it is necessary not only toreplace overaged equipment but also to provide additional equipment forhandling the expected increase of general cargo traffic and also of con-tainers. To meet this need, provision has been made in the project for theprocurment of adequate equipment together with spares for 3 years.

2.21 Work Shifts: Although the port is officially open for workinground the clock, the port labor works in two regular shifts, with gaps in

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between which are covered by overtime work if required. Because highercharges are applicable during overtime hours, cargo working outside regularshift hours is not a normal feature. The long gaps between shifts result inconsiderable loss of time in closing hatches, returning equipment to garageetc. The operations suffer further due to the shift hours of tally clerksbeing different trom those of the port labor. In the interest of efficientoperations, it is highly desirable that CPA introduces two regular shifts(without gap) to be followed by a third shift on an optional basis, and thatthe same timings are observed by both the labor and all the CPA staff

assigned to cargo operations. During negotiations, agreement was reachedwith CPA that such new system would be in operation by December 1, 1982.

2.22 Port Working System: All cargo handling in the port is carried outby licensed contractors. Stevedoring firms engaged by the ship's agentsattend to ship-shore movement. Transfer of cargo between the hook and tran-sit sheds/storage areas and between the latter and the warehouses isentrusted to shore handling and jetty handling contractors engaged by CPA.There are more than 50 firms who undertake these contracts, many of whom areinexperienced. Up to four contractors are involved in handling the samecargo at different stages of its passage through the port. This contributesto damage and pilferage of cargo and inefficient use of labor. The contrac-tors hire the labor through the unions and pay them by time at rates fixed bycollective bargaining. The payment received by the contractors is based onrates per ton of cargo handled. This arrangement should have caused thecontractor to make every effort to get the most out of the labor, but judgingfrom the handling rates in the port, there is little evidence of such concernon the part of the contractor, apparently because in negotiating the tonnagerate he allows for a low level of productivity. It may be possible toimprove the performance, if a bonus is paid when the average output per shiftexceeds an agreed level. GOB has approved, in December 1980, a scheme forthe regulation of employment of Chittagong Dock Workers, under which a DockWorkers Management Board has been recently constituted. The Board willmaintain a register of dock workers and employers and be responsible, interalia, for making payment to the workers (from deposits to be made in advanceby employers), taking disciplinary action and arranging training courses andwelfare measures. CPA has recently taken action to reduce the number oflicensed contractors from 55 to 33. During negotiations, assurance wasobtained that in consultation with the Dock Workers Management Board, CPAwill examine the desirability of further reducing the number of licencedcontractors by raising the qualification criteria and of introducing a bonusscheme or other suitable measures to improve cargo handling performance ofthe contractors and to implement such measures in consultation with IDA.

2.23 Cargo Clearance: It is not surprising that, like many other ports,Chittagong also suffers from slow cargo clearance. According to the Port'sstatistics, cargo remaining uncleared on June 8, 1981 amounted to 83,822tons. This included 77,845 tons lying for less than 2 months, 4,548 tonsover 2 months, 791 tons over 4 months and 638 tons over 6 months bringing the

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average dwell time to more than 35 days. More than 25% of the cargo remain-ing uncleared for more than 2 months belonged to public sector corporations,whose inability to take delivery of their cargo stems generally from a com-bination of administrative, budgetary and cash-flow problems. The defaultersin the private sector, who account for nearly 75% of cargo lying over 2months and 87% of that lying less than 2 months, are mostly the industrialimporters who often have difficulty in mobilizing necessary cash in time.The current tariff for storage provides for a free period of 4 days and forstepping up of rates as storage periods increase; an increase in the tariffwill not by itself be effective as the parties concerned are able to pass onmost of the additional cost to the consumer. Remedial measures to overcomethe difficulties experienced by importers in both the public and privatesector entities would be more productive. Stricter enforcement of the rulesfor disposal of uncleared cargo by customs also would help. The period afterwhich uncleared cargo is removed to the customs enclosure or auctioned offshould be reduced from 60 to 45 days and this should be applied uniformlyto both public and private sector cargos. There is also scope for streamlin-ing the customs processing of the bill of entry by telescoping/deleting somesteps. During negotiations, agreement was reached that CPA/GOB will by June30, 1983 develop and implement a plan of action to bring down the dwell timeof cargo in the port area to less than 25 days. Storage charges, whichaccount for about 35% of CPA's revenues will go down to about 25% with thereduced dwell time. However, this will be offset by the increase in therevenue when the tariffs are revised to reflect the cost of services (para5.04). It is expected that the storage charges would then be higher thanthose in the private sector. -

2.24 Organizational Changes: The present organization of the operationsdepartment, which does not permit adequate supervision of the wharf and shedactivities, needs to be improved. The traffic manager is assisted by threejetty superintendents, one in the head office and two in the Port area. Theadministrative and paper work related to the operations in the port areaextending over 17 general cargo berths, special berths, outer anchorage andthe storage area keeps the two jetty superintendents, two assistant jettysuperintendents and three assistant traffic officers so fully occupied thatthey are hardly able to supervise the operations. It has been proposed thatthe present operations area should be divided into four zones and each zoneshould be placed under the charge of an assistant traffic manager, who willbe assisted by traffic officers and assistant traffic officers/foreman sothat adequate attention could be given to administrative as well as super-visory duties. An additional zone should be set up to cover the multipurposeberths when they become operational. There is also need for reorganizing theMaintenance Department. The staff responsible for repair and maintenance ofcargo handling equipment are also responsible for other duties such as civiland electrical work in the colony, the maintenance of cars and light tran-sports of CPA, maintenance of lights, fans and air conditioners in office andresidential building etc. In discharging their several duties, the staff do

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not give to cargo equipment the priority it deserves. To correct this situa-tion it is proposed that a separate division should be established and placedin the charge of a senior official whose main responsibility would be tomaintain and repair cargo handling equipment. This change should be possiblemostly through reorganization of existing staff. CPA has accepted in prin-ciple the need for making the above changes and is working out detailedproposals. During negotiation, agreement was reached with CPA that theproposed organizational changes, satisfactory to IDA, would be made effectiveby June 30, 1983.

2.25 Training Needs: A review of the port's operations points to theneed for training in all aspects of dock-work involving personnel from manualgrades through to supervisory level. An effective training program is anessential prerequisite for Chittagong's advent into the era of modern tech-nology. CPA has already made a modest beginning with training classes heldin an old warehouse building, but substantial improvement in the scope,organization and planning of the scheme is needed. The establishment of aproperly planned and staffed Training Institute is proposed. Provision ismade in the project for a building to house the institute and for the serv-ices of specialists to assist in the planning, organization, and initialrunning of the training program. The first priority would be to upgrade theskills of the operators for cargo handling equipment and to have sufficientnumber trained before the new equipment to be procured under the proposedproject is delivered. At the same time, there would be courses for tallyclerks/checkers, shed supervisors, traffic officers and for the staff engagedin the maintenance and servicing of the cargo handling equipment. This partof the program would be initiated as soon as possible. The second prioritywill be to train personnel for the operations at the proposed MPBs. The longterm objective of the program would be to provide training courses for allcategories of port workers, employed not only by CPA but also by stevedoresand cargo handling contractors, shipping agents, clearing and forwardingagents, customs and transport services etc. In due course, the Institute mayalso undertake the training of apprentices, as and when an apprenticeshipscheme is adopted for ensuring an adequate supply of suitable workers for theport industry. During negotiations, assurance was obtained that CPA would byNovember 1, 1982 organize a training program satisfactory to IDA and arrangefor a sufficient number of equipment operators to be trained by April 1,1983, when the delivery of the new equipment is scheduled to begin.

E. Development Strategy

2.26 Because of the draft and length restrictions to which ships usingthe Port of Chittagong are subjected, GOB/CPA have under consideration thedevelopment of an outer port at Patenga on the right bank of Karnafuli justnear its mouth. The main benefits expected from the outer port are: (a) theelimination of the present lighterage operations in the outer anchorage; and

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(b) substantial freight savings due to the possible use of 5G,000 DWT vesselsfor the import of bulk commodities. Although the Patenga location would befree from the restriction on the length of ships, it would still be subjectto some draft restrictions as the working depth would depend entirely on theextent to which it would be feasible to dredge and maintain a channel acrossthe outer bar. With a view to assessing the optimum depth that can beeconomically achieved and the estimated cost of capital and maintenancedredging involved therein, CPA has embarked on a project of trial dredgingwith financial assistance from IDA (Credit 1096-BD). The dredging operationswhich commenced in April 1981 are expected to continue for about a year.Some indication about the feasibility of dredging will be available in thelatter part of 1982. Even if the indications are positive, it would not bepractical or advisable to attempt to carry out in one operation the dredgingto the full depth of -11.7 m required to service 50,000 DWT vessels. Thisrepresents an increase of nearly 4.5 m above the present depth resulting in asignificant change in the regime of the river, which experience suggestsshould be avoided. It would be desirable to carry out the deepening in threestages of 1.5 m each, so that the river would have an opportunity to stabi-lize between stages and the effects of the dredging in one stage beforeaction is taken on the next could be carefully monitored. Thus even underoptimistic assumptions, the working depth required for the outer port wouldnot be attained for at least another 15 years.

2.27 The implications of the possible diversion of traffic to the Portof Chalna need to be considered before deciding on a major development likethe outer port at Patenga, if on completion of the on-going studies on thesiltation problems in the Pussur River (para 1.11), it is determined that thepresent draft restrictions at Chalna can be eliminated or substantiallyreduced. Therefore Patenga development should not start for several moreyears.

2.28 Another alternative which could affect the decision on Patenga isthe offshore bulk terminal recommended by the USAID financed study carriedout by SOROS Associates (USA). However, traffic is unlikely to be sufficientto justify the high cost of this alternative in the near future.

2.29 Since none of the alternatives is a short term proposition, theonly possibility of meeting the growing needs of traffic in the immediatefuture is by improvement and expansion of the facilities in the existingport. The strategy for port development in the short and medium term shouldtheretore be directed to: (a) improving the throughput of the existinggeneral cargo and specialized berths, and (b) providing additional capacityin stages by constructing new berths between berths No. 13 and the cementclinker jetty. The new development should be tested for economic and finan-cial viability under the present restrictions on both the draft and length ofvessels but the berth structures should be designed for alongside depth of 10m to provide for the possibility that it would be feasible to make the access

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channel suitable for the entry of 184 m, vessels at tull draft. Any develop-ment of the existing port should be compatible with the plans under con-sideration (Patenga and bulk terminal) for meeting the long term needs. Theprovision made in the project for procurement of new cargo handling equip-ment, improvement of maintenance and repairs and training of dock workerswould increase the throughput of general cargo berths. In the case of thespecialized berths, the respective operators would have to take the necessaryimprovement action. The Grain Silo Berth should be able to discharge 800,000tons of grain per year if arrangements are made for installing weighingequipment, improving the offtake from the silos and increasing the flatstorage capacity. The TSP and Cement Clinker jetties should have no dif-ficulty in handling all the fertilizer raw materials and clinker importsforecast for the decade. During negotiations agreement was reached thatgrain would not be required to be handled at the general cargo berths unlessthe imports exceed 800,000 tons per year or subject to severe bunching condi-tions and that cement clinker and fertilizer raw materials would be handledwholly at the specialized berths. The two multipurpose berths proposed underthis project conform fully to the above strategy.

III. THE PROJECT

A. Project Objectives and Composition

3.01 The primary objective of the project is to provide the Port ofChittagong with adequate capacity for handling the expected growth in generalcargo and container traffic through the early nineties. This will beachieved firstly by constructing two multipurpose berths suitable for servic-ing general cargo as well as container vessels and secondly by improving the

throughput of the existing berths through the provision of new cargo handlingequipment and training of the port workers.

3.02 The scope of the project is adapted from the feasibility studycarried out by CPA with the help of its consultants (Maunsell Consultants,Australia and Engineering Consultants and Associates Ltd, Dacca) in 1980/81under IDA Credit 872-BD. To meet the long term requirement of containertraffic, it is proposed to construct two new berths along the undevelopedriverbank upstream of No. 14 berth. The berths will be designed to carrygantry cranes and other container handling equipment. However, no gantrycranes are to be provided now as the container traffic in the early years ofdevelopment is expected to be moved in vessels equipped with their owncranes. Provision for yard equipment and back-up facilities (storage yard,freight station, etc.) will be adequate to meet the traffic needs in theinitial years. It is envisaged that suitable augmentation of thesefacilities as also the addition of gantry cranes would be made at a laterstage as and when required. For an orderly and rapid development of etfi-cient container operations, CPA should have the full cooperation and support

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of all the parties concerned. To this end, CPA has constituted a ContainerDevelopment Committee for coordinating the procedures for handling andstorage of containers, and for developing suitable procedures for smoothprocessing of documents, quick clearance through customs and inland movementof containers etc. During negotiations, it was agreed that the compositionand terms of reference of the committee would be reviewed in consultationwith IDA.

3.03 Pending the construction of the new berths, container vessels areto be serviced at existing berths No. 10 and 11. Two of the existingwarehouses and a part of the paved area available near these berths togetherwith the yard equipment to be provided under this project will serve as theinterim container facilities. Because of limitations of deck loading, thecontainer operations at these berths would be confined to the use of shipsgear and tractor/trailer units, as the wheel loads of fork lifts, mobilecranes or straddle carriers would be too heavy.

3.04 For improving the operations at the general cargo berths, it isproposed to replace overaged equipment and to provide additional cargo han-dling equipment. Furthermore, technical assistance will be provided todevelop an effective program for preventive maintenance of equipment and forthe training of operators, dock workers and warehouse supervisors.

B. Project Description

3.05 The project will comprise:

a) Two Multipurpose Berths (Map IBRD-16052)

i) Construction of two multipurpose berths of a total length of450 meters (including a 45 meter ramp for ro-ro vessels) withalongside depth of 10 m below port datum, fitted with rails tocarry gantry cranes;

ii) Provision of back-up facilities including paved storage areafor containers (about 150,000 m2) container freight station(13,650 m2), office and other buildings, custom fencing, garageand workshops, services and utilities; and

iii) Provision of container handling equipment: two mobile cranes(35 T @ 40 m), 11 fork-lift trucks (25-30 T) 23 fork-lift trucks(3-5 T), and 8 tractor-trailer units.

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b) Cargo Handling Equipment

i) For interim container facilities: 5 rubber tired portal cranes(35 T), 3 fork-lift trucks (30 T); (for use in storage yard)and 21 tractor-trailer units.

ii) For replacement of overaged equipment: 30 fork-lift trucks (3 T),8 tractors, 16 trailers, 3 mobile cranes (10, 20 and 40 T);

iii) Additional equipment for general cargo berths: 38 fork-lifts(3-5 T), 8 tractors, 35 railers, 4 mobile cranes (10, 20 and40 T);

iv) Spares for 3 years.

c) Maintenance Facilities

Provision of one central and four zonal workshops with necessaryequipment and auxilliaries.

d) Training Institute

Additions and alteration to the Institute building andfurnishing it with necessary equipment and auxilliaries.

e) Technical Assistance for:

i) developing and putting into operation a preventive maintenanceprogram;

ii) training of equipment operators, dock workers, tally clerks,and supervisors;

iii) developing a long-term training program and organizing theworking of the Training Institute;

iv) overseas fellowships;

v) developing a port management information system and trainingstaff for its operation; and

vi) preparing a manual detailing the procedures and documentationfor container operations and training CPA staff in themanagement and operation of the container facilities.

f) Engineering services for:

i) detailed engineering of back-up facilities; and

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ii) supervision of the contracts for civil works and procurementof equipment.

C. Technical Evaluation

3.06 The main considerations taken into account in the technical evalua-tion of the project were:

i) conformity of the proposed berths with CPA's development strategyand with the Master Plan for future development of ChittagongPort;

ii) suitability of soil conditions for the pile construction proposedfor the multipurpose berths;

iii) need for two berths for handling the expected growth of containertraffic to 90,000 TEU by 1990;

iv) suitability of the lay-out proposed for the storage yard andcontainer freight station for phased expansion to suit containertraffic growth;

v) suitability of the parameters of the design vessel, (viz. overalllength of 184 m, maximum draft of 9.1 m and maximum capacity of20,000 DWT) for which the length, alongside depth and fenderingsystem of the berths are designed;,

vi) adequacy ot the loadings for the design of the decking;

vii) suitability and adequacy of the equipment proposed for handlingcontainers and general cargo; and

viii) availability of land for future expansion of storage yard andCFS capacity.

D. Cost Estimates

3.07 The total cost of the project is estimated at US$110.0 million witha foreign exchange component of US$60.0 million, which would be financedunder the proposed development credit. Details of the cost estimates aregiven in Table 1 and are summarized below:

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---- Taka million ----- ---- US$ million

Local Foreign Total Local Foreign Total

a) Multipurpose Berthsi) Berth structures 198.90 255.60 454.50 11.05 14.20 25.25ii) Back-up facilities 200.34 81.90 282.24 11.13 4.55 15.68iii) Container Handling

Equipment 94.32 155.34 249.66 5.24 8.63 13.87

b) Cargo Handling Equipmenti) Interim Container

Facility 62.64 100.98 163.62 3.48 5.61 9.09ii) Replacement Equipment 37.26 61.92 99.18 2.07 3.44 5.51iii) Additional Equipment 37.98 64.44 102.42 2.11 3.58 5.69

c) Maintenance Facility 33.48 19.80 53.28 1.86 1.10 2.96d) Training Institute 11.88 9.00 20.88 0.66 0.50 1.16e) Technical Assistance 35.46 35.46 1.97 1.97f) Engineering Services 64.44 64.44 3.58 3.58

Base Cost 676.80 848.88 1,525.68 37.60 47.16 84.76g) Contingencies

Physical 54.36 61.38 115.74 3.02 3.41 6.43Price 168.84 169.74 338.58 9.38 9.43 18.81Grand Total 900.00 1,080.00 1,980.00 50.00 60.00 110.00

3.08 The base cost estimate of civil works and equipment has beenobtained by updating to January 1982 of the consultant's estimate which wasbased on January 1981 prices. The latter estimate was prepared on cost ofmaterials and labor in Chittagong area and on the recent bids and prices(inclusive of duties and taxes) quoted for comparable work and equipment andare considered to be realistic. Contingency provision has been made for:(a) physical variation in civil works at 8% in the case of the berth struc-tures and 20% in the case of the back-up facilities and other works for whichdetailed engineering has not been prepared yet; and for (b) annual priceescalation on foreign cost at 8.5% for 1982, 7.5% for 1983 to 1985 and 6% for1986-87 and on local costs at 11% for 1982-87. Provision for technicalassistance allows for 132 man-months of expatriate specialist services atUS$10,000 per man-month and 96 man-months of local/regional expertise atUS$3,000 per man-month.

E. Financing Plan

3.09 The proposed IDA financing for the project would cover theestimated foreign exchange cost of US$60.0 million. Of the local currencycosts estimated at US$50.0 million, US$35.0 million would be met by CPA fromits own reserves and the balance of US$15.0 million would be provided by GOB.

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3.10 GOB will be the Borrower and CPA the Executing Agency for thisproject. The proceeds of the development credit will be on-lent to CPA undera subsidiary loan agreement on terms and conditions satisfactory to theAssociation. During negotiation, agreement was reached with GOB regardingthe on-lending terms (para 5.21). Signing of the subsidiary loan agreementwould be a condition of effectiveness of the credit.

F. Execution of the Project

3.11 CPA will be responsible for the execution of the project in accord-ance with the provisions of a Project Agreement to be signed between CPA andthe Association. As indicated in the bar chart (Table 2), proJect implemen-tation is expected to take about 5 years from July 1982 to June 1987. Duringnegotiations, the implementation program was agreed with CPA.

3.12 For attending to the various administrative, coordination andmonitoring functions necessary for the proper execution of the project, CPAwould establish under the Chief Engineer Planning and Development, a ProjectImplementation Unit (PIU) with a senior engineer as its head and an account-ant and an office manager as its members and provide it with adequate supportstaff. Appointment of the key members of the PIU whose qualifications andexperience would be satisfactory to the Association would be a condition ofeffectiveness of the proposed credit.

3.13 For the preparation of detailed engineering and bid documents forthe back-up facilities, and for the supervision of the contracts for civilworks and equipment procurement, CPA will need to retain the services ofconsulting engineers. During negotiations, agreement was reached with CPAthat the qualifications, experience, terms of references and the terms ofappointment of such consulting engineers and the principles and proceduresof such appointment would be satisfactory to the Association on the basisof the Bank Group's Guidelines (August 1981).

3.14 The area at the back of the proposed site for MPBs, which is underlease to four public sector agencies has to be vacated and cleared wellbefore the construction of the berths is scheduled to start. CPA and GOBhave already initiated action to terminate the leases and to bring pressureon the tenants to vacate the premises. The lessees have started the processof moving their effects and are expected to complete it by June 30, 1982.However, because of the importance of this issue, for the timely implementa-tion of the project, it should be a condition of effectiveness that CPA shallhave obtained vacant possession of all the land abutting the MPB site. GOBapproval of the Project Proforma should also be a condition of credit effec-tiveness.

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G. Procurement

3.15 Contracts for the construction of the MPBs and for the major com-ponents of the back-up facilities totalling about US$34.0 million would beawarded on the basis of international competitive bidding (ICB) after pre-qualification of bidders in accordance with the Association's guidelines.Eligible local bidders would be affored a preference of 7 1/2% under ICBprocurement. Minor civil works of estimated contract size less than US$1.0million, aggregating to US$6.0 million would be procured in accordance withlocal bidding procedures satisfactory to the Association and under whichforeign bidders would have opportunity to participate. Procurement of allcargo handling and other equipment also would be made through ICB. Apreference of 15% of the CIF cost or the customs duty and taxes, whichever isless, will be allowed in the case of items of local manufacture, but it isnot likely that any of the items to be procured will be locally manufactured.Documents for all contracts estimated to cost over US$200,000 for civil worksand US$50,000 for equipment and other goods, will be reviewed by IDA beforethe bids are invited.

XH. Disbursements

3.16 Previous experience, as reflected in actual disbursement profiles,indicates that transport projects in South Asia, as well as all projects inBangladesh, normally require seven to eight years for full implementation.However, in the case of the proposed project, it is considered reasonable toallow a shorter implementation period. The construction of berths, whichwill be the subject of international competitive bidding is expected to becarried out by foreign contractors who will be imploying modern work methodsand equipment, this component, which has the longest lead time, would nor-mally require less than three years for completion, but to allow for localconditions, it is conservatively estimated to take four years. In the caseof the procurement of equipment, which is the other major component of theproject, the suppliers would be reputable foreign firms selected from inter-national bidders and can be expected to effect timely deliveries. Animplementation period of five years should be adequate for this project.

3.17 The proceeds of the proposed credit would be disbursed as follows:

I. Civil Worksi) Berth structures 56% of total costii) Back-up facilities, )

Maintenance facilities ) 31% of total costand Training Institute )

II. Equipment 100% of foreign expenditureif imported, 100% of ex-factory cost if locally

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manufactured, and 65% oftotal cost if procuredlocally other thanex-factory.

III. Technical Assistanceand Engineering Services 100% of total cost

The above proposals would cover disbursement of the full estimatedforeign exchange cost of the project and the local costs in the case of IIIbut not duties and taxes.

3.18 Table 3 gives the estimated schedule of disbursements based on theabove proposals and the implementation program (Table 2). As the executionof the project is expected to be completed by June 1987, the proposed closingdate for the credit is December 31, 1987.

I. Monitoring

3.19 For facilitating the monitoring of the project execution, CPAshould: (i) submit to IDA quarterly progress reports in specified formats,(ii) maintain separate account of the financial transactions relating to theproject and have it audited annually by an independent auditor satisfactoryto the Association; and (iii) prepare a project completion report within sixmonths of the closing of the credit. Agreement was reached during nego-tiations that CPA would comply with the above monitoring requirements.

J. Port Efficiency Indicators

3.20 For optimizing the utilization of port resources and for takingtimely action for improving port operations, CPA should compute each quarteroperating efficiency indicators relating to: (i) cargo handling rates forthe main categories of cargo viz. break-bulk, unitized, dry bulk, containersand liquid bulk; (ii) dwell time of cargo in port; (iii) ship turnaroundtime; (iv) ship waiting time, and (v) berth occupancy. This will requiresystematic collection of data for each ship from its arrival till departure,and recording them in a manner suitable for easy derivation of the aboveindicators. The data to be collected and the efficiency indicators whichshould be used as targets to be achieved are shown in Annex 1. During nego-tiations agreement was reached that CPA would start computing the efficiencyindicators not later than January 1, 1983 and use its best efforts to equalor better the targets referred to above, by June 1, 1984.

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K. Environmental Impact

3.21 No significant adverse environmental impact is expected in the portor the city of Chittagong due to the proposed project, since no handling ofany dirty or dusty cargo is envisaged. It is not expected that the containermovement would adversely affect the traffic conditions in the city, as thetransfer of full containers destined for Dacca area would be largely handledby inland waterways and railway, and the remainder choosing to move by roadwould be able to by-pass the city.

L. Uncertainties in the Project

3.22 Although experience of other ports in the region strongly points toa rapid rise in container traffic, it is conceivable, though not probable,that at Chittagong the growth might not materialize as expected or may evenbe reversed. In the unlikely event of such a development, the signs of theunfavorable trend would be evident during the early period when the interimcontainer facility is in operation, and there would be sufficient time toreview the situation and to postpone or cancel the procurement of the con-tainer handling equipment for MPBs and acquire instead equipment suitable forgeneral cargo, for which the new berths would then be used. The lay-out ofthe back-up facilities is flexible enough to make it possible to effect suchchange over. During negotiations agreement was reached that before invitingbids for MPB equipment, CPA would review the prospects for container trafficdevelopment and decide in consultation with the Association, on what equip-ment to acquire for the MPBs.

IV. ECONOMIC EVALUATION

A. Traffic Forecasts

4.01 In recent times, the volume of traffic handled at Chittagong Porthas been characterized by significant variability from one year to the next(Table 4), reflecting mainly the volatility of bulk imports. In particular,the volume of foodgrain imports has ranged from roughly one-fourth toone-half of total dry cargo tonnage, depending on the relative success orfailure of domestic foodgrain harvests. Other important, and somewhat vari-able, bulk imports are fertilizer, cement clinker and coal. General cargoconstitutes about one-third of dry cargo tonnage and has been relativelystable in recent years.

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4.02 Traffic forecasts for the period 1981/82-95/96 (Table 4) have beenestimated on the basis of commodity-wise analyses, described in the projectfile, whereunder import and export traffic volumes reflect differencesbetween domestic production and consumption. Domestic consumption estimatestake into account the growth of GDP and population, while domestic productionestimates reflect future output levels in the relevant subsectors. In par-ticular, foodgrain and fertilizer import projections have been estimatedwithin the framework of GOB's MTFPP. Given the operational constraints ofthe Port of Chalna (para 1.11), the Chittagong Port's share of imports andexports has been conservatively assumed to remain constant over the periodunder consideration. The resulting average growth rate for dry cargo trafficover the period 1981/82-1995/96 is about 3.7% per annum, which is conserva-tive when compared with a likely GDP growth rate of 4-5% per annum.

4.03 Ships calling at the port of Chittagong are beginning to bring insome container traffic, in amounts currently estimated at about 15,000 tonsper year. Although future levels of container traffic will depend, amongother things, on the provision by CPA of suitable container handlingfacilities, the experience of other ports in the region indicates that, evenin the absence of such facilities, container traffic is likely to increasesignificantly. The reasons for such trend are, among others, the strongresistance to and the high cost of handling break-bulk cargo in the ports ofdeveloped nations. Taking into account the volume and containerizability ofcargo traded between Bangladesh and its industrialized partners, it is con-servatively estimated that container traffic could grow to about 90,000 TEUor 600,000 tons per year toward the end of this decade. 1/ In the interestof Bangladesh's trade with developed countries, it is appropriate that thecountry's premier port should prepare itself to meet the needs of containertraffic th.rough the provision of berths and equipment designed to be equallysuitable for handling general cargo and container traffic.

1/ A significant proportion of container traffic will be general cargo,which has been one of the least volatile traffic categories in recentyears. The growth path of container traffic is projected (in thousandtons per annum) as 27 in 1981/82, 54 in 1982/83, 108 in 1983/84, 135in 1984/85, 201 in 1985/86, 268 in 1986/87, 335 in 1987/88, 469 in1988/89, and 600 in 1989/90 and thereafter. The average load per con-tainer handled at the port would be 6.7 tons. Estimated containertraffic of 600,000 tons in 1989/90 would be equivalent to about 20% ofall dry cargo tonnage not not handled at specialized bulk berths; thisis a conservative projection, since preliminary estimates suggest thatup to 1,500,000 tons of dry cargo would be containerizable annually by1990.

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B. Port Capacity Considerations

4.04 At present, port capacity is limited by several factors, includingthe number of berths, the persistently low cargo handling rates and theinadequate rules for traffic allocation between GCBs and specialized bulkjetties. If effective port capacity is to increase to meet future trafficlevels, CPA will have to improve cargo handling rates and/or construct ofadditional berths. In so far as increases in handling rates are concerned,various physical and institutional changes may be considered by CPA, includ-ing the procurement of handling equipment for general cargo and containers,the institution of labor training programs, speeding up of cargo clearance,and improvement of work shift patterns. The effect on port capacity ofincreases in handling rates courses of action is shown in Table 13 andChart 2.

4.05 It is estimated that, if cargo handling rates remain constant attheir present low levels, there would be a dramatic increase in berth dayrequirements to handle future traffic. Even if the long ship waiting timesassociated with a 90% occupancy are tolerated, as many as 27 berths (10 morethan today) would be required in 1990/91; and, if an occupancy of 80% is tobe reached, about 31 berths (14 more than today) would be needed in the sameyear. Assuming, however, that cargo handling rates will experience somemeasure of improvement so as to avoid the construction of a large number ofadditional berths, the following alternative scenarios are among the manypossible:

(a) If all target handling rates (para 4.07) except containerrates are achieved in 1993/94, it is estimated that 19berths (2 more than today) would be required to handlethe 1990/91 traffic at 90% occupancy; alternatively,21 berths (4 more than today) would be needed to loweroccupancy to 80%.

(b) If all target handling rates except container rates arereached in 1987/88, only 17 berths would be required tohandle the 1990/91 traffic, but occupancy would remainat a high 90%; alternatively, with 19 berths (2 morethan today) occupancy would be an acceptable 80% in thesame year, but this improvement would not last too longand occupancy would rise to 94% in 1993/94 as a resultof tratfic increases.

(c) If in addition to reaching target rates by 1987/88,container handling facilities and equipment are provided,these items would have an overall effect similar to thatof two additional berths; in particular, congestion levels

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would drop considerably, with occupancy remaining under90% unitil 1994/95.

C. Economic Justification

4.06 The main economic benefits resulting from the project are a com-bination of:

(a) reduced ship turnaround time, 1/ reflecting the factthat the average ship waiting time at the outer anchorageand the average ship time at berth will be lower withthe project than without it; and

(b) avoided construction of additional berths, which theproject will render unnecessary as higher handling rateswill increase the port's effective capacity.

4.07 The project's economic justification (Table 5) is predicated on thefollowing assumptions:

(a) cargo handling equipment, container facilities and labortraining provided under the project will result in asteady increase in handling rates, which will reach thefollowing target levels by 1987/88: 500 tons of generalcargo, raw jute or jute goods per berth-day; 800 tons ofiron and steel products per berth-day; 1,200 tons oftertilizer and cement per berth-day; 1,400 tons of foodgrain

1/ In order to estimate changes in ship turnaround time attributable to theproject, the GCBs/MPBs have been analyzed with the tools of queueingtheory. A model was formulated on the basis of generalized Erlang-k(Gamma) probability distribution functions for ship interarrival timesand for ship time at berth; under this approach the GCBs/MPBs system isparametrically defined by three variables only, namely k for interar-rival times, k for berth times and the number of berths. The chosenErlang-k (Gamma) functions among other things, do not impose the con-straint that the mean be equal to the standard deviation, and thereforeprovide a more accurate representation of queueing phenomena than thePoisson interarrival and random (negative exponential) service times.The model was calibrated on the basis of available 1979/80 port statis-tics, and subsequently applied to each year in the period under evalua-tion. Since no closed mathematical formulae can be derived for thecomputation of average waiting time under this model, an interpolationmethod was used, which is described in the project file.

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per berth-day; and 150 TEU of container traffic per berth-dayAgreement was reached duringnegotiations (para 3.20) that the above target cargo handlingrates would be achieved by 1984/85, which is feasible, andwill result in even greater benefits to Bangladesh (para4.09); concerning the without-project case, it is assumedthat CPA will find it necessary to effect institutionalchanges and purchase some new and replacement equipmentover the next eight years, and as a result cargo handlingrates will increase slowly, reaching target levels in1993/94, i.e. several years later than they would underthe project;

(b) if the project is not implemented, CPA would have to constructadditional berths to cater to increasing traffic, but only asfew as needed to keep the occupancy factor (traffic intensity)around 90%, which is representative of the congestion levelprevailing in recent years, although a 90% occupancy reflectsunacceptable port operating conditions, it has been used tocharacterize the without-project case so as to not overestimatethe benefits resulting from avoided berth construction; thefinancial cost of each additional berth is US$12 million,including a 56% foreign exchange component;

(c) a proportion of bulk traffic will be diverted away from GCBsand onto existing specialized bulk handling facilities, thusrelieving GCBs from an additional burden, specifically,agreement will be reached with CPA, the Food Ministry, BADCand bulk jetty operators, that bulk facilities will handle upto 800,000 tons of foodgrain and 250,000 tons of fertilizerinputs annually, as well as the entire volume of coal andcement clinker imports (para 2.29);

(d) the value of ship time is estimated at US$9,000 per ship day,which reflects the ship mix currently calling at Chittagong,and

(e) the shadow foreign exchange rate is 20% higher than theofficial rate.

4.08 For the estimation of the economic rate of return (ERR), it hasbeen assumed that the full savings resulting from avoided ship days at theouter anchorage may be attributed to the project, which reflects the factthat avoided surcharges would be of the same order of magnitude as the costof avoided ship days of the outer anchorage, this is so regardless of whatfraction of such savings is actually captured by CPA by means of its tariffstructure. On the other hand, only 25% of the savings resulting from avoidedship days at berth has been included as a project benefit, because such

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savings would only accrue fully to the country in the case of Bangladeshivessels (15% of total traffic) and in the case of foreign chartered vessels(10% of total traffic) which operate in a competitive environment and arelikely to pass the bulk of cost reductions on to shippers. Finally, theavoided cost of additional berth construction has also been included in thebenefit side. The savings from reduced cost of cargo handling have not beenincluded. The resulting base ERR is 23% and, as an indication of theproject's timeliness, the estimated first-year ERR is about 17%.

D. Sensitivity Analysis

4.09 To account for the effect of possible departures from the assump-tions used in the base case, economic rates of return have also beenestimated for the situations summarized below:

Base case 23%

If only 70% ot avoided ship waitingtime of outer anchorage is attributedto the project as a benefit 15%

If costs are 15% higher 18%

If benefits are 15% lower 17%

If costs are 15% higher and benetitsare 15% lower 12%

If the materialization of benefits isdelayed by two years 13%

If target cargo handling rates arereached by 1984/85 37%

4.10 The main fact brought out by the sensitivity analysis is thateither a two-year implementation delay or a 15%-cost-increase-cum-15%-benefit-reduction would result in about a 13-point reduction in theproject's ERR. Conversely, if CPA takes ali the steps required to reachthe target cargo handling rates by 1984/85, this would produce an increaseof about 10 points in ERR.

4.11 The risks associated with this project are not expected to begreater than those found in similar projects. The main risks would berelated to changes in the country's economy, particularly in food productionand balance-of-payments performance, which could have a depressing effect ontraffic volumes through the port of Chittagong. In this respect, however, it

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is estimated that reductions, even large, in the volumes of foodgrain, fer-tilizer, coal, cement and POL traffic would have a negligible effect on theproject, since those items will be handled almost exclusively at specializedtacilities (para 2.29). A reduction in the level of general cargo would havesome effect on the project but it is unlikely that general cargo volumeswould grow at a much slower pace than has been conservatively assumed. Con-tainer traffic forecasts have also been made on conservative assumptions(para 4.03); in the unlikely event of container traffic volumes are muchlower than forecast, there would be sufficient time to revise, postpone ordrop the proposed procurement of container handling equipment (para 3.22).

V. FINANCE AND EARNINGS

A. Introduction

5.01 CPA is a financially autonomous corporate entity. The principalactivities of the accounting and finance department are: (i) preparation ofbills related to vessels; (ii) preparation and maintenance of accountingrecords; (iii) preparation of budgets in respect of operational and capitalreceipts and expenditure; and (iv) preparation of interim financial reportsand annual financial statements. To perform its functions, the department isorganized in to two main sections, namely, accounting and finance and inter-nal audit. CPA follows accrual principles of accounting. All handling ofcash transactions has been transferred to local banks. CPA is exempt frompaying income taxes.

5.02 In the past CPA has taken prompt action to request needed tariffsand GOB has granted tariff increases to match increased cost of inputs. Thefinancial surpluses from its operations have enabled CPA to pay all its debtservice and make substantial contribution to development expenditure. Thelarge surpluses are appropriated to various funds.

B. Improvements in Accounting System

5.03 Several studies have been conducted in recent years (EWP/PriceWaterhouse 1981; NEI 1978; Louis Berger 1974 and others) which have includedassessments of CPA's accounts and finances. Those reports have madecriticisms regarding lack of a proper register of fixed assets and theirvaluation, worthless receivables and payables (including loans), doubtfuldebts, obsolete stocks, slow preparation of accounts, lack of proper audit-ing, poor management and budgetary control and tariffs being unrelated to thecosts of providing the several services to vessels and cargoes, becauseaccounts are not prepared in a way which facilitates ascertainment of costs.

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CPA has responded by making some improvements such as revising the deprecia-tion categories and rates, speeding up presentation of accounts, appointmentof professional auditors, making changes in budgetary control procedures,making a start with machine accounting and creating a new post for developingrates having special responsibility for tariffs and costs.

5.04 Although the pace of progress has been steady, further improvementsare needed. Under IDA's Technical Assistance Credit 872-BD an accountingand financial services and tariff structure study - Phase I (referred to inthis report as Accounting and Tariff study) was completed in April 1981. Theconsultants have recommended that: (i) CPA's accounting system be modifiedand adapted in order that revenues by service could be identified and matchedwith cost of providing the related service (cost accounting); (ii) CPA'stariff structure be simplified and rate levels established to reflect thecost of service provided; and (iii) training be provided to staff. UnderPhase II of the Accounting and Tariff study, the consultants will assist CPAin the implementation of these recommendations. Specifically fixed assetregister will be created, fixed assets will be revalued and a system forperiodic updating will be provided, accounting improvements includingwrite-off of obsolete and worthless items both on asset and liability side ofthe balance sheet will be accomplished, and cost accounting system imple-mented for instituting cost based tariffs. In developing tariff rates,consultants will give due attention to marginal cost pricing concepts andprovide on the job training to CPA staff who will later constitute CPA'scosting cell.

5.05 It is expected that two years will be required to achieve fullimplementation which is expected to start in May 1982. During negotiationsagreement was reached with CPA/GOB on a timetable with target dates forcompletion of the Phase II study and for the revision of tariffs and improve-ment of the accounting system in consultation with IDA.

C. Budgets and Audits

5.06 CPA must submit an annual budget to the Government for approvalwhich includes the revenue, current expenditure and capital expenditureestimates. Once approved by GOB it forms the financial plan for the ensuingyear. The budgeting process begins in January, six months in advance of thestart of the ensuing fiscal year (July 1) and ends with GOB approvalgenerally by end May. Annual budget is prepared on the basis of six monthsactual results of the current year. Budget also shows capital expenditureto be financed from port funds and non-port funds. For capital expenditurefinanced with non-port funds the approval of the Planning Commission isrequired (ADP - Annual Development Plan). CPA's financial planning which isnow limited to one year and needs to be improved to cover a period of fiveyears (para 2.11).

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5.07 Budgetary control is not sophisticated but it is effective due tothe application of a rigid pre-audit system which disallows any expendituresoutside the approved budget. Until recently, any expenditure over Taka 100had to be approved by the Chairman. Recently this has been changed andnew reasonable level of expenditures can be authorized and approved bydepartmental officers without reference to the Chairman. Annual budgetpreparation is satisfactory.

5.08 CPA maintains a competent internal audit department comprisingseventy-seven staff members who conduct financial, operational and managementaudits of a satisfactory professional standard. The useful role played bythe internal audit in protecting port assets would be enhanced if it reportedto the highest level of executive authority instead of to the Member Finance,as at present. Agreement was reached during negotiations that by October 1,1982, CPA would implement a plan of action satisfactory to IDA for arrangingthat its internal audit would report directly to the Chairman.

5.09 CPA Ordinance (1976) requires that accounts of the port authoritybe audited by at least two firms of chartered accountants and a joint auditreport is issued. Auditors are now appointed for a term of three years ascompared to previous practice of annual appointments. This change willprovide continuity and it is hoped that it would enhance overall quality ofaudit reports. The audit reports are generally thorough and are satisfactoryto IDA. In addition, the Auditor General of GOB also conducts audits of CPAaccounts, but his reports are behind in their coverage. During negotiationsagreement was reached that CPA would furnish audited statements and auditreports to the Association within six months after the end of each fiscalyear. However, for FY83 and FY84 when the implementation of the accountingimprovements would be in progress, a longer time of nine months would beallowed for this purpose. Also assurances were received from CPA that neces-sary corrective action will be taken on deficiencies pointed out in the auditreports.

D. Tariffs

5.10 CPA's tariff structure dates back from early years of ChittagongPort Trust. The tariffs are not cost based and follow the colonial patternin that charges against vessels are low and those against cargo are high.The structure is complex and time consuming to administer, and covers a widerange of services. The aim of CPA in setting tariff charges is to generatesufficient revenues to cover full cost of services provided. Even thoughthis practice has enabled CPA to generate sufficient surpluses, the tariffincreases over the years have not been based on costing individuai services,but probably influenced by overall increase in costs. Tarift rates atChittagong are generally considered low and are also low in comparison tothose of other ports in the region especially in respect of the vesselcharges.

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5.11 Since all port charges are payable in Taka, the shipping lines, themajority of whom are foreign have been reaping benefits from the decline inthe value of Taka which has fallen from US$0.132 in 1973 to US$0.055 in 1981.To avoid erosion of CPA's revenue from vessels due to adverse changes inexchange rate, agreement was reached at negotiations that vessel charges willbe linked to a major convertible currency.

5.12 Several revisions of CPA tariffs (1975, 76, 78 and '80) have beenmade since the formation of Bangladesh in 1971, and periodic tariff increaseshave averaged about 20% p.a. over the period FY77 to FY81. The charges onvessels have been increased at a higher percentage rate than those on cargo.The average revenue from cargo (excluding that on storage) grew by about 28%p.a. between FY77 and FY81 whereas during the same period the average revenuefrom charges against vessels increased by about 44% p.a. Thus charges onvessels now constitute about 28% of total revenue compared to some 20% pre-viously. The structure and rate level of tariffs will be further improvedwhen recommendations of the accounting and tariff study are implemented (para5.04).

E. Past Performance

5.13 CPA's actual revenue and expenditure accounts for the period FY77to FY81 are summarized below and detailed in Table 6. The balance sheets forthe corresponding period are shown in Table 7.

Account Head Actual Revenue and Expenditure Annual(in current Taka million) Growth

1976/77 1977/78 1978/79 1979/80 1980/81 rate %

Total Revenues 129.5 167.4 261.3 344.4 395.3 32.2Total Working Expenses 65.9 89.2 114.7 159.0 207.8 33.2Depreciation 10.5 9.4 17.8 36.4 42.2 41.6Total Operating Expenses 76.4 98.6 132.5 195.4 250.0 34.5Operating Revenues 53.1 68.8 128.8 149.0 145.3 28.6Interest Charges 14.0 9.5 9.2 6.8 6.1 (18.8)*Total Expenses 90.4 108.1 141.7 202.2 256.1 29.7Net Revenues 39.1 59.3 119.6 142.2 139.2 37.4Operating Ratio a/ 59.0 58.9 50.7 56.7 63.2

* Indicates reduction.a/ Total operating expenses as a percentage of total revenue.

5.14 CPA has been able to generate large surpluses over the years, andthe revenues by FY81 have registered an increase of about 200% over those of

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FY77. The revenue increases were mainly attributable to tariff and trafficincreases (12% p.a. during FY77 to FY81). CPA had its best results in FY80handling a record high of 6.2 million tons of cargo which resulted in gener-ation of the largest surplus of Taka 142.2 million.

5.15 Growth rates of some key cost items during FY77 to FY81 are shownin Table 8. Total expenses have grown at an average rate of about 29.7% p.a.Staff and labor, repairs and maintenance and administration which constituteabout 4U%, 50% and 10% of the total working expenses have shown averageannual increases of 36%, 30% and 32%, respectively. This has resulted in thetotal working expenses showing an average increase of 33.2% p.a. in currentprices. The increases are partly attributable to factors outside CPA'scontrol, such as inflation which has averaged about 12% p.a. over the fouryear period; salary increases authorized by GOB in 1978 with retroactiveadjustment; and large increases in the prices of fuel (which accounts for25% of CPA's bills for repairs and maintenance). On the other hand, staffstrength has increased by about 1.7% p.a. and CPA's management has beengenerous in granting staff benefits and allowances and paying higher ratesfor handling contracts. The justification for increases provided by CPA wasthat during the period immediately following the war of independence verylittle had been done to keep up with the rising costs and a lot of catchingup had to be done during the period FY77 to FY81. It is expected that ageneral slowing down in the growth rate of the cost of inputs would beexperienced in the coming years and this has been reflected in financialprojections. Except for the staff costs, the other reported working costsare low as shown by the working ratios during the period (Table 6).

5.16 Up to FY78 the depreciation charge was very low. However, in FY79CPA changed its practice, which resulted in substantial increase in thedepreciation charge for FY79 and subsequent years. The change involvedbroadening of rate categories and increase in depreciation rates. It rosefrom Tk 10.5 million in FY77 to Tk 42.2 million in FY81. This increasethough may be less than what is required on a replacement cost basis, none-theless has contributed to a small rise in the operating ratio from 59% inFY77 to 63.2% in FY81, which is still favorable.

5.17 The financial position of CPA has consistently been sound. CPA'sbalance sheet for FY81 shows a large amount in the investment account of Tk575.3 million which have resulted from earnings accumulated over the yearsby appropriation of surpluses into a number of reserve funds. These invest-ments which are entirely in the form of interest bearing bank deposits con-stitute about 30% of the total non-current assets of CPA and interest incomeearned on these amounted to Tk 31 million in FY81. The interest incomeearned on investments is included in respective funds. As these investmentsearned an average interest rate of about 9%, which was lower than the averageinflation rate of about 12% during the last few years, CPA would have faredbetter if the funds were used for development works instead of investing themin a bank account and allowing them to deplete in value. However, CPA could

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not take up such works as it had no access to foreign exchange. The cashreserves would contribute substantially to the local cost of the proposedproject. Currently with rise in interest rates in Bangladesh the port hasbeen earning an interest rate on its investments of about 12% on itsdeposits. CPA's debt/equity ratios have been consistently very favorable(Table 7). CPA has taken positive steps on the liability side of the balancesheet in that foreign loans are in FY81 reflected at the current exchangerate rather than the very old rate which was in use previously which resultedin understatement of the true liability.

F. Future Prospects

5.18 Table 9 shows forecast revenue and expenditure accounts of CPA forthe years FY82 to FY88 so as to cover project implementation period and oneyear of operation of the MPBs. The assumptions used for the financialprojections are detailed in Annex 2. In conformity with the practice fol-lowed by CPA, the projections do not provide for capitalization of interestduring construction period. The projections are summarized below:

during 1st yearForecast Revenues and Expenditure of CPA Operation

… ------…during project implementation period--------- of MPBs

Annual(in current Taka million) Growth

1981/82 1982/83 1983/84 1984/85 1985/86 1986/87 Rate % 1987/88

Total Revenues 444.0 534.4 598.,8 706.2 833.3 982.6 17.2 1,300.0Total Working Expenses 251.2 303.9 368.3 447.2 543.6 661.6 21.4 844.6Depreciation 43.2 51.8 57.0 62.7 69.0 76.0 12.0 213.0Total Operating Expenses 294.4 355.7 425.3 509.9 612.6 737.6 20.2 1,057.6Operating Revenues 149.6 178.7 173.5 196.3 220.7 245.0 10.3 242.4Interest Charges 5.8 32.3 86.1 132.8 176.7 201.8 103.4 200.0Total Expenses 300.2 388.0 511.4 642.7 789.3 939.4 25.6 1,257.6Net Revenues 143.8 146.4 87.4 63.5 44.0 43.2 (21.4)* 42.4Operating Ratio a/ 66.3 66.6 71.0 72.2 73.5 75.0 81.3

* Indicates reduction.a/ Total operating expenses as a percentage of total revenue.

5.19 Operating revenues are based on CPA's revised estimates for FY51.Future revenues have been projected on the conservative assumption that CPA'straffic will increase by about 3% p.a. and is in line with traffic forecasts(Table 4). A 25% tariff increase has been proposed by CPA in July 1981.That such tariff increase shall have been approved by GOB and made effectiveby CPA would be a condition of credit effectiveness. The revenue projections

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reflect the 25% increase for FY83 and thereafter a tariff increase of 15%p.a. for the period FY84 to FY87 and 30% for FY88. Under these conditionsrevenues would more than double between FY82 to FY87 showing a growth rate ofabout 17.2% p.a. The tariff increases assumed reflect the minimum requiredfor CPA to generate sufficient funds to meet all its commitment including 40%of its annual capital investment. The future tariff increase seemsreasonable when compared with the increases in the preceding years. Thelarger increase in FY88 could be reasonably collected through higher chargesagainst vessels using the new berths as they would benefit from faster tur-naround time. During negotiations, agreement was reached with CPA/GOB thatthe tariffs will be revised from time to time as necessary in order for CPAto generate sufficient funds to cover all its cash operating and maintenanceexpenses and debt service charges and contribute not less than 40% toward theannual average capital expenditures.

5.20 Expenses for the period FY82 to FY87 have been projected usingcurrent prices. Staff and labor cost are expected to increase by 15% p.a.,maintenance and repair cost to experience an increase of 25% p.a. andadministrative costs to register an increase of 20% p.a. Total workingexpenses indicate a growth rate of 21.4% p.a. The depreciation charge isexpected to increase from Taka 43.2 million in FY82 to Taka 76 million inFY87 and interest charges show a dramatic increase (103% p.a. over the periodFY82 to FY87) because of the necessary borrowing for the proposed project(Taka 1,350 million) from GOB, at an assumed rate of 14.0% per annum. Thustotal expenses are expected to show an increase of 25.6% p.a. The operatingratio would increase from 66.3% in FY82 to 75% in FY87 which is stillfavorable. The reason for the increase is because the tariff increasesprojected are relatively lower than the expected increases in expenses.

5.21 Forecast balance sheets for the period FY82 to FY88 are shown inTable 10. The financial projections have assumed that IDA Credit would beUS$60 million equivalent and that CPA reserves (USA35 m) and GOB's contribu-tion (US$15 m) would cover the local cost of capital expenditures. It isalso assumed that the proceeds of the Credit would be relent to CPA at 14.0%p.a. (which is in line with the current industrial lending rate and isestimated to be positive over the loan period) with a repayment period of 20years including 4 years of grace, and that the foreign exchange risk would beassumed by CPA. These terms of lending were agreed at negotiations (para3.10). As the proposed project is implemented, the debt/equity ratio isexpected to increase from 18:82 in FY82 to about 48:52 in FY87. Despite thischange the forecast balance sheets indicate a strong financial position forCPA from liquidity and capital structure standpoint.

5.22 Financial forecasts are most likely to be affected by variationin operating costs and accordingly sensitivity analysis was performed byincreasing these costs by 10% which indicates that the tarift increasesrequired would go up from 15% to 18% p.a. A reduction of 10% in costs would

-39-

bring down the required tariff adjustment to 12% p.a. These tariff adjust-ments would enable CPA to meet the cash generation requirements as outlinedin para 5.19.

G. Financial Resources

5.23 The investment program proposed for the six-year period 1981/82- 1986/87 is shown in Table 11. The period 1981/82 - 1984/85 covers the lastfour years of the Second Five-Year Plan (SFYP) and the two years 1985/86 and1986/87 will form part of the Third Five-Year Plan which is under considera-tion by GOB. The proposed investment program has been approved by CPA.Initially it included a provision for future dredging for maintaining adeeper access channel, which has been deleted. The reasons are that there isuncertainty with respect to future maintenance dredging due to its dependenceon the results of current trial dredging. Also, because of the need forsubstantial amount of foreign exchange to undertake this dredging, it isconsidered appropriate that it should be included in the investment plan onlyafter the prospects of its technical, economic and financial viability aremore clearly indicated. The impact of its inclusion would be higher tariffsto generate additional funds to recover the investment costs.

5.24 Proposed spending for the five-year period 1982/83 - 1986/87 duringwhich the proposed project is to be executed amounts to about Tk 2,628 mil-lion (in current Taka) and this amount has been used in the financialforecasts. Of this, the proposed project amounts to Tk 1,980 million, orabout 75% of the total investment program for the period. The balance ofTk 648 million is considered reasonable for normal capital works and replace-ments to be undertaken by CPA during the same period. The bulk of theforeign exchange required (40% of the total investment program) is for theproposed project and will be covered by the proposed IDA credit. Smallamounts of foreign exchange required for other items will be provided by GOBor through bilateral arrangements. The proposed investment program is ade-quate and is reasonable considering the financial resources of the port. Itmeets CPA's most critical needs which are for handling containers and main-taining normal capital expenditures for handling of general cargo. Agreementwas reached at negotiations with CPA on the investment plan for the period1982/83-86/87, outside of which CPA will not make any investments in excessof US$2 million equivalent in any fiscal year without prior consultation withIDA.

5.25 The forecast source and application of funds statement in Table 12shows that cash generation will be sufficient to meet CPA's requirements.During the period FY83 to FY87, in which proceeds of the proposed credit willbe utilized, the funds required by CPA and the anticipated sources of suchfunds are summarized as follows:

-40-

Takamillion US$ million %

Sources of funds:For Investment ProgramCPA internal cash generation 1,276 71 43IDA Credit 1,080 60 36GOB loan 612 34 21Sources of Funds - Total 2,968 165 100

Required FundsCapital Expenditure 2,628 146 88Loan Repayment 109 6 4Change in Working Capital 231 13 8Required Funds - Total 2,968 165 100

5.26 CPA would be able to generate about 43% of its total investmentrequirements out of internally generated funds. The balance would be metwith funds provided by IDA and GOB which would also cover immediate foreignexchange expenditures. During negotiations, it was agreed that CPA willincur additional debt only if debt service payments, including that on therelending of the proposed IDA Credit and on any new loans or credits obtainedby or made available to CPA, are covered 1.5 times by CPA's cash generationfrom operations.

5.27 Having regard to the satisfactory level of all financial indicators(working, operating and debt/equity ratios) as reflected in the financialprojections, the modest tariff increases required under the revenue covenantand the past Government action in approving tariffs, it is considered thatthe risks of failure to achieve forecast financial results are small. Theproposed project is financially feasible and CPA's financial position willcontinue to be sound.

H. Financial Aspects of Container Facilities

5.28 At present CPA does not have a separate tariff for its containertraffic. Under the accounting and tariff study Phase II (para 5.05), theconsultants will propose a rate structure for the interim period until theMPB's are completed. Also they will identify cost elements to be included indeveloping rates for container handling when facilities are completed. Thebroad objectives in setting tariffs would be to generate revenues sufficientto meet (i) cost of providing the services; (ii) the need for normal replace-ments and renewals of assets; and (iii) reasonable internal generation ofresources to finance future programs. A fund analysis made by Maunsellconsultants indicates that based on 70% ot utilization of the containerfacilities and providing for full cost recovery including a return on equity

-41-

of 12% p.a., the total gross charge per container would be about US$200(distributed through tariff in general) or US$20 per ton. The proposed rateis lower than current charges in ports in the developed countries, butslightly higher than in some ports in the region.

VI. AGREEMENTS REACHED AND RECOMNENDATIONS

6.01 During negotiations, agreement was reached on the following.

a) With GOB:

i) Import of fertilizer at Chittagong to be in bulk to theextent possible and bagging to be done locally (para 2.18);

ii) Release to CPA ot adequate amount of foreign exchangefor spares on a regular basis (para 2.19);

iii) Ali grain imports at Chittagong would be handled at the GrainSilo Jetty unless the imports exceed 800,000 tons per yearor are subjected to severe bunching of vessels; and all cementclinker and fertilizer raw materials would be whollyhandled at the CCJ and TSP jetties, respectively(para 2.29); and

iv) Proceeds of the Credit would be onlent to CPA under asubsidiary loan agreement on terms satisfactory to IDA(paras 3.10 and 5.21).

b) With CPA:

i) Making a careful assessment of the manpower requirements inthe different categories of staff and by December 1983,implementing a program satisfactory to IDA for correctingimbalances (para 2.09);

ii) CPA to reorganize its Planning Cell in a manner satisfactoryto IDA by January 1, 1983 (para 2.12);

iii) Extending the palletization scheme to more berths and adoptinga phased program for reducing railway movements and tracks inthe port area (para 2.18);

iv) Use of private workshops for major overhaul/renewal of cargohandling equipment (para 2.19);

-42-

v) completing necessary improvements to the port's electricalnetwork by December 31, 1983 (para 2.19),

vi) Adoption of revised system of workshift for dock workersand CPA staff by December 1, 1982 (para 2.21),

vii) Examination of the possibility of further reduction inthe number of licensed contractors and of adopting measuresto improve their cargo handling performance (para 2.22);

viii) Development and implementation, by June 30, 1982, of a plan ofaction acceptable to the Association to bring down thedwell time of cargo to less than 25 days (para 2.23);

ix) Implementation by June 30, 1983 of organizational changesin the operations and maintenance departments and placingof the maintenance of cargo handling equipment separatelyin the charge of a senior official, in a manner satisfactoryto IDA (para 2.24);

x) Organizing by November 1, 1982 a training program satisfactoryto IDA and arranging for a sufficient number of equipmentoperators to be trained by April 1, 1983 (para 2.25);

xi) Composition and the terms of reference of the recentlyconstituted Container Development Committee would bereviewed in consultation with IDA (para 3.02),

xii) Project implementation program (para 3.11);

xiii) Consultants, whose qualifications and experience, terms ofreference and terms of appointment would be satifactory toIDA would be appointed for detailed engineering, preparationof bid documents and for supervision of contracts and theprinciples and procedures of such appointments would bein accordance with the Bank Group's Guidelines (August1981) (para 3.13);

xiv) Compliance with monitoring requirements (para 3.19),

xv) Computation and use of efficiency indicators to begin byJanuary 1, 1983; and cargo handling rate targets to beachieved by June 1, 1984 (para 3.20);

xvi) Before inviting bids for container equipment for use at theMPBs, CPA would review prospects of container trafficdevelopments and decide in consultation with IDA as to whatequipment to acquire (para 3.22);

-43-

xvii) Timetable for the completion of the accounting and tariffstudy (Phase II), and for the revision of tariff proposalsand improvement of the accounting system (para 5.05);

xviii) By October 1, 1982, CPA will implement a plan of actionsatisfactory to IDA for arranging that Internal Auditwill report to the Chairman of CPA (para 5.08);

xix) Audited accounts and audit reports to be furnished to theAssociation within six months after the end of each fiscalyear; for FY83 and and FY84, however, a longer period ofnine months would be allowed for this purpose: CPA totake corrective action on points mentioned in auditreports (para 5.09),

xx) Tariff for services to vessels would be linked to a majorconvertible currency (para 5.11);

xxi) CPA to revise tariffs from time to time so as to generatesufficient funds to cover all its cash operating andmaintenance expenses and including debt service chargesand contribute not less than 40% toward the annual capitalexpenditures (para 5.19);

xxii) Investment Plan to be followed by CPA for the period 1982/83to 1986/87, and the condition that CPA would not make anyinvestment in excess of US$2.0 million on items outside theplan without prior consultation with IDA (para 5.24); and

xxiii) No new debts (other than those relating to the proposed project)would be incurred by CPA unless the debt service payments onthe current and new borrowing are covered 1.5 times by the cashgenerated by CPA's operations (para 5.26).

6.02 It is recommended that conditions of effectiveness for theproposed credit should be:

(i) Signing of the subsidiary loan agreement (para 3.10);

(ii) Appointment of the key members of the PIU, whosequalifications and experience would be satisfactoryto IDA (para 3.12);

(iii) CPA's obtaining vacant possession of all land abuttingthe MPB site (para 3.14);

-44-

(iv) GOB approval of Project Proforma (para 3.14);

(v) Tariff increase of 25% to be approved by GOB and madeeffective by CPA (para 5.19).

6.03 Based on the agreement reached on the matters indicated above, theproposed project provides a suitable basis for an IDA credit of US$60.0million equivalent to the Government of Bangladesh.

_ 45 - ANNEX 1Page 1

BANGLADESH

APPRAISAL OF CHITTAGONG PORT PROJECT

PORT EFFICIENCY INDICATORS

I. Data to be Collected

1. In order that Port Efficiency Indicators may be computed on a regularbasis, the following important data should be collected.

a) For each ship serviced at the port:

i) date and time of arrival in port;

ii) name, dead weight tonnage, length and draft on arrival of ship;

iii) date and time of start and end of lighterage operations (if any);

iv) date and time of arrival at berth and name of berth assigned;

v) date and time of departure from berth;

vi) periods when ship is idle at berth and reasons therefore;

vii) tonnage and category of cargo discharged and loaded;

viii) number of gangs and number of men in each gang employed in eachshift;

ix) number of shifts and overtime worked;

x) type, number and shifts of cargo handling equipment requested;

xi) type, number and shifts of cargo handling equipment was available.

b) For each transit shed and open storage area:

i) tons of cargo cleared within free period;

ii) tons of cargo remaining uncleared for more than 2 ,4 and 8weeks;

iii) No. of containers (TEUs) cleared within free period;

iv) No. of containers (TEUs) (full) remaining uncleared for morethan 2, 4 and 8 weeks;

-46 - ANNEX 1

Page 2

v) No. of containers (TEUs) (empty) remaining uncleared for morethan 2, 4 and 8 weeks.

2. From the above data, the following indicators should be derived eachquarter and compared with the targets shown in the last column below:

Target(to be achievedby June 1984)

a) Throughput per ship Total tonnage handledper day (of 2 shifts) divided by number of days

at CPA berth

Break-bulk general cargo 500 T/ship dayPalletized general cargo 700 T/ship dayBagged cargo 1,200 T/ship dayIron and Steel. 800 T/ship dayFertilizer 1,200 T/ship dayGrain 1,400 T/ship dayContainers 150 nos/ship day

b) Productivity Total tonnage handledTons per net gang hour divided by total gang time

(including overtime) lessstoppages not attributed tothe gang (e.g. weather,cargo/equipment not available etc.)Break-bulk general cargo 15 tons/gang/hrBagged cargo, fertilizer, 25 tons/gang/hrgrain 30 tons/gang/hrContainers 12 nos/gang/hr

not more than:c) Average Dwell Time Ton-days of cargo in 25 days for general cargo

storage beyond free 15 days for full containersperiod divided by total 25 days for empty containerstonnage stored

d) Equipment Availability Equipment hours supplieddivided by equipment hoursrequested 70%

- 47 - ANNEX 1

Page 3

e) Waiting Time Total time between arrival(hours/ship) and berthing of all ships

divided by number of shipsberthed

f) Service Time Total time at berth of all(hours/ship) ships divided by number of

ships

ANNEX 2- - Page I

BANGLADESHi

CHITTAGONG PORT PROJECT

Assumptions Made in Preparing Financial Forecasts

A. General

The financial projections in current prices cover the period1981/82-86/87 and account for increases in the traffic throughput andassume some reduction in the growth rates ot working expenses.

B. Revenue and Expenditure Forecasts (Table 9)

The base revenue figures consist of CPA's revised estimates forfiscal year 1981 based on nine months actual operating results. There-after the operating revenues are expected to be influenced by (i) anaverage expected annual growth of about 3% which corresponds to a 15 yearsaverage annual growth in the volume of traffic as shown in Table 4, and(ii) minimum increases in the general tariff rates required to preserve ahealthy financial position of the port. The projected increase in thecontainerized general cargo has not been treated separately since it isassumed that such cargo will pay approximately the same charge asnon-containerized cargo.

Uniform tariff increases effective July 1 of each fiscal year havebeen assumed across the board as follows:

Fiscal Year: 1983 1984 1985 1986 1987 1988

Tariff increase 25% 15% 15% 15% 15% 30%

With the exception of 25% increase in FY83, for which CPA hasrequested GOB approval, the tariff adjustments used in the forecasts arenot proposals but rather indications of the order of magnitude of theadjustments which will be required for CPA to maintain a reasonable finan-cial position and meet all its financial commitments.

Maintenance and Repairs

These costs recorded an average growth of over 30% per annumduring FY77 to FY81. Main inputs to such a growth were fuel costs andspares which increased at growth rates generally higher than the generalrate of inflation. In view of the anticipated stability of oil prices itis assumed that costs of fuel and spares in future will be rising at muchlower rates. Thus a growth of 20% per annum in the cost of maintenanceand repairs, combined with the growth in the volume of traffic is assumedto result in a composite average growth of 25% per annum. Cost ofmaterials is expected to grow at its historical record of about 25% perannum.

- 49 - ANNEX 2Page 2

Administrative Costs

These have been assumed to grow at about 20% per annum which isslightly lower than its historical growth.

Depreciation

Forecast figures were provided by CPA and were determined on thestraight line method using the following rates which have been in use byCPA consistently in the recent past. The rates are (i) civil works(2.5%); (ii) vessels and crafts (5%), (iii) plant and machinery (10%),(iv) electrical installations (10%); and (v) vehicles and trailers (10%).Since the fixed assets have not been revalued the depreciation charge maybe understated. The realistic values of depreciation will remain unavail-able until Phase II of the accounting study is completed. Depreciationbased on historical cost is reflected in the forecasts. These estimatesshould therefore be viewed as a very rough measure of what would be deter-mined as a sufficient provision for depreciation.

Interest Charges

The interest charge on all monies provided by GOB to CPA wereassumed to be 14.0% per annum with repayment period of 20 years, includingfour years of grace. The loan repayment is assumed to be in equalinstallments starting July 1987.

C. Balance Sheet Forecasts (Table 10)

It is assumed that since the new facilities, namely the multipur-pose berths and their related machinery and equipment will not be opera-tional until after 1986/87 when the project will be completed, all fixedassets created during the implementation period with the exception ofrenewals and replacements have been grouped under 'work in progress'.Their transfer to the block fixed assets for depreciation purposes willbe made at the beginning of fiscal year 1988. Some of the old claimswhich cannot be realistically collected are shown under "sundry advances","accounts receivable" and "accounts payable" headings. It is expectedthat these items will be written off as recommended by the auditors.Funds which are appropriated by CPA from gross surplus each year tovarious funds and changes in the working capital have now been reflectedin one account as cash.

-50- ANNEX 2Page 3

D. Capital Expenditure

The sources and applications of funds forecasts (Table 12) weredetermined on the basis of the investment program shown in Table 11. Theflow of borrowed funds as well as withdrawals from own reserves as shownin Table 12 were also based on the investment program.

E. Financial Statement Presentation

The projected financial statements have been prepared by themission and the presentation has been modified from the format used byCPA to conform to the more conventional way of presentation for clarity.

- - ANNEX 3

Page 1

BANGLADESII

CHIITTAGONG PORT PROJECT

Selected Documents and Data Available in the Project File

1. FeasibiliLy Study - Chittagong Port Development Project (September 1980):Maunsell Consulants, Australia, Volumes 1 and 2

2. Economic and Financial Justification Study - Chittagong Port DevelopmentProject (May 1980): Maunsell Consultants, Asutralia

3. Outline Equipment Specifications - Appendix B2, Volume 2 of Item 1 above

4. Outline Job Specifications - Appendix C - Volume 2 of Item 1 above

5. Outline Structure and Syllabuses of Training Courses - Appendix E4 of

Volume 2 of Item 1 above

6. Feasibility Study - Port of Chittagong (December 1974): Louis BergerInternational Inc. Volumes 1 and 2

7. Chittagong Port Entrance Study (May 1978) - Netherlands EconomicInstitute, Report and Annexes

8. Report on Accounting and Financial Services and Tariff Structure (April1981): Maunsell Consultants in association withEWP Associations and Price Waterhouse Associates

9. Worksheets: (i) Economic Analysis Sheets(ii) Price Contingency Computation(iii) Computer printouts of various Scenarios on financial

projections

BANGLADESH

CHITTAGONG PORT PROJECT

Cost Estimates

Takas Million --- ------ US $ Million ------

Item Description Quantity Local Foreign Total Local Foreign Total

A. Multipurpose Berths

Berth Structure 15,300 m2 198.90 255.60 454.50 11.05 14.20 25.25

2 Backup Facilities:Reclamation and Pavement 150,000 m2 81.00 27.00 108.00 4.50 1.50 6.00Custom Wall 1,530 m 1.80 - 1.80 0.10 - 0.10Patenga Road Relocation 900 m 3.24 - 3.24 0.18 - 0.18Container Freight Station 13,650 m2 32.76 14.04 46.80 1.82 0.78 2.60Office and Other Buildings 4,320 m2 17.10 8.64 25.74 0.95 0.48 1.43Garage and Workshop 1,800 m2 8.10 3.96 12.06 0.45 0.22 0.67Services and Utilities - 56.34 28.26 84.60 3.13 1.57 4.70

200.34 81.90 282.24 11.13 4.55 15.68 3 Container Handling Equipment: 24

Fork-lift Trucks - 30T 3 nos. 14.04 22.68 36.72 0.78 1.26 2.04Fork-lift Trucks - 25T 8 nos. 27.36 37.44 64.80 1.52 2.08 3.60Fork-lift Trucks - ST 8 nos. 2.88 5.76 8.64 0.16 0.32 0.48Fork-lift Trucks - 3T 15 nos. 5.40 8.10 13.50 0.30 0.45 0.75Wharf Mobile Cranes 35T x 40m 2 nos. 36.00 68.40 104.40 2.00 3.80 5.80Tractor-trailer Units 30T 8 nos. 8.64 12.60 21.60 0.48 0.72 1.20

94.32 155.34 249.66 5.24 8.63 13.87B. Cargo Handling Equipment

Interim Container FacilitiesRubber-tired Portal Cranes 35T 5 nos. 29.70 40.50 70.20 1.65 2.25 3.90Tractor-trailer Units 30T 21 nos. 18.90 37.80 56.70 1.05 2.10 3.15Fork-lift Trucks 30T 3 nos. 14.04 22.68 36.72 0.78 1.26 2.04

62.64 100.98 163.62 3.48 5.61 9.092 General Cargo Berths

i) Additional EquipmentFork-lift Trucks 3T 31 nos. 11.16 16.74 27.90 0.62 0.93 1.55Fork-lift Trucks 5T 7 nos. 2.52 5.04 7.56 0.14 0.28 0.42Tractors 25T 8 nos. 4.32 8.64 12.96 0.24 0.48 0.72Trailers 25T 35 nos. 12.60 18.90 31.50 0.70 1.05 1.75Mobile Crane lOT 1 nos. 1.44 3.06 4.50 0.08 0.17 0.25 g Mobile Crane 20T 2 nos. 3.60 7.20 10.80 0.20 0.40 0.60 @ 3Mobile Crane 40T 1 nos. 2.34 4.86 7.20 0.13 0.27 0.40

37.98 64.44 102.42 2.11 3.58 5.69

3 ii) Replacement EquipmentFork-lift Trucks 3T 30 nos. 11.52 17.28 28.80 0.64 0.96 1.60Tractors 6T 8 nos. 2.88 5.76 8.64 0.16 0.32 0.48Trailers 6T 16 nos. 2.86 5.76 8.64 0.16 0.32 0.48Mobile Cranes lOT 1 nos. 1.44 3.06 4.50 0.08 0.17 0.25Mobile Cranes 20T 1 nos. 3.60 3.60 5.40 0.10 0.20 0.30Mobile Cranes 40T 1inos. 2.34 4.86 7.20 0.13 0.27 0.40Spares 14.40 21.60 36.00 0.80 1.20 2.00

37.26 61.92 99.18 2.07 3.44 5.51

Carried Forward 631.44 720.18 1,351.62 35.08 40.01 75.09

--- Takas Million ------- ------- US $ Million ------

Item Description Quantity Local Foreign Total Local Foreign Total

C. Maintenance Facilities

i) Central Workshops (1)

Building 23.40 12.60 36.00 1.30 0.70 2.00

Equipment 2.34 3.60 5.94 0.13 0.20 0.33

Ancillaries 1.62 0.36 1.98 0.09 0.02 0.1127.36 16.56 43.92 1.52 0.92 2.44

ii) Zonal Workshops (4)

Buildings 4 4.86 2.34 7.20 0.27 0.13 0.40

Equipment 0.36 0.54 0.90 0.02 0.03 0.05

Ancillaries 4.50 0.36 1.26 0.05 0.02 0.07

6.12 3.24 9.36 0.34 0.18 0.52

D. Training Institute

Alteration to Building 3.78 1.80 5.58 0.21 0.10 0.31

Equipment 3.60 5.94 9.54 0.20 0.33 0.53 1

Ancillaries 4.50 1.26 5.76 0.25 0.07 0.32

11.88 9.00 20.88 0.6 0.50 1.16

E. Technical Assistance and Training

Training Advisors 204 m/m (108 m/m @ 10,000,

@ 96 m/m @ 3,000/-) 24.66 24.66 1.37 1.37

Overseas Fellowships 120 m/m @ 3,000/- 6.48 6.48 0.36 0.36

Container Operations Manual 12 m/m @ 10,000/- 2.16 2.16 0.12 0.12

Ports Management Information 12 m/m @ 10,000/- 2.16 2.16 0.12 0.12

System35.46 35.46 1.97 1.97

F. Engineering Services

i) 6% on Al - supervision 27.18 27.18 1.51 1.51

ii) 9% on A2, C and D - design

and supervision 25.02 25.02 1.39 1.39

iii) 2% on A3, B1, 2 12.24 12.24 0.68 0.68

64.44 64.44 - 3.58 3.58

G. Contingencies

I Physicali) 8% on Al and F (i) 20.16 18.36 38.52 1.12 1.02 2.14

ii) 20% on A2, C, D and F (ii) 34.20 43.02 77.22 1.90 2.39 4.29

54.36 61.38 115.74 3.02 3.41 6.43

2 Price168.84 168.74 338.58 9.38 9.43 18.81

00

Grand Total 900.00 1,080.00 1,980.00 50.00 60.00 110.00 lmX

I-.

BANGLADESH

C5ITTAGOJ8G PORT PROJECT

IMPLEMENTATION SCHEDULE

Fiscal Year 1982 1983 1984 1985 1986 1987

Quarter III IV I II III IV I II III IV I 11 III IV I IITIII IV I IT III TV

X,,j,,j ,. -il i -t l I I ~ ~~~LjI ..Credit Approval X .Credit Effectiveness .

MPB - Berth Structure

Prequalify bidders X .

Invite bidsOpen bids

I

Award contract tConstruction -K ----- ---- _____ ----- ---- ----- ----- -----

MPB - Back-up Facilities

Detailed engineering Xi

Prequalify bidders

Invite bids *Award contractConstruction x -- - -- - ---- ---- -- - -- - -- - --- - -- - - -----------__ t

MPB - Equipment |…- …

Invite bids Open bidsAward contract $

Manu facture/delivery .______ i

I.C.F. and GCB Equipment

Invite bids

Oen bidsAward contractManufacture/delivery ---- --------------------

Technical Assistance

Appoint Training ii

Advisers -------- |Conduct courses , - ---------- ---- ----- ----------- j

Container OperationsAppoint expert ----

Prepare Manual ----- ---lort Management Information

Source: Ilission EstimateOctober 1981

Table 3- 55 -

BANGLADESHAPPRAISAL OF CHITTAGONG PURT

ESTIMATED SCHEDULE OF DISBURSEMENTS

----- Disbursement in US$ 000 ----IDA Fiscal Yearand Quarter Ending During Quarter Cumulative

FY 1983

September 30, 1982 300 300December 31, 1982 1,000 1,300March 31, 1983 1,500 2,800June 30, 1983 2,000 4,800

FY 1984

September 3U, 1983 2,500 7,300December 31, 1983 2,700 10,000March 31, 1984 3,500 13,500June 3U, 1984 3,800 17,300

FY 1985

September 20, 1984 4,200 21,500December 31, 1984 4,500 26,000March 31, 1985 4,700 30,700June 30, 1985 4,300 35,000

FY 1986

September 30, 1985 4,100 39,100December 31, 1985 4,000 43,100March 31, 1986 3,700 46,800June 30, 1986 3,500 50,300

FY 1987

September 30, 1986 3,000 53,300December 31, 1986 2,500 55,800March 31, 1987 2,000 57,800June 30, 1987 1,200 59,000

FY 1988

September 30, 1987 500 59,500December 30, 1987 500 60,000

Source: Mission EstimateOctober 1981

Chittagong Port Proect

Traffic Through Chittagong Peort (000 Tons)

1977/76 - 1995/96

---------------- Actual ----------------- ---------------------------------------------------------- Projection ------------------------------------------------------------

76/7 77/8 78/9 79/80 80/1 81/2 82/3 83/4 84/5 85/6 86/7 87/8 88/9 82990 908 91/2 92/3 93/4 94/5 95/6

Raw Jute andJute Goods 224 215 184 171 183 226 233 241 248 250 253 256 259 262 264 267 270 273 277 278

Foodgrain 552 1,287 884 2,044 1,021 900 800 700 600 600 600 600 600 600 600 600 600 600 600 600

Fertilizer 91 333 537 439 236 395 367 403 482 470 505 553 536 532 584 619 656 696 737 782

Cement 92 18 153 311 247 223 244 262 254 276 276 296 315 331 354 361 377 402 416 442

CementClinker 21 239 175 245 182 220 230 240 250 250 255 260 265 270 270 270 270 270 270 270 0'

Coal 100 138 39 127 180 186 211 241 275 275 275 275 275 275 275 275 275 275 275 275

Iron and Steel(inrl. pig iron) 96 224 227 270 330 358 38B 422 457 496 538 584 634 688 732 780 831 885 942 1.003

General Cargoand other(Export andImport) 525 959 797 816 1. 0 7 1,009 1,083 1,161 1,247 1,339 1,437 1,513 1.594 1,679 1,769 1,863 1,963 2-068 2,180 2,297

Total Drv Car.o 1, ?01 3,413 2,996 4,423 3,457 3,517 3,556 3,670 3,833 3,956 4,137 4,337 4,478 4,637 4,848 S.035 5,242 5,469 5,697 5,947(EPp. and Imp.)

of which, ' on-taLier Traffic

(000 TEl) - - _ (2) (33 (9) (16 (20) (30) (40) (50) (70) (90) (90) (90) (90) (90) (90) (90)(000 Tons) - - (14) (27) (54) (108) (135) (201) (2681 (335) (469) (6011) (640) (600) (600) (600) (600) (600)

FOL (Export andimport) (encl.molasese) 1,557 1,569 1,489 1,809 1,870 1,940 2,010 2,090 2,170 2,250 2,300 2,340 2,390 2,440 2,480 2,530 2,580 2,640 2,690 7,740 D

Grand Total 3,258 4,982 4,485 6,232 5.327 5,457 5.566 5,760 5,983 6,206 6,437 6,677 6,868 7,077 7,328 7,565 7,822 8,109 8,387 8,687 .

Source: CPA and Appraisal MissionOctober 1981

BANGLADESH

CHITTAGONG PORT PROJECT

Economic Costs and Benefits

(Figures in US$ Million)

1982/83 1983/84 1984/85 1985/86 1986/87 1987/88 1988/89 1989/93 1990/91 1991/92 1992/93 1993/94 1994/95 1

COSTS

Capital Investment *WP (16.96) (33.60) (22.63) (17.63) (11.22) *WOP - - ( 5.8 ) - - - ( 5.8 ) - - -

WP - WOP (16.96) (33.60) (16.83) (17.63) (11.22) - 5.8 - - -

Additional Operating Cost ( 2.68) ( 2,68) ( 1.54) ( 1.54) ( 1.79) ( 2.33) ( 1.55) ( 1.65' ( 1.90) ( 1.92) ( 1.90) ( 1.92) ( 1.90)

Total Cost (19.64) (36.28) (18.37) (19,17) (13.01) ( 2.33) 4.25 ( 1.65) ( 1.90) ( 1.92) ( 1.90) ( 1.92) ( 1.90)

BENEFITS

100% of Avoided Waiting Time - 7.60 15.16 18.92 13.42 17.01 18.81 11.47 14.38 15.69 7.94 6.92 ( 1.83)

50% of Avoided Berth Time - 1.75 3.27 4.60 6.22 7.72 7.49 7.28 6.33 5.33 4.36 3.16 3.16

Avoided Berth Construction - - - 13.34 - - 13.34 - - 13.34 - 13.34 13.34

Total Benefits - 9.35 18.43 36.86 19.64 24.73 39.64 18.75 20.71 34.36 12.30 23.42 14.64

NET BENEFIT STREAM (19.64) (26.93) 0.06 17.69 6.63 22.40 43.89 17.10 18.81 32.44 10.40 21.50 12.74

ERR = 27%

W WP - With Project*WOP = Without Project

Source: Appraisal Mission

October 1981

- 58 -

TABLE 6

BANGLADESH

CHITTAGONG PORT PROJECT

CPA Revenue and Expenditure Accounts FY1977-81

(Figures in Current Taka Million)

1977 1978 1979 1980 1981

---------- Actual----------------------- EstimateRevenues

Vessels - Revenue 24.0 37.8 57.7 72.4 102.9

Cargo - Revenue 94.0 118.8 186.7 246.0 266.8

Port Revenues 118.0 156.6 244.4 318.4 369.7

Rent 4.6 4.8 4.3 7.1 6.2

Interest 11 2.3 3.2 7.1 13.5 14.0

Miscellaneous 4.6 2.8 5.5 5.4 5.4

Total Revenue 129.5 167.4 261.3 344.4 395.3

Working Expenses

Salaries and allowances 21.7 32.5 39.5 50.4 59.2Cargo handling 3.9 6.6 9.2 12.3 17.9

Maintenance and Repairs 23.0 29.4 34.3 55.6 78.8Materials 11.4 12.0 20.3 27.5 33.5

Administration 5.9 8.7 11.4 13.2 18.4

Total Working Expenses 65.9 89.2 114.7 159.0 207.8

Depreciation * 10.5 9.4 17.8 36.4 42.2

Total Operating Expenses 76.4 98.6 132.5 195.4 250.0

Interest charges 14.0 9.5 9.2 6.8 6.1

Total Expenses 90.4 108.1 141.7 202.2 256.1

Net Revenue 39.1 59.3 119.6 142.2 139.2

Working ratio 2/ 50.9 53.3 43.9 46.2 52.6Operating ratio - 59.0 58.9 50.7 56.7 63.2Interest coverage 4/ 4.5 8.2 15.9 27.3 30.7

1/ Does not include interest income earned on reserve fund investmentsnamely depreciation reserve fund, revenue reserve fund and sinking fund investments.

2/ Total workinR exDenses as percentaRe of total revenue.

3/ Total operaLing expenses as perceataie of to.al revenue.

4/ Total revenue less working expenses divided by interest charges.

Source: CPA/Mission

October 1981

-59- TABLE 7BANGLADESn

CHITTAGONG PORH PROJECT

CPA Balance Sheets as of June 30

(Figures in Current Taka Million)

1977 1978 1979 1980 1981

FIXED ASSETSLand. buildings and civil works 175.2 402.3 435.5 451.3 531.4

Vessels and crafts 118.7 157.3 249-5 257.2 268.9Vehicles, eachinerv and esuipsent 28.6 85.3 123.6 199.7 223.0Works in Progress 349.1 135.0 187.6 199.4 239.8

Total net fixed assets 671.6 779.9 996.2 1107.6 1263.1

OTHER NON-CtRRENT ASSETSInvesteents of reserve funds 358.2 322.7 368.4 471.7 575.3Securitv dewosits 0.3 0.3 0.3 0.2 0.2

Sundry advances 65.7 63,9 68-9 76.6 101.9

Total non-current assets 424.2 386.9 437.6 549.5 677.4

Total Long-Term Assets 1095.8 1166.8 1433.8 1656.1 1940.5

CllRRENT ASSETSStores and other inventorY 12.6 6.5 7-4 9.2 13.7Accounts receivable 36.6 44.9 49.7 52.1 99.3

Cash on hand/in Bank 0.7 1.3 1.1 1.4 2.0

Total current assets 49.9 52.7 58.2 62.7 115.0

TOTAL ASSETS 1145.7 1219.5 1492.0 1718.8 2055.5FINACED BYESUITIES

GOB contribution 369.8 505.3 608.9 762.9 1000.4Retained Earnings 36.7 75.9 135.4 135.6 272.5Reserves 336.7 289.2 297.6 356.6 334.9

Total Eauities 743.2 870.4 1041.9 1255.1 1607.8

LONr-TERM LIABILITIES0B Loans 136.6 116.4 116.3 116.2 116.1

Foreign Loans 169.5 187.4 274.3 275.6 279.5Security deposits 3.0 3.0 2.8 2.4 3.1

Total long-ters liabilities 309.1 306.8 393.4 394.2 398.7

CURRENT LIABILITIESBank overdraft 40.9 2.4 3.4 4.6Accounts Payable 52.7 42.3 54.4 66.1 44.5

Total current liabilities 93.6 42.3 56.8 69.5 49.1

TOTAL EQUITIES AND LIABILITIES 1145.9 1219.5 1492.1 1718.8 2055.6

Liouid Ratio 0.4 1.1 0.9 0.8 2.1

Current Ratio 0.5 1.2 1.0 0.9 2.3

Debt to Eouity Ratio 0.4 0.4 0.4 0.3 0.2

* Provisional

Source: CPAOctober 1981

BANGLADESH

CHITTAGONG PORT PROJECT

Key Cost Items as Percentages

of Total Working Expenses

(Current Prices)

Estimate1976-77 1977-78 1978-79 1979-80 1980-81

(a) Total Working Expenses 100.0 100.0 100.0 100.0 100.0

Salaries and Allowances 32.9 36.5 34.4 31.7 28.5

Cargo Handling - Labor Cost 5.9 7.4 8.0 7.7 8.6

Maintenance and Repairs 34.9 32.9 29.9 35.0 37.9

Materials 17.3 13.4 17.7 17.3 16.1 %

Administration 9.0 9.8 10.0 8.3 8.9 0

Key Cost Items as Percentages

of Total Revenues

Estimate1976-77 1977-78 1978-79 1979-80 1980-81

(b) Total Working Expenses 50.9 53.3 43.9 46.2 52.6

Depreciation 8.1 5.6 6.8 10.6 10.7

Total Operating Expenses 59.0 58.9 50.7 56.7 63.2

Interest Charges 10.8 5.7 3.5 2.0 1.5

Total Expenses 69.8 64.6 54.3 58.7 64.8

Net Revenue 30.2 35.4 45.7 41.3 35.2

Source: CPA Data and Mission Estimates

October 1981 t0

BANGLADESH

CHITTAGONG PORT PROJECT

CPA Income and Expenditure Forecasts

For the Period FY1982-88

(Figures in Current Taka Million)

-------------------Project Implementation Period…---------… - Operation*

1981/82 1982/83 1983/84 1984/85 1985/86 1986/87 1987/88

REVENUESCharges to Vessels 106.0 136.7 161.3 190.4 224.6 265.1 352.6Charges to Cargo 274.8 354.5 418.3 493.6 582.5 687.3 914.1

Port Revenues 380.8 491.2 579.6 684.0 807.1 952.4 1,266.7

Rent Income 7.2 8.2 9.2 10.2 11.2 12.2 13.3Interest Income 50.0 28.0 - - - - -Miscellaneous Income 6.0 7.0 10.0 12.0 15.0 18.0 20.0

Total Income 444.0 534.4 598.8 706.2 833.3 982.6 1,300.0 >

EXPENDITURESSalaries and allowances 68.1 78.3 90.0 103.5 119.1 136.9 157.4Cargo Handling 20.6 23.7 27.2 31.3 36.0 41.4 47.6Maintenance and Repairs 98.5 123.1 153.9 192.4 240.5 300.6 375.7Materials 41.9 52.3 65.4 81.8 102.2 127.8 198.1Administration 22.1 26.5 31.8 38.2 45.8 54.9 65.8

Working Expenses 251.2 303.9 368.3 447.2 543.6 661.6 844.6

Depreciation 43.2 51.8 57.0 62.7 69.0 76.0 213.0

Operating Expenses 294.4 355.7 425.3 509.9 612.6 737.6 1,057.6

Interest Charges 1/ 5.8 32.3 86.1 132.8 176.7 201.8 200.0

Total Expenses 300.2 388.0 511.4 642.7 789.3 939.4 1,257.6

Net Income 143.8 146.4 87.4 63.5 44.0 43.2 42.4

Working Ratio 2/ 56.6 56.9 61.5 63.3 65.2 67.3 64.9Operating Ratio 3/ 66.3 66.6 71.0 72.2 73.5 75.0 81.3Interest Coverage 4/ 33.3 7.1 2.7 2.0 1.6 1.6 2.3

* The financial forecast for 1987/88 includes first year of operationof MPBs.

1/ CPA does not capitalize interest and this practice has been conformed toin the financial projections.

2/ Working ratio is working expenses divided by total income3/ Operating ratio is operating expenses divided by total income4/ Total income less working expenses divided by interest charges

Source: Mission EstimateOctober 1981

BANGLADESH

CHITTAGONG PORT PROJECT

CPA Balance Sheet Protections as of June 30

(Figures in Current Taka Million)

1982 _983 1984 1985 1986 1987 1988

FIXED ASSETSFixed Assets 1,103.3 1,110.1 1,118.3 1,131.3 1,153.6 1,179.6 3,950.8Depreciation 43.2 51.8 57.0 62.7 69.0 76.0 213.0Works in Progress 484.0 1,056.2 1,763.2 2,217.1 2,546.5 2,752.2 100.0

Total Net Fixed Assets 1,544.1 2,114.5 2,824.5 3,285.7 3,631.1 3,855.8 3,837.8

OTHER NON-CURRENT ASSETSInvestments of Reserve Funds 575.3 312.1 - - - - -Security Deposits 0.2 0.2 0.2 0.2 0.2 0.2 0.2

Sundry Advances 101.9 101.9 101.9 101.9 101.9 101.9 101.9

Total Non-Current Assets 677.4 414.2 102.1 102.1 102.1 102.1 102.1

Total Long-Tern Assets 2,221.5 2,528.7 2,926.6 3,387.8 3,733.2 3,957.9 3,939.9

CURRENT ASSETSStores and other Inventory 15.5 20.0 40.0 60.0 70.0 75.0 75.0Accounts Receivable 1/ 60.0 65.0 80.0 85.0 90.0 95.0 95.0

Cash on Hand/in Bank 5.5 50.0 144.3 104.9 149.3 177.0 160.4

Total Current Assets 81.0 135.0 264.3 249.9 309.3 347.0 330.4

TOTAL ASSETS 2,302.5 2,663.7 3,190.9 3,637.7 4,042.5 4,304.9 4,270.3

Financed By:Equities:

GOB Contribution 1,094.6 1,094.6 1,094.6 1,094.6 1,094.6 1,094.6 1,094.6

Retained Earnings 751.3 897.7 985.0 1,048.5 1,092.5 1,135.6 1,178.0

Total Equities 1,845.9 1,992.3 2,079.6 2,143.1 2,187.1 2,230.2 2,272.6

LONG-TERM LIABILITIESGOB Loans 116.1 116.1 216.1 368.1 548.1 728.1 728.1

Foreign Loans 272.3 476.8 812.1 1,035.4 1,209.2 1,243.5 1,166.5

Security Deposits 3.1 3.1 3.1 3.1 3.1 3.1 3.1

Total Long-Term Liabilities 391.5 596.0 1,031.3 1,406.6 1,760.4 1,974.7 1,897.7

CURRENT LIABILITIESBank OverdraftAccounts Payable 65.1 75.4 80.0 88.0 95.0 100.0 100.0

Total Current Liabilities 65.1 75.4 80.0 88.0 95.0 100.0 100.0

TOTAL EQUITIES AND LIABILITIES 2,302.5 2,663.7 3,190.9 3,637.7 4,042.5 4,304.9 4,270.3

Liquid Ratio 2/ 1.0 1.5 2.8 2.2 2.5 2.7 2.6

Current Ratio 3/ 1.2 1.8 3.3 2.9 3.2 3.5 3.3

Debt to Equity Ratio 4/ 0.2 0.3 0.5 0.7 0.8 0.9 0.8

1/ Only partial amount of this account represents trade receivable,substantial portion is non-trade receivable.

2/ Current assets less inventory divided by current liabilities/ Current assets divided by current liabilities4/ Total long-term liabilities divided by total equities

Source: Mission EstimatesOctober 1981

BANGLADESH

CHITTAGONG PORT PROJECT

CPA's Investment Program FY1982-87

(Figures in Current Taka Million)

Budget ------------------------ Forecast ………-------- ------- TOTALName of the Project 1981-82 1982-83 1983-84 1984-85 1985-86 1986-87 1982/83-86/87

1. Reconstruction of Transit Sheds 20.00 25.00 22.00 20.00 - - 67.002. Workshop and Slipway 17.20 20.00 10.00 - - - 30.003. Construction of Lighterage Jetty 7.50 20.00 - - - - 20.004. Rehabilitation of Railway Track 7.50 30.00 - - - - 30.005. Construction Explosive Jetty 10.00 30.00 - - - - 30.006. Procurement of Vessels and Crafts 20.00 15.00 20.00 - - - 35.007. Multipurpose berths - IDA Project - 411.20 637.00 420.30 315.80 195.70 1,980.008. Rehabilitation of Eight Jetties 14-17 - - - 3.6 3.6 - 7.209. Construction of Two Lighthouses 5.00 4.00 3.00 - - - 7.0010. Expert Services for Operating,

Accounting and Financial Services 2.00 2.00 - - - - 2.0011. Improvement of Lighting in the

Port Area 5.00 5.00 5.00 - - - 10.00 L12. Dredging 1/ 130.00 - - - - - -13. Embayment Works to Jetty No.1 20.00 10.00 10.00 10.00 10.00 10.00 50.00

TOTAL - ADP Approval Required 244.20 572.20 707.00 453.90 329.40 205.70 2,268.20

14. Capital Works, Replacements andRenewals 80.00 50.00 60.00 70.00 85.00 95.00 360.00

GRAND TOTAL 324.20 622.20 767.00 523.90 414.40 300.70 2,628.20

Source: Mission Estimates a09October 1931

Notes: 1/ One item dredging for the period 1982/83 onwards has been excluded from theinvestment plan as its execution is dependant on success of the trial dredging currentlyunderway under the Fertilizer Transport Project. The above investment plan has beenapproved by CPA.

BANGLADESH

CHITTAGONG PORT PROJECT

CPA Sources and Applications of Funds Forecasts

For the Period FY1982-88

(Figures in Current Teka Million)

1981/82 1982/83 1983/84 1984/85 1985/86 1986/87 1987/88

Sources

Net income 143.9 146.4 87.3 63.5 44.0 43.1 42.4

Depreciation 43.2 51.8 57.0 62.7 69.0 76.0 213.0

Surplus withdrawal - - 263.2 312.1 - - - -

Total internal cash generation 187.1 461.4 456.4 126.2 113.0 119.1 255.4

GOB Grant 94.2 - - - - - - O

Proposed IDA credit - 211.6 342.7 230.8 182.5 112.5 X

Other foreign loans - - - - - -

Local loans - - 100.0 152.0 180.0 180.0 _

Total longterm debt - 211.6 442.7 382.8 362.5 292.5

Total sources 281.3 673.0 899.1 509.0 475.5 411.6 255.4

Applications

Proposed IDA project - 411.2 637.0 420.3 315.8 195.7 _

Other capital investments 324.2 210.8 130.0 103.6 98,6 105.0 195.0

Total investments 324.2 622.0 767.0 523.9 414.4 300.7 195.0

Local loan repaymentsForeign loan repayments - World Bank - - - - - 65.5 67.0

Foreign loan repayments - Other 7.2 7.3 7.4 7.5 8.7 10.7 10.0

Total repayment 7.2 7.3 7.4 7.5 8.7 78.2 77.0

Working capital change (50.1) 43.7 124.7 (22.4) 52.4 32.7 (16.6)

To tal annlications 281.3 673.0 899.1 509 _ 41i.6 255.4tdj

Source: Mission EstimateOctober 1981

- 65 - Table 13

BANGLADESH

APPRAISAL OF CHITTAGONG PORT

Effect of Alternative Investments on Effective Port Capacity

82/3 84/5 87/8 90/1 93/4 95/6

Dry Cargo Tonnageat GCBs/MPBs only(000 tons) 2065 2438 2952 3453 4074 4552

Berth dayrequirements (Case A 5494 6375 7663 8928 10440 11598

(Case B 5494 5631 5898 6157 6495 7215

(Case C 5494 5009 4432 4954 5895 6615

(Case D 5494 5125 4767 5554 6495 7215

Note: Case A: If handling rates remain constant at present levels.Case B: If handling rates increase steadily and reach target

levels in 1993/94; container facility is not provided[without-project case].

Case C: If handling rates increase steadily and reach targetlevels in 1987/88; container facility is provided[with-project case]

Case D: If handling nets increase steadily and reach targetlevels in 1987/88; container facility is not provided.

Source: Appraisal MissionOctober 1981

BANGLADESHSTAFF APPRAISAL REPORT

CHITTAGONG PORT DEVELOPMENT PROJECTOrganization of the Chittagong Port Authority (CPA)

0-,,~~~ ~ ~ ~ ~ ~ CHARMNO

I I~~~~~-

|mn Offw- Meme l l i X

Shpp,~g

Dep_ty Chief s |perDock Ma enr

Eeg her _ Worktflop Ori2

BANG LADESHCHITTAGONG PORT PROJECT

PORT CAPACITY SUPPLY AND DEMANDBerth-day Supply

and Demand at Port

12,000 Case A

11,000

10,000

9,000 _

8,000 _

Cases B and D I7,000 Case C

............... . =... 90% Occupancy Berth-day Supply under6,000 -

the Project, i.e................... ....... ............... 80% Occupancy 17 Berths before 1986/87

19 Berths as of 1986/875,000 1...........

4,000 -

3,000 Note: Cases A, B, C and D are described in Table 13

2,000 _ Demand for Berth-days

...... Supply of Berth-days1,000 _

1982/83 1984/85 1986/87 1988/89 1990/91 1992/93 1994/951983/84 1985/86 1987/88 1989/90 1991/92 1993/94 1995/96

YEAR World Bank-23355

Ili,

IBRD 16051 R, A.I N C I A 9]~.t91-4S

9 1. 52 FEBORUARY 1982

INt. N Th,e ttta h-a bea po,op.ed by thef h _ > Wotrd B-at eff -C- y t,othe - -een,- of the--ee...o

<S ~~~~~~~~~~the eport 'n oh,ch ,t atta-hed

I,1_-2-2 hTOe de'noin.n22Cons n.ed and the 22-2-f' ~ ' .- _ do oro - opty on the pr of . C IheT

Wortd Ban. a-d tn affb,et- any Sadarghot-j ) fndontent on the teettatus Sfo5ff| I

BANGLADE S H r C eteve h Ouch bno aetJ--

I f \k, { \ + F--ip~~~~~~~~ Chittagong Z+

rNOIA I, ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~~UIIt. I ! .^ I f PA 9 f f i c e G* 75 M. fs V tln cto , /

75 K _** BLR A _rns ..

91 ,144'-.... .- ~~~~ ~ ~ ~ ott., ¶SRMAl Basel \ltn 1

- ~ ~ . -. mn\

| \ \0<¢~~~~~~~~~~~~~~~~~~Noner boon y I

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! - - - \ g X > ~~~~~~~~~~~~~~~~BendK22t16' FUTURE srgo 22-16'

Port limit IIIDUSTRIAL- ------ SITE\ hta c

Pciteng/ BANGLADESH

CHITTAGONG PORT PROJECTPORT FACILITIES

Project site-- 7 Teatotnp -. . -" Jetties

,- . M i d dI e : T Training wallsIsland ------ Depth contours - fathoms

lilt 11 - .-. -MudOtt^'B@' lil'l|te Boo ... - -Swamp

Roads

-e- --.-- Railway. -N t----Port limit

L 2.~2 .2 \\ - 22'12

MILES~~~~~~~Ig ~ ~ ~ ~ ~ ~ ~ _ . .~~~~~~~~~~~K LOAAETER; 0 1 2 3

- ~~~~~~~~~~~~~~~~IhAL E S O 1 2

19t'4J' 9148' 91-52

f I~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~BRD 16052RBANGLADESH (fFEBRUARY 1982

CHITTAGONG PORT PROJECT /GREXISTING FACILITIES ANDN / Q MULTIPURPOSEPROPOSED DEVELOPMENT BERTHS LAYOUT

I!~~~~N IPR UHRT--- STATIONAN

POTATORFRY e 2TANSIT SHED 'Zz

CUSTOM HOUSE ( &D7 1 ~/CNTIESBEKB~(7 ( ~~~~~~~~~~~~~~~~~~~~~NON STANDAD AND

ON ~~~~~~~~~~~~~~~~~~UNITISED CARG IMPORS

7 - (50 / 114

N- ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~~~~IN ADR N

''E l1

U~~~~~~~~~~~~~~~~~~~~~~~~~NITISRG CARGO AND1-7 Proiect Areo ~ ~ * MPOTSWHEELED VEHICLES

'~~' 71 Praieot Area T~~~\\ IMPORTS CONIAINERNS, z7/ExstngShed '5 QPETNON

Se Existing ,,n~~~~~~~~~~~~~~~~~~~ S~~TANDARD& '5

0½~ //~' -~7~A) 57,/li ERShed Under Construction '•\\UNITSED -

F~0Other Buildings CAORGO

RailwaysPort Authority Boundary

/ ME T/PStRQSF f1/T'S i~~ 1' 200 400 600 Boo

\,~/,~;;/E E?AUFQ M~P~Gpto ~ %BANGAMIETER/ CR U>LK NONSADARD

EXOC~~~~1~N

TE,s stan Era Been prapat~~~~d RE the ~dK 1AND,UNITUR

the oorwsntenoe rPsOe readers oP E,GCATED CARGOIMPORT

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hoodaoa how o tOs ap STCKIG REA' any tn/ttsp orasp sdoraStast I / RIER

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: 0 S o H i iS jat S i | X . 0,, gz .: X X~~~~~~~~~~~~~~~~~~~~~~~~~~Hb .,

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I ~ ~~~~~~~~~~~~ Sb nf R):2Z YD A 1 P4 U

r , - /; h>R TRAN~~~~~JSSORE 0 5i .~~~~ 1 T '~~~~~~~~~~~~~~~~~~'>fU Sl.* Us.1 f5 rI Ost ,\,,<J

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