Document of The World Bank

FOROFFICIAL USE ONLY Public Disclosure Authorized

ReportNo. 6294-MAG

REPORT Public Disclosure Authorized STAFF APPRAISAL

MADAGASCAR

PORTS REHABILITATIONPROJECT Public Disclosure Authorized

November 14, 1986 Public Disclosure Authorized

TransportationDivision Eastern and Southern Africa Regional Office

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

Unit Malagesy Franc (FMG) US$1.00 FMG 630 a/ FMG 1 million US$1,587 a/

WEIGHTS AND MEASURES: METRIC

1 meter (m) 3.28 feet (ft) I cubic meter (m3) 35.29 cubic feet (cu.ft) 1 kilometer (>I) 0.62 mile (mi) 1 square kilometer (km2) 0.386 square mile (sq.mi) 1 hectere (ha) 2.47 acre (ac) 1 kilogram (kg) 2.2 pounds (lbs) 1 metric ton (m ton) 2,204 pounds (lbs) 1 liter (1) 0.26 US gallons (gal)

ABBREVIATIONS

CCCE - Caisse Centrale de Cooperation Economique CMN - Compagnie Malgache de Navigation DAC - Direction de l'Aviation Civile, de la Mari.e Marchande, et de la Meteorologie, MTRT DGP - Directeur General du Plan FAC - Fonds d'Aideet Cooperation MC - Ministry of Commerce MPARA - Ministere de la Production Agricole et de la Reforme Agraire (Ministry of Agriculture) MTP - Ministere des Travaux Publics (Ministry of Public Works) MTRT - Ministere des Transports, du Ravitaillement et du Tourisme (Ministry of Transport, Supplies and Tourism) NTP - National Transport Plan PIP - Public Investment Program RNCFM - Reseau National des Chemins de Fer Malagasy (Madagascar National Railway) SEPT - Societe d'Exploitation du Port de Toamasina (Toamasina Port Authority) SMTM - Societe Malagasy des Transports Maritimes TSM - Transport Sector Memorandum

Fiscal Year

January 1 - December 31

a/ See para 3.20 (M) FOROMCIAL Usr ONLY

MADAGASCAR

PORTSREHABILITATION PROJECT

STAFFAPPRAISAL REPORT

Table of Contents

Pate No.

I. THE TRANSPORT SECTOR

A. Geographicand EconomicSetting...... 1 B. The Transport System...... 9999 2 C. Transport Sector Management...... 4 D. Transport Policy ...... 5 E. SectorInvestment Planning ...... ,.....6 F. BankGroup Role in Transport...... ,...7 G. Rationalefor Bank Involvement...... ,...... 7

II. THE MARITIMESUBSECTOR

A. InternZationalShipping 8 B. CoastalShipping ... 8 C. ShippingFleet ...... 9 D. ThePot9

III. THE PROJECT

A. ProjectObjectives ...... 16 B. ProjectScope ...... C. Project Description...... 17

D. Cost Estimates 999999.99 ...... 19

E. Financing..... 999999999.9.9...... 2 F. ProjectImplementation and Monitoring...... 22 G. Procurement...... ,...... 23 H. Disbursements...... ooo..o...o.ooo..ooo..o.o...24 I. Env'ronmental Aset 27 ......

IV. ECONOMICEVALUATION

A. GeneralObjectives ...... o.o...... 28 B. Forecastof FutureTraffic...... 29 C. NavigationAids and Shipping ...... 30 D. Cargo HandlingImproveihents and Dredging...... 31 E. Economic Rate of Return...... F. Rik .P32

SilvioCapoluongo (Mission Leader), B. Bostrom(Senior Economist), A. Litvak (PortEngineer), C. Tran-Luu(Training Specialist), J. Curien and J. McCaul (Consultants)prepared this report. Dr. Mario D. Fenyo assistedin Its preparation.

This document has a restricted distribution and may be used by recipients only in the performance of their officialduties. Its contents may not otherwise be disclosedwithout World Bank authorization. M)

V. FINANCIALEVALUATION

A. Societed'Exploitation du Port de Toamasina(SEPT) ...... 34 B. The Ports Budget...... 37 C. The CargoHandlingCompani...... 38 D. Financial Objectives...... E. Financial Covenants ...... 39

VI. AGREEMENTSREACHED AND RECOMENDATION...... #41 ANNEXES

1.1 PublicInvestment Plans for the TransportSector 2.1 Develonmentof Port Traffic 2.2 Developmentof ToamasinaTraffic 1978-84 2.3 CabotageFleet as of November1985 2.4 Port Installations 2.5 PhysicalDescription of the Port Sector 2.6 New Organization 2.7 OrganizationChart-September 5 1985 2.8 SEPT Action Plan and PerformanceIndicators 3.1 Cost Estimates 3.2 TrainingProgram 3.3 ImplementationSchedule 3.4 PerformanceIndicators for Ports Other than Toamasina 4.1 Forecastof Port Traffic1990-1995 4.2 Ship Loading!UnloadingP.ates 4.3 Summaryof Costs and Benefits 4.4 Detailsof EconomicBenefit Calculations 4.5 Summaryfor Each Project 4.6 EconomicReturns and SensitivityTests 5.1 SEPT IncomeStatements for the Years Ended December31st 5.2 SEPT BalanceSheets at December31st 5.3 SEPT Funos Statements 5.4 SEPT Ratio Analysis1980-1985 5.5 SEPT FinancialForecast - Assumptions 5.6 SEPT Pro-formaIncome Statements for the Years Ended December31st 5.7 SEPT Pro-formaBalance Sheets at December31st 5.8 SEPT Pro-formaFunds Statements 5.9 SEPT Pro-formaRatio Analysis1986-1995 5.10 1984 Ports Budget 5.11 Ports Budget - Main Accounts 5.12 Pro-formaPorts Budget 5.13 Pro-formaPorts Budget:Assumptions

Map

1. Madagascar, Ports RehabilitationProject (IBRD #19595) (iv)

MADAGA_AR

PORTS REHABILITATIONPROJECT

LIST OF DOCUMENTSAVAILABLE IN THE PROJECTFILE

1. Dossier1, Traficmaritime, situation actuelle et perspectives, MTRT, November22, 1985 2. Dossier2A, Les projetstechniques, MTRT, November22, 1985 3. Dossier2B, Projet de renforcementinstitutionnel, MTRT, November 22, 1985 4. Dossier2C, Plan de formation,MTRT, November22, 1985 5. Dossier3, Moyens de desserte,November 22, 1985 6. Dossier4, Evaluationeconomiqre des projets,MTRT, November22, 1985 7. Dossier5, Analysefinanciere des projets,MTRT, November22, 1985 8. Dossier6: Les dragages,MTRT, November22, 1985 9. Dossier7, Etude operationnelleet financiere,premiere phase, MTRT, January31, 1986. 10. Etude de la dessertemaritime de Madagascar,phase 2, Ponds d'Aide et de Cooperation,December 1983 11. MadagascarPorts Project: Aspectsinstitutionnels et organisationnels,Bossard International Entreprise, January 1986 12. PreliminaryAssessment of MadagascarShipping, International MaritimeAssociates, Inc., January24, 1986 13. Renseignementsstatistiques, Annie 1983-1984,SEPT, n.d. 14. Rapportd'audit des etats financiersde l'exerciceclos le 31 decembre1984, SEPT, April 1986 15. Madagascar: etude de la signalisationmaritime, tome I, MTRT, September1985 16. Elaborationd'un plan de formation,propos'tion du 4/12/85, MTRT 17. Elaborationd'un plan de redressementdu port de Toamasina,MTRT. MADAGASCAR

PORTS REHABILITATIONPROJECT

I. THE TRANSPORTSECTOR

A. Geographicand EconomicSetting

1.01 Madagascaris a large and diverseisland with a good naturalbase for agriculture.Ecological zones are variedand the agriculturalsector is equallydiverse. Rice and assavaare the main food crops,while cattle raisingis common in most areas. Most exports,of which coffee,cloves and vanillaare the most important,are of agriculturalorigin though some minerals,mainly graphite,chromite and mica, are also exported. The country'smineral resources are limited,but recenuexploration indicates that petroleummight be found in commercialquantities. Manufacturing consistsalmost entlrelyof consumergoods industriesctering to local demand and agro-industries.

1.02 Fourth largestisland in the world,Madagascar covers an area of about 590,000km2. The topographyis generallyrugged and a central mountainrange traversesthe countryfrom north to south. The climateis marine tropicalwith cyclonesand heavy rainfallparticularly frequent on the east ceast. The countryis sparselypopulated (about 17 per km square) and the populationis unevenlydistributed, with about one half of all inhabitantsoccupying the centralone-quarter of the island. Total populationis estimatedat about 9.8 millionand growingat about 3% p.a. Ninetypercent of the populationworks in the agriculturalsector; its output accountsfor 401 of the Gross DomesticProduct. Industryaccounts for 14X of GDP and annualper capitaincome is about US$265. Madagascaris thus at an early stage of development.

1.03 Promptedby economicstagnation and a 12% declinein per capita incomein the 1970's,significant investments were made in all sectorsof the economyin 1979-81. Financedlargoly by foreignborrowing, the spending boom left the countrywith a debt serviceburden that is strainingthe economy. Economicdevelopments over recentyears reflectthe need to correctserious imbalances on externalaccount and in the Governmentbudget. With generallydeclining expor.s, the imbalanceon externalaccount has been correctedby cuttingback imports. Importsdeclined steadily betweena 1981 and 1984; the volume of importsin 1984 was 23% lower than in 1979. Reduced importsof raw materialsand spare parts have adverselyaffected production. The volume of GDP declinedby about 9% in 1981, and 2% in 1982. Estimates for 1983-85suggest a growthof 1% to 2% p.a. Industrialoutput has declinedand there are now seriousshortages of a numberof basic goods such as soap, candles,oils. Shortagesof new equipmentand spare parts have affectedthe transportsystem and greatlydiminished its capacity. Economic policyhas recentlyfocused on structuraladjustment with IMF and World Bank support. Progress,however, continues to be constrainedby the external debt overhangand the legacyof past policies. I -2-

B. The TransportSystem

1.04 Madagascardepends on shippingfor its transport link witutthe outsideworld. It has four internationalports, 13 coastalshipping ports, about 15 minor ports and a navigablecanal along part of the east coast. The country'sinternal transportation infrastructure includes an extensive but poor road network,two rail systemsof considerablelength and a well- developedair network. The transportationinfrastructure fails to provide accessto all productiveareas of the country. Madagascar'slifeline, betweenthe port of Toamasinaand the centralplateau where most of the populationlives, consists of a railwayline and a highway,RN 2, two thirds of which has just been rebuiltwith assistancefrom China. The old sections of RN 2 are built to inadequatestandards. Costly road construction,poor road maintenance(paras 1.17 and 1.26) and inadequateoverland communicationshave led to the developmentof an extensivesystem of ports and coastalshipping and to an air transportnetwork derser than in most comparablecountries.

Road Transport

1.05 About 5,200 km. of Madagascar'snearly 50,000 km. of roads are paved. The paved highwaynetwork consists of a main north-southlink connectingMahajanga on the west coast with Antananarivo,the capital,and Fianarantsoain the highlands,and the east-westroad linkingAntananarivo, Moramangaand Toamasina(Map IBRD t 19595). Only parts of the north-south highwaycan sustainheavy vehicletraffic. A new paved sectionof the Toamasina-Moramangaroad providesall-weather transit between Moramanga and Brickavilleon the coast. While this developmentgreatly improved road communicationsbetween Antananarivo and Toamasina,heavy truck trafficwill continueto be constrainedbecause the highlandMoramanga-Antananarivo road (115 km), as most of the island'sroads, was built to low standards,and is narrowand badly aligned. The Bank and Switzerlandare financingthe rehabilitationof the Manajanga-Antananarivoroad, RN 4, under the Sixth HighwayProject. In the frameworkof the priorityroad networkestablished under that project,other donors (EuropeanDevelopment Fund, Germany, Switzerland,and the AfricanDevelopment Bank) are financingrehabilitation of the worst stretchesof the main highwayaxes.

1.06 Tota_ vehiclesin 1984 numbered42,000, some 13,000,or 31%, of which are trucks and pickups. Less than 50% of the commercialfleet is operational.By contrast,in 1976, there were 104,000vehicles, 47% of which were commercial.This developmentreflects scarce funds for fleet replacementas well as a severedecline in economicactivity (para 1.03). Passengertransport is providedby cooperativeand individualcarriers and regulatedby the Ministaredes Transports,du Ravitaillementet du Tourisme (MTRT)and provincialauthorities. The truckingindustry is also regulated by MTRT and local authorities.Until early 1986, entry to the industrywas nominallyscreened by the Governmenton the basis of supplyand demand,but, in practice,was generallyopen to capableentrants. Transporttariffs were determined within a minimum-maximum rate system established by MTRTand lagged behind cost inflation. Under the Sixth HighwayProject, the Bank urged furtherliberalization. During negotiations of the Third Railway Project(Cr. 1694-MAG),in March 1986, Governmentagreed to removeremaining restrictionsto the free movementof goods and to freedomof pricingand has since ac ed to carry out this agreement. -3-

Rail Transport

1.07 The railwaysare operatedby the ReseauNational des Cheminsde Per Malagasy(RNCFM), a parastatalagency under the supervisionof MTRT. ~he railwaysconsist of two separateand unconnectedsingle track systems ,Map IBRD #19595).The northernsystem (about700 km) connectsAntananarivo, the capital,and industrialareas in the high plateauregion with the main port of Toamasinaand the rice and chromeproducing area of Lac Alautra. The southernsystem (163 km) connectsthe regionalcenter of Fianarantsoa and the main coffeeproducing areas in the South with the port of Manakara. The Antsirabe-Antananarivo-Toamasinaline is t.e most importantline and the main mode of transportbetween the most populatedand developedparts of the country. Almosthalf the populationof Madagascarlives in the area served by the railway.

1.08 RMCFM is expectedto remainthe main means of transportfor bulk commoditiessuch as petroleumproducts, grain, chemicals and construction materialsfrom Toamasinato the centralhighlands. Long-termprojections indicatethat rail trafficis unlikelyto increasesignificantly even if the economycontinues to grow, due to increasedroad competitionfor non-bulk commodities. Freighttraffic by rail is thus expectedto stabilizeat the currentlevel of 224 millionton-km p.a. In the short-to-mediumterm, despitesome 302 declinein passengertraffic since 1979, the peak year, the railwaywill still continueto carry a substantialnumber of passengers becausemany existingroad vehiclesneed to be replaced. Their replacemeLt may take some time given the currentscarcity of foreignexchange.

Air Tranasort

1.09 By regionalstandards, Madagascar has developeda dense domestic air transportnetwork in responseto the distancebetween population centers,the ruggedterrain, costly construction and the poor conditionof surfacetransport. There are 56 airports,17 of which are built to all- weather standardsand five of which are suitablefor internationalflights; the remainderare gravelor grass strips. The internationalairport at Antananarivohandles 502 of all traffic;15 small airportsgenerate 30% of the traffic; and 40 very small airportsshare the remaining20Z of total traffic. Serviceto many small airportsis not financiallyprofitable but ensuresaccess to otherwiseisolated areas.

1.10 Air Madagascar,80% owned by the Government,18X by Air Franceand 2% by privateshareholders, provides international service to Paris, Marseilles,several countries in East Africa and all domesticservice. Aircraftin its fleet includea B-747 (combinationcargo/passengers) for serviceto Europe,two B-737'sfor domesticand regionalservice, two HS- 748's and four Twin Ottersfor domesticservice, and severalsmaller aircraftfor air-taxiand charterservices. In 1984,Air Madagascar successfullyrenegotiated maturities on its long term debt obligationsto foreignbanks, and in 1985 began a financialimprovement program.

Ports and CoastalShiDpint

1.11 Becauseit is an island,Madagascar will continueto rely on maritimeshipping for the bulk of its foreigntrade and on coastalshipping -4 - for an importantpart of its internaltrade. Indeed,shipping by water is the only means of transportingfreight between many areas of the country with no accessto all-weatherroads. Toamasina,the main international port, handles552 of the total traffic;Mahajanga, 11%; Antsiranana,5%; and Toliara,about 4%. The remaining 25% of trafficis handledby all other ports cateringalmost exclusively to coastalshipping vessels. The port of Toamasinahas adequatecapacity to handlepresent tra!fic, but operations are hamperedby low labor productivityand poor conditionof the equipment for lack of maintenanceand spare parts. Poor performanceat the port of Toamasinahas led to the diversionof some internationaltraffic to the port of Mahajanga. Capacitythere is limited,howr-,er, as the port requires lighteringand the transferinland of goods deliveredat Mahajangais restrictedby the conditionof the road connectingit to the capital(RN 4). Rehabilitationof the worst sectionsof RN 4 is includedin the ongoing Sixth HighwayProject.

1.12 The SocieteMalgache des TransportsMaritimes (SMTM), the state controlledinternational shipping line, operatesthree cargo vessels. Coastalshipping is handledprimarily by the CompagnieMalgache de Navigation(CMN), 92% state-owned,operating nine vesselsof which eight are leasedfrom the government.The government-ownedoil company,SOLIMA, operatesthree tankers,and a numberof lightersand barges. Several privateoperators operate small vesselsalong the coast and to nearby islandsin the IndianOcean. Parts of the intracoastalwaterway on the East Coast are being rehabilitatedwith AfDB financingbut initialtraffic is expectedto be light (para.1.20). It is Goverment's objectiveto improve the efficiencyof coastalfshipping and ports'services. To this end, in 1983,the Governmentcarried out a comprehensivesector survey with French aid. This study (paras.1.21 -1.23)forms the basis for the proposed project.

C. TransportSector Management

1.13 Severalministries and Governmentorganizations share responsibility for the transportsector: the Ministryof Transport,Supply and Tourism (Ministeredes Transports,du Ra,vitaillementet du Tourisme,MTRT) and the Ministryof PublicWorks (Mitnisteredes TravauxPublics, MTP) play the most importantrole. MTRT is responsiblefor road, rail, air and water transport, end ovetseesseveral autonomous Government agencies, including the national Railway (RNCFM),Air Madagascar,the Port of Toamasina,and the shipping companies. MTP is responsiblefor planning,building and maintaining highraysand other Governmentcivil works exceptports and airports.

1.14 Other Governmentagencies that influencetransport policy include: the Ministryof Commerce(MC), the Ministryof Agriculture(Ministere de la ProductionAgricole et de la ReformeAgraire, MPARA), the DirectorGenetral of Planning(Directeur General du Plan, DGP), and the local governments. MC's responsibilityto collectand market crops significantlyaffects road transportcapacity and its controlof pricesof basic commoditiesinfluences transporttariffs. MC also regulatesthe importationand assemblyof motor vehicles,and, in concertwith the CentralBank, allocatesforeign exchange for imports. MPARA and the militaryoperate large state-ownedroad transportenterprises. Finally, each provincialgovernment operates a trucking company. 1.15 MTRT's PlanningDirector is chargedwith transportsector planning. The director'smain task is to coordinatetransport investment plans with other agencies. Pendingthe completionof a WAtionalTransport Plan (para 1.19),scheduled for December1986, the DGP began to establisha Public InvestmentProgram (PIr)with assistanceprimarily from MTRT and MT? for the transportsector. IDA and otherbilateral and multilateralaid agencies have helped improvesector planning, but more assistance is needed. During preparationof the Sixth HighwayProject, planning improved. The officeof MTRT's planningDirector was establishedand supportedby technical assistancefinanced by Franceand IDA. The planning effortwas well coordinatedwith DGP and MPARA and yieldeda priority'Economic Road Network"list of about 10,000km (4,300km psvedroads, 3,300 km engineered earth roads and 2,400 km feederroads). This was the agreedbasis for the IDA Sixth HighwayProject.

D. TransportPolicy

1.16 Developmentof the transportsector has been influencedby: (i) ruggedtopography and a tropicalclimate with heavy rains and frequent cyclones;(ii) unevenlydistributed population concentrated in e few isolatedregional centers; and (iii)lack of suitableconstruction materials in some parts of the island. As a result,road constructionand maintenance is costlyand the less populatedregions remain relatively isolated. Transportneeds are relativelywell servedon the centralplateau where half of the populationis concentrated.

1.17 Government.policy towards transport development is to: (i) connect regionalcapitals by all-weatherroads; (ii) improvecorimunications between the centrallylocated capital and the main seaportof Toatasina (the Antananarivo-Moramanga-Toamasina road/rail corridor); (iii) improve road maintenance;and (iv) improvethe transport organizationsand services. An overridingobjective is to satisfythe country'squantitative and qualitativetransport requirements at a reasonablecost, takinginto account balanceof paymentsdifficulties. IDA is in generalagreement with these objectives,and has successfullysupported them throughseveral projects (para.1.24).

1.18 A programof actionto bettercoordinate measures relating to infrastructureand means of transporthas been establishedfor the 1984-1987 period. It seeksto: (i) coordinateand plan transportservices, complementarity,infrastructure, and pricing;(ii) improvethe qualityof serviceby introducingcompetition between the differenttransport modes and, where possible,between different operators of a given type of transport;(iii) reorganize training of infrastructurespecialists and transportcompany personnel; (iv) rehabilitatetransport companies by importingsufficient quantities o- sparesand suppliesand throughregular upkeep of infrastructure;and (v) replaceobsolete transport material and keep the fleet properlymaintained. Other objectivesrelate to the general developmentof Madagascar. The overallpolicy goalsare to provide transportat a lowercost and to reduceregional isolation through rehabilitationof the secondaryroad network. -6-

E. SectorInvestment Planning NationalTransport Plan

1.19 The Government'ssector policy objectivesare likelyto change littleover the medium term. What may change,however, is the relative emphasison differentaspects, modes, or geographicalareas. To assistin this process,IDA and FAC are supportingthe developmentof a National TransportPlan (NTP)by MTRT. The NTP work began in 1985 and the MTRT team has so far completedseveral detailed studies concernlng tariff policy, origin and destinationof road traffic,relation between road transport costs and tariffs,and port servicesin the northeastof Madagascar.A firstdraft investmentplan for the sectorfor 1986-1990has been prepared and consideredin the formulationof the project.

1.20 The draft investmentplan (Annex1.1) continuesto emphasizeroad rehabilitationand maintenancebut is otherwisefairly balanced between transportmodes and clearlymeets many of the urgentneeds for rehabilitationof the sector. The main problemis availabilityof resources. Less than half the investmentsoriginally planned for 1984 and 1985 were in fact made mainly becauseof budget cuts. A separateissue is the investmentin the Canal des Pangalanes(para. 1.12), financed by AfDB. About 9% of the total investmentof the NationalTransport Plan is allocated to this project. While the generalproject objectives appear reasonable, the assumptionsunderlying the economicevaluation of this project, particularlythe trafficforecasts, appear rather optimistic. In the contextof the PublicInvestment Review, the Governmenthas expressedthe intentionto work closelywith the Bank as well as AfDB to ensurethat investmentand operatingcosts of the Canalbe kept to a minimumand the risk of cost overrunsbe preventedas much as possible.

The Ports RehabilitationProzram

1.21 The need for port rehabilitationwas recognizedin 1982. This recognitionled to an agreementwith France'sFAC to financea studyof ports and shippingcompleted in 1983. The objectivesof the studywere: (i) to developa programto rehabilitateand maintainMadagascar's ports; (ii) to Improve coastalshipping; and (iII)to collectrelevant port and traffic statisticsto be used as a basis for a sectorinvestment plan. The study was dividedin two phases. Duringthe firstphase, the consultantsprepared an inventoryof all ports and theirphysical characteristics, studicd the economiesof each coastalarea and their transportneeds, and prepared trafficprojections.

1.22 Duringthe secondphase of the study,the consultantsevaluated alternativeways to meet the transportneeds of the coastalregions and catriedout a comparativeeconomic analysis of all practicalalternative investments.The reportalso includedhydrographic surveys and studieson port maintenance,cargo !'andling and coastalshipping. Furthermore,it recommendedthat thieGovernment rationalize and streamlineinstitutional arrangements,establish improved accounting and financialsystems for all ports, and employspecialists to designan effectivesystem of navigational aids. - 7 -

1.23 In 1984, the Bank found that the study financedby Francewas a good basis for a port rehabilitationprogram and, at the requestof the Government,agreed to financetechnical assistance required to preparethe proposedproject with a PPF advance,to supplementgrants for the same purposeby Franceand the UK .

F. Bank Group Role in TransRort

1.24 Bank involvementin Madagascar9stransport sector is substantial. Between1974 and 1986,the Bank supportedten transportprojects with IDA Creditstotalling just over US$110million, six in highways,one in ports, and three in railways. The Bank has playedand expectsto continueto play a criticalrole in improvingthe institutionalcapacity and policyframework for the sector.

1.25 The first port project(Credit 200-MAG, US$9.6 million, 1970) consistedof the extensionof the deep water berth at Toamasina,the creationof the ToamasinaPort Authority(SEPT), and technicalassistance for managementand training. In 1973, the creditwas increasedby US$1.8 million to cover a shortageof funds resultingfrom a currencyrealignment. PPAR No. 2299, dated December22, 1978, concludedthat (i) the physical objectivesof the projectwere satisfactorilycarried out; (ii) a lower, revisedeconomic return of 7.0% i-asdue to lack of trafficgrowth resulting from adverselocal and internationalpolitical and economicconditions that could not have bQen foreseenat the time of appraisal;and (iii)although the technicalassistance for institutionbuilding did not achievefully satisfactoryresults, initially because of the poor performanceof technical assistants,the Port Authoritymade some progresstowaris autonomy and Improvedmanagement. These positiveachievements. however, were relatively short-livedbecause of the country'seconomic deterioration, SEPT's weak management,and labor problems.

G. Rationalefor Bank Involvement

1.26 Transportis a key sectorin the Bank's lendingstrategy in Madagascarbecause transport constrains economic development in other sectorsas indicatedin the TransportSector Memorandum (TSM). The Bank has investedheavily in the sectorand has seen results: (i) a gradually increasingemphasis on rehabilitationversus new investments;(ii) progress towardsthe creationof a highwaymaintenance system; and (iii) increased managementand financialautonomy for the Railwaywhich enabledit to significantlyimprove its operations.The Bank has been promotingan integratedapproach to transportto help Madagascar'seconomy, to maintain an ongoingdialogue with the Governmentwith a view towardpromoting policy reform,and to balancethe Bank presenceamong subsectors. -8-

II. THE MARITIMESUBSECTOR

A. InternationalShioping

2.01 Becauseit is an island,Madagascar depends on shippingby sea for all its foreigntrade except for a mitor volumeof high value commodities shippedby air freight. Only about 5,000 tons of total 1985 exportsand importstotaling about 1.1 milliontons were shippedby air. International sea trade essentiallyfalls into three categories: scheduledliner services,dry bulk, and liquidbulk transport. Most high value general cargo moves by regularscheduled liner servicesand conferencelines; the conferencebetween Europe and the IndianOcean is the most important. This conference,CIMACOREM, includes European carriers and the SocieteMalagasy des TransportsMaritimes (SMTM) which operatestwo modern ships equippedto handle containers. The major part of bulk cargoessuch as rice importsand chromeexports are shippedby speciallychartered vessels. The same appliesto the third major category,oil imports,except for a minor volume handledby the nationaloil companySOLIMA on its own ships.

2.02 Madagascar'smost importantinternational port is Toamasinaon the east coast. In 1984, it handleddry cargo importsof some 321,000tons, 169,0OOtons of trans-shipment,and 250,000tons of oil imports,or about 80% of the country'stotal oil consumption.Exports through Toamasina were 182,000tons or 58% of total exportsof 315,000tons. An overviewof port trafficin Madagascaris given in Annex 2.1 and in more detailfor Toamasinain Annex 2.2. The clear dominationof Toamasinais due to severalfactors, the most importantof which is that it is the only deep- water port with easy road and rail accessto the capitaland to the central plateau,the most populatedand developedarea of the country. This in turn made it the obviouschoice for the SOLIMAoil refinery. Other ports with directexport traffic are Nosy Be and Port St. Louis for sugar and fish, Mahajangafor textilesand Tolagnarofor sisal and mica. Ports with directimport traffic include Nosy Be for oil, and Mahajanga,Antsiranana, Toliaraand Morondavafor dry cargo.

B. CoastalShipping

2.03 Coastalshipping performs two main functions:it distributes locallyproduced commodities such as rice, sugar,salt and corn to other parts of the island,and it acts as a collectorfor trans-shipmentof exportssuch as coffee,cloves and certainminerals and importssuch as cement,rice and oil products. The coastalshipping fleet is listedin Annex 2.3. In 1984, some 224,000tons of dry cargo and 120,000tons of petroleumproducts were carriedDy a fleet of 14 vesselslarger than 500 dwt, three of which are tankers. By way of comparison,international trafficwas 763,000tons of dry cargo exportsand imports,and 314,000tons of importedoil. Most ports have lighterageoperations; the main exceptionsare Toamasinaand Toliarain the southeast,Vohemar and Antsirananain the north. Port installationsare summarizedin Annex 2.4. Another15 or so smallercommunities are only servedby sailboatsand small lighters,but the total volumeof cargo is very limited. Coastalshipping typicallyoperates into severalports on the same voyagebe it aroundthe islandor on eitherthe west or the east coast. Cargo handlingrates in - 9 - the ports are generallylow, partly reflectingthe constraintsinherent to lighterageoperations. Many of the ships are old and poorlymaintained. Weatherand sea conditionsincrease the difficultiesand furtherdecrease ship utilization.Due to geogr6phicand demographicconstraints, coastal shippingwill continueto play an importantrole in the foreseeablefuture.

2.04 Poor infrastructureand equipmentconditions in severalports affect coastalshipping adversely. Coastalshipping patterns have changed to overcome some of these constraints; examples of change are the use of small beachableroll-on/roll-off ships (LandingCraft, LCT's) to certain ports and the changeduse of Mahajanga,where trafficis alreadylargely handledby small shallow-draftvessels or by lighterage.The proposed projecthas been designedto take these trendsas well as possiblefuture changesinto account. Examplesof possiblefuture shipping alternatives are the use of LCT's to Morondavaand Maroantsetraand shallow-draft motorizedbarges at Morondava. Small LCT's could also serve some of the communitiesnow servedonly by sailingcraft.

C. ShippingFleet

2.05 As indicatedin Annex 2.3, the major part of the Malagasycoastal shippingfleet is very old and in poor conditionbecause ship ownershave had littleincentive to investand limitedopportunity to obtain foreign exchangefor vesselreplacement and maintenance. The Malagasy internationalfleet, however, is relativelymodern. SMTM and CMN each operatetwo modern ships. SMTM'stwo newest ships are part of the liner conferenceto Europe (para2.01), while a third one is used for regional and inter-islandtrading. In additionto smallervessels, CMN operatestwo 5,300 DWT ships servingdomestic and regionaltrade betweenSouthern Africa and the IndianOcean Islands. Some privateship operatorsoccasionally also operatein inter-islandtrade. In additionto the ships listedin Annex 2.3, about 110 schoonersand 140 dhows serve small communities withoutport installations.Although these sailboatscarry only about 3% of coastaltraffic, some isolatedcommunities along the coast dependentirely on these traditionalcraft.

D. The Ports

Physical Description

2.06 In spite of the vital role which it must perform,since 1975 the ports subsectorhas been affectedby inadequatemaintenance, overdue equipmentreplacement, institutional problems, and decliningtraffic. Thoughthere are numeroussmall ports (Annex2.4), servedoccasionally by small private motor or sail vessels, about 97% of the total traffic is concentratedin 10 ports,which are the only ones includedin the proposed project. A descriptionof these ports is given in Annex 2.5.

2.07 Sea conditionsare quite differenton the east and west coasts: The east coast is exposedto the wave actionand swellsof the Indian Ocean,while the west coast,which faces the MozambiqueChannel, is fairly well protected. This differenceaffects both the type of vesselsthat can operatesafely, and the type and productivityof port operations. - 10 -

2.08 The east coast is roted for its inhospitableshores, subject to strongSE winds and heavy swell from April to October. From Novemberto March rain squallsare frequentand cyclonesmay occur. Two devastating cycloneshave hit the northernregions, including Toamasina, in the last three years. There are no good storm sheltersto be found on the east coast. Toamasina,the most importantport of Madagascar,and Antairanana at the northerntip, are its only deep water ports. These,together with Vohemar are the only ports along the east coast which do not require lighterage.The rest of the ports along the east coast,the most important of which are Manakaraand Tolagnaro,are built in unprotectedsites, and rely on lighterageoperation4.

2.09 Becauseit is protectedfrom the tradewinds, the west coast, from Antairanansto Cape St. Marie, is more shelteredthan the east coast. The north-wer4coast from Antsirananato Mahajanga is servedby Port St Louis, Hell-Villeon the islandof Nosy Be and Mahajariga,the secondport of the country. From Mahajangato Cape St. Marie,the west coast is sparsely populated,with few ports: Morondavaand Tollaraare the most significant ones. The west coast'sonly relativelydeep water port, at 8 meterswater depth, is Toliara. All other ports dependon lighterageoperations, assistedby a tidal range of almost3 meters.

2.10 Functionally,the ports of Madagascarare classifiedin the followinggroups:

- Main ocean goina vessels: open to long distanceinternational shipping,as well as local coastalvessels; Toamasina is the only port in this category;it is organizedthrough an independentport authority(SEPT).

- Secondaryocean going vessels: open to all ships exceptsome specificallyindicated by Governmentregulationls, as well as coastalships; includes Antsiranana, Mahajanga, and Toliara; their operationsare supervisedby a Port Director,assisted by a local committee.

- Main coastalvessels: open to all coastalvessels; includes 8 ports,six of which--Manakara,Morondava, Nosy Be, Port-Saint- Louis,Tolagnaro, and Vohemar--areincluded in the project; their operationsare supervisedby a Port Agent.

- Secondarycoastal vessels: only open to non-international coastalshipping; these ports are not includedin the project due to their low level of traffic,about 3% of the total.

Port Problems

2.11 The infrastructureproblems are deteriorationand advancedage of many wharves,buildings, and pavementsto such an extentthat unlessprompt repairsare carriedout the investmentsrequired will be much largerdue to total loss. The poor conditionof rollingsurfaces, coupled with a chronic lack of spare parts and of preventivemaintenance, have also resultedin a criticalequipment situation. Additionally,some of the equipmentrecently acquiredthrough bilateral aid has not been very well suitedto the - 11 - specificneeds, and has in fact added a burdento the respectiveoperating firms. In summary,the ports need rehabilitationand replacementof equipment,with only a very small amountof new items,mainly paved surfaces. It is also necessaryto establishan institutionalframework to ensurethat there will be no recurrenceof past neglectof maintenance activities,both for equipmentand for civilworks.

DredRina

2.12 Exceptat Manakara,hardly any dredginghas been done in the last ten years. Yet the impacton port activitiesand on shippinghas not been dramatic,because lighterage operations have continued,and the demand for maritimetrensportation has decreased,although this may be partlydue to the high cost and low productivityof these services. Initialproposals to returnto the dredgingpatterns of the 1960'shave been carefullyevaluated and found uneconomicalat currenttraffic levels. At appraisal,Government agreed to a much reduceddredging program. Regulardredging under MTRT supervisionwould continueat Manakara,while a bottomcleaning operation would be conductedin Mahajanga(once only),and minor dredgingwould be carriedout sporadicallywith small equipmentby privatestevedoring and lighteragecompanies in Toliaraand Tolagnaro.

NavigationAids

2.13 Duringthe last decade,Government has not carriedout adequate maintenanceof lighthouses,markers, and buoys,nor has it carriedout regularlycharting and hydrographicsurveys. As a result,considerable capitalinvestment is requiredto catch up with deferredmaintenance. The logisticproblem of supplyingremote lighthouses and the degreeof deteriorationof the existingequipment make it adv-.sableto replacesome 21 lightswith solar poweredunits. In general,hoever, much of the existingold equipmentis highlyregarded and can be rehabilitated. Operatorsare well trainedand, given a reasonable supply of spare parts and managementencouragement, can continueto servicethe old equipment well. Other importantneeds are provisionof buoys, rehabilitationof structures,a vessel to servicethe installations,and improvementsin managementand technicalassistance.

Port Institutions

2.14 In recentyears, the most difficultproblems facing the Madagascar ports subsectorhave been institutionalweaknesses. The 1983 study (para 1.21) indicatedthat the administrationof the port subsectorwas carried out by three ministries,MTRT, MTP, and the Ministryof Finance,and that the attributionsand responsibilitiesof the two formerones was quite unclear,with resultinggaps as well as overlapsin the dischargeof their functions. While the infrastructurewas under the supervisionof MTP, the administrationof the ports was under the supervisionof MTRT. ThoughMTRT was supposedlyin chargeof planningnew investments,MTP was responsible for their execution. While the navigationaids were under MTP, the means of transportto the lighthousesand buoys were providedby MTRT. The dredgeswere procuredby MTP, but their operationand maintenancewas done by MTRT. There was littlecoordination between the two ministries,and fundswere insufficient.The work indeedsuffered, the ports deteriorated, and productivitydeclined. - 12 -

2.15 The consultantsrecommended the incorporationof dredging, hydrography and navigationaids under a singledivision of MTRT, to be given sole responsibilityfor the administration,planning and maintenance of the ports,with the provisothat MTP would continueto provide assistancein the executionof new works and certainmaintenance activities,when requestedto do so by MTRT. This was done by Government decreeof February1985, givingfull attributionsto MTRT, under the Directorof Civil Aviation,Merchant Marine, Meteorology and Ports (DAC), which is now fully in chargeof all ports,except Toamasina, and of maritimetransport. This institutionalsetup is satisfactoryand should remainin effectbecause it is conduciveto a more efficientallocation of scarce resourcesand adequatemaintenance of infrastructureand equipment.

2.16 The new (March,1986) organization,Chart shown on Annex 2.6, is an improvementfrom the previousone shown on Annex 2.7. It follows closelythe recommendationsof the 1983 study as well as new ones made by consultantsfinanced under a PPF advanceresulting in an enhanced institutionalframework. DAC has now four port orienteddepartments: Mi)Seaways; (ii) MerchantMarine; (iii) Port Services,and (iv) Provincial Services. In additionto the above,there is at each port a representation of the Port ServicesDepartment, which at Antsiranana,Mahajanga, and Toliarais carriedby the local head of the ProvincialServices Department. The Port Servicesdepartment controls activities at all ports, exceptat Toamasina,where the stevedoring,cargo handling,and port authority functionsare delegatedto the Societed'Exploitation du Port de Toamasina (SEPT). Decentralizationof headquartersauthority has been implementedby the creationof the provincialdepartments responsible for coordinating activitiesin each coastalregion. The main objectivesof this reorganizationare: (i) reinforcementof local port administrations;(ii) clear definitionof operationalobjectives; (iii) clear definitionof lines of authority;and (i'J) givingeach port the means and supportit needs to achieveits objectives.

OrRanization of the Ports

2.17 DAC's staff workingon port orientedactivities consists of 72 at Antananarivo,and 132 at the variousports. While the centralstaff is adequateand needs only upgrading,the field staff is quite underutilized due to lack of means to carry out the work, a situationwhich shouldchange in the near future. For example,39 dredgingworkers are essentiallyidle; even under the new dredgingplan, most will continueto be redundant,and will be reassigned.

2.18 SeawaysDepartment is in chargeof maritimeaccesses, including navigationaids, hydrography,dredging and civilworks. For navigation aids it has a buoys maintenanceyard, repairshop and trainingcenter at Antsiranana,but it cannotdischarge its dutiesdue to lack of a buoy tender. Currentlyit cannotdischarge its dredgingfunctions either, becausepractically all the dredgesare out of service. Nor can it carry out any hydrogrephicwork becauseit does not have a singleappropriate vessel.

2.19 Dredgingconstitutes a uniquesituation because, until 1985, the servicedepended on MTP, and the dredgingstaff was chargedto the budget, - 13 - when in fact no dredgingat all was being done, exceptat Manakara.

2.20 HerchantMarine Degartmentsupervises Malagasy shipping lines (trafficstudies, tariffs, conference agreements, etc), and compliancewith maritime regulations.

2.21 Port Services Deiartment establishes the operational budget and supervisesoperations and administrationof the ports, includingthe issuanceof financialstatistics, negotiation of concessionagreements, and settingof tariffs.

2.22 ProvincialServices Department is at presentonly in chargeof local merchantmarine matters but will soon includelocal representation for all the centralservices described above.

2.23 At each port stevedoringand cargo handlingactivities are contractedto a singleprivate enterprise or to a consortiumunder concessionagreements. Contractorshandle cargo on their own behalf and on behalfof others. The firms havingconcessions are, by port:

- SEPT at Toamasina.

- ToliaraLighterage, organized by the local chamberof commerce.

- TolagnaroLighterage, an affiliateof SOMACODIS,a parsstatal tradingCompany.

- ManakaraLighterage, organized by the local chamberof comerce.

- Nosy Be Lighterage,organized by the local chamberof commerce.

- VohemarStevedoring, subsidiary of a large tradingfirm.

- CMDH, a privatecompany at Mahajangaand Antsiranana.

- SECIAM,the meat tradingcompany, and SocioteDublois at Morondava.

2.24 The situationof the cargo handlingand lighteragefirms is quite poor, due to the doubledisadvantage of too much personneland insufficient tariffsto recovercosts. Equipmentin their possessionis usuallylacking in maintenance,and the infrastructurein which they operateis not maintainedat all. They are, however,the only entitieswhich at the local level have demonstratedcapability to operate,and who have means to carry out operations,in contrastwith harbormasters and port captainswho do not have officesor vesselsto carry out their duties.

Societed'Exploitation du Port de Toamasina(SEPT)

2.25 SEPT is responsiblefor servicesto ships such as piloting,tug services,line handling,stevedoring, cargo handling,warehouses, storage yards,port infrastructure,shops, maintenance, and policeat Toamasinaand other non - port relatedcommercial activities. It is autonomousbut subjectto the supervisionof MTRT and Ministryof Finance,administered by - 14 - a 12 member board, in which there is Government,unions, and ship owners' representation.The Chairmanof the Board is appointedby the Councilof Ministers.

2.26 Thoughpiloting, line handling,and tug servicesprovided by SEPT do not presentin generaldifficult problems, stevedoring and cargo handlingdo. The symptomsof the problemhave been poor productivity,low levelof security,and damageto cargo,to such an extentthat shipping rates to Madagascarare considerablyhigher than to similarlylocated ports on the same route. The causesof the problemsare complex,but can generallybe reducedto: (i) lack of competition;(ii) job tenureresulting in disincentivefor work; (iii)strong union pressureon management;(iv) absenceof motivation;(v) inadequateequipment, due to poor maintenance and operatingpractices, and (vi) lack of certainspecific qualifications at the highestmanagement positions. There are some highlyqualifled staff who have been ineffectivebecause they lackedauthority or management support. Toamasina'ssituation contrasts sharply with that of some small ports, such as Manakaraand Vohemar,where there is a reasonablyefficient operation.

2.27 A new GeneralManager was appointedin April 1986,with strong backingby the highestGovernment levels, and a clear mandateto turn SEPT around. Since his appointment,the new GeneralManager actively participatedin the preparationof SEPT'sAction Plan (Annex2.8 and paras 5.06-5.08)and is committedto its implementation.The Action Plan consistsof a seriesof measuresaimed at improvingSEPT's performance duringthe first two years of projectimplementation. Improvements at the port were noticeableonly few weeks after the arrivalof the new General Manager: tighterdiscipline, enforcement of simplehouse-keeping measures, and improvedstaff morale. For example,the port appearedmuch cleaner,a third shift was institutedfor handlingcertain commodities, working hours are beginningto be respected,and overtimehas been reducedby more than half.

2.28 The highlightsof the ActionPlan are divestitureof non-port relatedactivities, strengthening of the entireupper management,training and developmentof staff at all levels,reduction of numberof staff,new tariffsystem, new budgetingsystem, establishment and pursuitof overall objectivesclearly defined, speeding of invoicingand collecting procedures,improved house-keeping practices, improved maintenance of storageyards, improvementof ship loadingand unloadingrates, complete overhaulof maintenancemethods, facilities and personnel,and development or a systemof incentivesto motivatestevedores.

2.29 Managementimprovements would be complementedby a programof physicalrehabilitation. The deep water berth (PierC) is damagedand is losingfill material;rolling surfaces and containerhandling yards are rough;maintenance sheds are in poor condition;and the electric,water, and drainagenetworks are out of order. Containertraffic has increased steeplyover the last years,and representsa good opportunitytc improve productivityand reduceshipping costs for the country. The port needs some equipmentto handle containersmore efficiently,as well as appropriatesurfaces for the operationof the equipment. These investments,together with technicalassistance and training,would provide the necessarymeans to improveperformance. - 15 -

2.30 The cyclonethat struckToamasina in March 1986 (Honorinina) causedserious damage to the breakwaterand to Pier C. The breakwater repairshave been includedin the SupplementalCredit to the Cyclone RehabilitationProject (Cr. 1526-HAG),approved by the Board in August 1986. The Pier C repairsmatch well the objectivesof the proposed Project,and have thus been included.

Role of the PrivateSector

2.31 Privatefirms play a limitedthough important role in Madagascar shippingand port sectors. At Toliara,Manakara, and Nosy Be cargo handlingfunctions are carriedout by firms organizedby and dependenton the local chambersof commerce,which are controlledby the privatesector. At Vohemar and Morondavacargo handlingis done by privatefirms, for whom these ports representa trade link. At Mahajangaand Antsiranana stevedoringis done by privatecompanies. At Port St. Louis and Tolagnaro cargo handlingis done by mixed companies. At Tosmasina,where there is an independentport authority,there are opportunitiesfor privatizationof cargo handling,and these will be pursuedduring the life of the project. - 16 -

III. THE PROJECT

A. ProtectObjectives

3.01 The proposedproject aims to rehabilitatethe physical infrastructure,including equipment, in selectedports, primarily to reduce overalltransport costs to the users of shippingservices. These ports accountfor about 97X of port trafficin 1984. Secondly,the projectaims to developthe institutionalcapacity to manage,operate, and maintainat a reasonablelevel of efficiencythe ports subsectorand its restoredassets. Thirdly,it aims to eliminatedelays and safetyhazards to navigation. These objectivesare consistentwith the Bank'ssector strategy formulated in the 1983 TransportSector Memorandum and the 1985 SelectedTransport Issuespaper. The projectrepresents a logicalextens .on to the ports subsectorof effortsunderway in the road iubsector(Sixth Highway Project),and in the railwaysubsector (Third Railway Project) to promote policy reformand rehabilitateinfrastructure. A seventhhighway project is presentlybeing prepared.

B. ProlectScope

3.02 The proposedproject includes the ports of Toamasina,Manakara, Tolagnaro,Toliara, Vohemar, Morondava, Mahajanga, Nosy Be, Antsiranpna, and Port Saint Louis;it will consistof the followingcomponents which would be phasedover 6 years,beginning in 1987:

(a) Rehabilitationand enhancementof ports infrastructure. Rehabilitation,repair and minor new constructionof quays, slipways,yards, buildings, and utilities.

(b) Modificationsand Improvementsto cargo handling. Procurementof new cargo handlingequipment, floating craft, spare parts,and materials.

(c) Servicesto shipaing. Dredgingat Manakara,Tolagnaro, Toliara,and Mahajanga;navigation aids and hydrographic surveyscapability covering the entireisland; and spare parts for the internationaland coastalshipping fleet.

(d) Institutionaldevelopment. Technical support to developand strengthentechnical skills, improve management, cargo handlingoperations, maintenance, navigation aids, and dredging.This supportwould be made availableto MTRT and to SEPT. Training,including a trainingspecialist, scholarships,training materials, and appropriatetraining for about 500 staff of MTRT, SEPT, and local stevedoringand lighteragefirms.

3.03 A summaryof projectcomponents for each port is shown on Table 3.1 on the followingpage: - 17 -

Table 3.1 Sumary of componentsat each port

MAHA MORO TOLI TOLA MANA TONA VOHE ANTS NOBE STLO

A) Infrastructure

(a) Quays, slipways X X X X X X X X (b) Yards X X x X X X X 'X (c) Buildings X X (d) Utilities X X X X X

B) Cargo handling I

(a) Equipment X X X X X X X X X X (b) Floatingcraft X X X X X X X X X (c) Spare parts X X X X X X X X X X and materials

C) Ship Services

(a) Dredging X X X (b) Navigationaids X X X X X X X X X X (c) Spare parts for X X X X X X X X X X coastalshipping

D) InstitutionalDevelopment

(a) Technicalsupport X X x X X X X X X X (b) Training X X X X X X X X X X

C. ProiectDescription

(a) Rehabilitationand enhancementof ports infrastructure

3.04 Quays,slipwavs and trestles. With the exceptionof Antsiranana and Tolagnaro,all the ports includedin the projectneed urgent repairsto the waterfrontstructures, such as concreteencasement of sheetpilewalls, sealingof fill behindconcrete blocks, replacement of pier beams, installationof fenders,and repairsto the pier and trestlesurfaces. A new quay and earthfillwould be the most economicsolution at Vohemar,to improveproductivity and to allow continuityof operationsduring repairs. A new slipwayis requiredat Manakarato maintainthe lighterageflest, and a new passengerramp at Mahajangato replacethe old one, no longer operational.

3.05 Yards. In all the ports,with the exceptionof Nosy Be and Port Saint Louis,cargo handlingoperations are seriouslyaffected by the poor conditionof storageyards, circulation and accessareas, a situationwhich causes equipmentdamage, and lowersproductivity. Thus the project includespreparation and paving of approximately140,000 m2 in eight ports, as well as some truck loadingand unloadingramps.

3.06 Buildings. Generally,the ports buildingsare sufficientand in - 18 - acceptable condition, so the project includes only an administration buildingat Toliara,and maintenancesheds at Toamasina.

3.07 Utilities. The projectincludes badly needed lighting,drainage, and water and electricdistribution at Toamasina,Toliara and Tolagnaro.

(b) Modificationsand improvementsto cargo handling

3.08 Equipment. Generally,due to aging,poor maintenance,bad rolling surfaces,and chroniclack of spare parts, cargohandling equipment in all ports under considerationis in very poor condition,idle, or completely out of service. The projectincludes the provisionof unsophisticated equipmentfor all the ports exceptSaint Louis,consisting primarily of: (i) four tire-mounted30-ton container cranes; (ii) 22 25-tonchassis; (iii)four 90 HP tractors;(iv) two small mobile cranes;and (v) one 25-ton and 13 5-ton forklifts.Additionally, the projectincludes the reconstructionof the chromiteore conveyorsystem at Toamasinaand a four- wheel drive vehiclefor Toamasina.

3.09 Floatingcraft. Of the ten ports includedin the project,seven requirelighterage, and all requirepilot launchesand line boats. With the exceptionof some work boats recentlyacquired under bilateralaid, the generalcondition of the floatingcraft is very poor, and many cann-tbe rehabilitated.The projectprovides 14 barges rangingfrom 80 to 150 ton, two 160 HP tugs, two 60-tonlanding craft, and one line handlingboat.

3.10 Spare parts and materials. Supplyof spareparts and materials and tools has been a seriousand chronicproblem in the entireport sector of Madagascar. The projectprovides parts and materialsfor about four years of operations. Most of the lot is allocatedto Toamasina,which is consistentwith the distributionof tonnageshandled, and the appraised needs. Also includedare 3,000 palletsbadly neededat variousports.

(c) Services to shippinR

3.11 Dredging. Siltationhas been a major problemin Mahajangaand Manakara,and, to a lesserdegree, in Toliaraand Tolagnaro. The project providesfor bottom cleaningin Mahajangausing a barge mountedclamshell excavatorand a split bottombarge, a small suctionpump to be mountedon a pontoonfor use in Toliaraand Tolagnaro,and the rehabilitationof the existingdredge at Manakara. The solutionretained in the project representsthe least cost solutiontaking into accountthe cost of dredging,the cost of cargo handlingand lighterage,and the cost of shipping. It also considersthe poor track recordof the publicsector in maintainingthe dredgesoperating. In essencethe approachwas to eliminatedredging to the extentto which it was possibleand economicto do so.

3.12 Navitationaids and hydrographicequipment. Madagascar'slights, lighthouses,buoys, beacons and marks have been seriouslyneglected, to the extent of endangering the security of coastal and international shipping, neglectingcompliance with internationalregulations and agreements. Similarly,charting, hydrographic surveys, notices to mariners,and weather servicehave been disregarded.The projectprovides new buoys, solar powered lights,repairs to lighthouses,spare parts,a mobile repairshop, - 19 - workshop,radio and telephonecommunication system. Also includedis a combinationnavigation aids-tender-hydrographic surveys launch.

3.13 Spare parts for the coastalshipping fleet. The projectprovides spare parts and their installation,as appropriate,for the largelyprivate coastalshipping vessels, which have sufferedfrom lack of foreign exchange.Private owners who operatea small but potentiallyimportant fleet are expectedto benefitsubstantially from this provision.

(d) Institutionaldevelopment and reform.

3.14 Technicalsupport. The projectprovides 274 staff-monthsof technicalsupport in the following areas: (i) a ports advisor,for technicalmatters, coordination, and projectimplementation assistance, duringfive years (60 staff-months);(ii) mainterance and cargo handling experts,during five years,to assistthe governmetutwith project implementationand improvementsto the efficiency*.- the port sectorin general (60 staff-months);(iii) one-yearassistance by a dredgingexpert, to assurecontinued operation and developmentof dredgingpersonnel (12 staff-months);(iv) one to two-yearmissions by expertsin accounting, administration,hydrography and navigationaids (118 staff-months); and (v) miscellaneoussaort durationmissions, of less than six months in specificassignments such as follow-upof the implementationof SEPT's Action Plan and trainingin procurementprocedures (24 staff-months).The breakdownis shown in Annex 3.1.

3.15 Training.The projectwill includethe followiagcomprehensive trainingprograms (i) a trainingspecialist for two years; (ii) scholarshipsand overseastraining for about 60 upper and middle level staff; (iii)training materials such as projectors,books, furniture;and (iv) trainingof 500 staff coveringMTRT, SEPT and cargo-handlingcompanies in port operations,dredging, navigation aids, and hydrographicsurveys. Detailsof the trainingprogram are given in Annex 3.2.

D. Cost Estimates

3.16 The total projectcost is estimatedat FMG 26,542million (US$42.1 million),including contingencies and local taxes. The loreignexchange cost is estimatedat FMG 18,005million (US$28.6million), or about 682 of total projectcosts. The projectcost, net of taxes and duties,is FMG 21,918million (US$34.8million). Detailedcost estimatesare presentedin Annex 3.1 and the projectcost summaryis shown on Table 3.2, on the followingpage. -- 20 -

Table 8.2 Project Cast S,immr

LOCALTAX A FOIRI4 TOTALTOTAL LOCALTAX A SMIf TOTALTOTA anr S To OvY EXTTD --- ILL ------N W

2. PM$TSDVnASIWJC

A. SYS, sLNY OmTRom.MD 441 815 63 1.,. 1,184 o. 0.5 1.1 2.8 1.8

U. YAM 441 815 6 1,8 1,071 0.7 0.8 1.0 2.2 1.7

C. JIlDSN 68 0 68 la 16 0.1 0.0 0.1 0.2 0.2

D. VJ=LT1 18 126 815 S0 804 0.8 0.2 0.8 1.0 0.8

JWfOTALPORTS V*lA8 JCE 1,184 76 1,701 8,591 2,83 1.8 1.2 2.7 6.7 4.8

ZS. CAIWOWNCLDIO

A. EJW9T 252 56? 1,575 2,394 1,827 0.4 0.9 2.5 8.8 2.9

-. ROATIO CPAFT 169 19 S6 1,006 819 0.8 0.8 1.0 1.6 1.8

C. SPANSPAT ANDATNUALS 18 1,006 0,894 8,891 2,8k 0.8 1.6 8.8 8.7 4.1

SUOTAL CARGOK8SUM 68 1,764 4,599 6, 8.29 1.0 2.6 7.8 11.1 8.8

ZUt. 6190

A. ORWa 19 252 680 1.071 819 0.8 0.4 1.0 1.? 1.8

6. NMVTTSN AM 262 282 1,00 1,512 1,26O 0.4 0.4 1.e 2.4 2.0

C. VSARNPARTWS PM COATALSWIPPINO as 189 04 756 57 0.1 0.8 0.8 1.2 0.9

.WOTALSHIPPDO 804 N8 2.142 3,8 2,64 0.8 1.1 8.4 5.8 4.2

Iv. DINSTUTIWEALO 0YUJPII

A. T#ICAL SWPUN1 16 0 1,575 1,701 1,701 0.2 0.0 2.5 2.7 2.7

S. TRADIO 252 n3 1,4e 1,764 1.701 0.4 0.1 2.8 2.0 2.7

UTOTAL NSTIUTIONALOV.DW 8as 6s 8,024 8,4U 8,402 0.6 0.1 4.0 5.5 5.4

V. 8ODERSN, 81D DOASn ANDMS WIPSY 1i 90 1,JSO 1,483 1,44 0.2 .0 2.1 2.8 2.8

TOTALBAEuLK COSTS 2,77S 8,801 12,776 18,686 15,855 4.4 8.2 20.8 29.0 24.7 ~omm mmp=aaman~tmem -=xmmm m==

PFSCAL CPINS00CY 270 5A0 1.W 1,868 l,8 0.4 0.5 2.0 8.0 2.5

PrImCCWIanAcy SW 998 8,951 8,800 4.607 1.4 1.6 6.8 9.2 7.6

TOTALPROJEIT COStS 8M9U 4,624 10,006 29,542 21,918 8.2 7.8 28.6 42.1 84.0 - 21 -

39'-17, Cost estimateswere preparedby engineeringconsultants, financed by IDA under a PPP advance,reviewed by the appraisalmission, and revised as appropriateto reflectknown costs for similaritems at mid-1986prices. Local taxes and duties,included in the estimates,amount to about FMG 4.6 billion (US$7.3million). Physicalcontingencies were calculatedat 10% of base costs. Price escalationfor foreignand local costs is based on projectedincreases in internationalUS dollarprices of 7.2% p.a. in 1986, 6.8X p.a. in 1987 and 1988, 7.0% p.a. in 1989, 7.1% p.a. in 1990, and 4.0% p.a. thereafter. The internationalrates have also been used for local cost *esc4etionassuming that the differencebetween domestic and inteenationalprice inflationwill be offsetby adjustmentsin the foreign exchangerate, in accordancewith Governmentpolicy.

3.18 Cost estimateshave been derivedas follows:(i) for equipment, spare parts,materials and supplies,defined at final engineeringlevel, they are based on engineers'estimates and are supportedby informal quotationstwitch is acceptablesince most projectitems are standard, "off-the-shelfacomponents; (ii) for civilworks, where applicable, estimatesare based on preliminaryengineering for the quantitiesand on currentcontracts for the unit prices; (iii) for technicalassistance and engineeringser4ices, the estimateswere based on actualcosts for similar servicesrendered under other projectsin Madagascar. Detailedengineering for civil works has been substantiallycompleted. About US$ 1.3 million out of the estimatedUS$ 2.3 millionfor engineering,bid documentsand supervision,has been spentwith financingfrom France,UK, and the PPF advance.

E. Financing

3.19 Project;xpenditures net of taxes and duties (US$ 34.8 million equivalent)would be financedby CaisseCentrale pour la Cooperation Economique(CCCE) and Ponds d' Aide et Cooperation(FAC) of France,KfW of the FederalRepublic of Germany,IDA, and local sources,including lovernment,cargo handlingcompanies, and SEPT. The UK provideda grant to assistin projectpreparation. The Projectfinancing plan is shown on Table 3.3 below:

Table 3.3: ProlectFinancing Plan

Source Local Foreign Total ----- US$ million------IDA 2.4 13.6 16.0 GCCE 0.0 10.0 10.0 KfW 0.0 2.6 2.6 FAC 0.0 2.3 2.3 ODA 0.0 0.1 0.1 Local Sources 3.8 0.0 3.8

Total 6.2 28.6 34.8

3.20 ProJectitems to be financedby IDA are shown in Table 3.4, ProcurementArrangements. The proposedIDA Creditof US$16.0million would finance46% of total projectexpenditures net of taxes and duties. The 1US$1.0million PPF advancewould be refinancedby the IDA Credit. The financingplan for this projectwas negotiatedbetween Government and the - 22 - donors,including the Bank, on the basis of this report'scost estimates. The exchangerate prevailingin mid-1986was used in the report. When the IMF's Sixth Stand-byprogram was initiated,a 20X step devaluation occurred. In November1986, the exchangerate was US$1 - FMG 750. No underfundingof the foreignexchange costs of the project,estimated at about 82X of total projectexpenditures, is expectedto resultfrom this change in the parityof the FMG. Significantoverfunding of the local costs of the projectis also unlikelybecause the effectof the depreciationof the FMG is expectedto be suostantiallyoffset over the projectperiod by local inflation(para 3.17).

3.21 The Governmentwould onlen4atout US$2.7.mil.ionequivalent to SEPT on the followingterms ond conditions:(i) finalmat rity of 20 years; (ii) six years grace; (iii)interest rate of 9.1% p.a.; (iv) commitment fee of 0.75% on the undisbursedportion of the loan; and (v) borrowerto assumethe foreignexchange risk. Executionof a subsidiaryloan agreement satisfactoryto the Bank would be a conditionof crediteffectiveness. Financingof all ports exceptToamasina will be allocatedto the Ports Budget (para 5.14). The Treasurywill recoverthe cost of the investments includinga reasonablecapital charge through the Ports Budgetover the life of the assets. It will recoverits investmentcosts from port users throughtariffs and from privatebeneficiaries such as cargo handling companiesthrough concession agreements acceptable to IDA for the use of Governmentproperty.

F. ProiectImplementation and Monitorint

3.22 The projectwould be implementedby MTRT, which would be the main executingagency, and by SEPT, which would be responsiblefor all investmentsin Toamasina. To this effect,technical assistance for both MTRT and SEPT will be providedfor projectimplementation. The projectis expectedto start in early 1987, and to be completedby September30, 1992. The implementationschedule shown in Annex 3.3 was discussedand agreed upon duringnegotiations.

3.23 MTRT's recentreorganization (paras 2.17 - 2.24) providesa coherentstructure, which csa serve as frameworkfor the Technical Assistance component, as well as a vehiclefor developingthe capabilityto carry out fu4tureprojects. SEPT has, in the past, been able to carry out projectsand, with the technicalassistance provi4ed under the projectand Qovernmentsupport of the Action Plan, is expectedto developsufficient institutionalcapability to implementits part of the project.

3.24 It will be criticalto followup on the Port Subsector devei.opmentsby moxBitoringperformance indicators shown at the end of Annex 2.8 for SEPT, and in,Annex3.4 for the other po;ts. At negotiations, a0suFances.werereceived that MTRT and SEPT will preparequ4rterly reports of the pejfrWaanceof the ports based on the agreedupon indicators.The targetswill be revised nnu4Xly,in consultationwith IDA, to reflectthe performanceattained during the previousyear. - 23 -

0. Procurement

3.25 Proposedprocurement arrangementsare summarizedin Table 3.4 belows

Table 3.4 - ProcurementArrangement

- ProcurementMethod - ICB Other N.A. Total (US$ millions) (a) Civil Works Quays, slipways,trestles 3.3 3.3 Yards 3.1 3.1 Buildings 0.2 0.2 Utilities 1.5 0.0 0.0 1.5 8.1 0.0 0.0 8.1 (5.0) (5.0)

(b) Equipment Port and cargo handling 1.0 4.3 0.0 5.3 1.0 4.3 0.0 5.3 (0.5) (0.5) (1.0)

(c) Floatingcraft For lighterage 0.0 2.3 0.0 2.3 For dredging 1.0 1.4 0.0 2.4 1.0 3.7 0.0 4.7 (0.5) (0.5) (1.0)

(d) Spare parts and materials For port equipment 4.0 4.1 0.0 8.1 For coastalshipping 0.0 1.6 0.0 1.6 4.0 5.7 0.0 9.7 (2.0) (2.0) (4.0)

(e) Navigationaids 3.3 0.0 0.0 3.3 3.3 0.0 0.0 3.3 (1.0) (1.0)

(f) Consulting services Technical support 0.0 0.0 3.8 3.8 Engineering supervision 0.0 0.0 3.3 3.3 0.0 0.0 7.1 7.1 (2.0) (2.0)

(g) Training 0.0 0.0 3.8 3.8 0.0 0.0 3.8 3.8 (2.0) (2.0)

Total 17.4 13.7 10.9 42.0 (9.0) (3.0) (4.0) (16.0)

Notet Figuresin parenthesisare the respectiveamounts financedby IDA. - 24 -

3.26 Civil works contractswould be awardedfollowing ICB procedures, with appropriatelocal preferences,if applicable.New equipment,floating craft,tools and materialsfor SEPT and MTRT financedby IDA would be procuredon the basis of ICB, in accordancewith Bank Group Guidelineswith a separatecontract for each type or groupsof similartypes of goods. Itemo costingno more than US$ 50,000,but not exceedingUS$1.0 million in the aggregate,would be procuredby internationaland local shoppingon the basis of at least three quotationsfrom differentsuppliers, dealers or manufacturers.Proprietary spare parts for an amountestimated at US$1.0 millionwould be procuredby directcontracting after negotiations.Each cargo handlingentity or ship owner would be responsiblefor procurementof its own spare parts and materials(US$1.0 million). MTRT would,with the assistanceof consultants,approve the lists of spareswith their respectivequotations. The firms would pay the CentralBank cash in local currencyequivalent, and these funds would be allocatedto MTRT'sports budget as counterpartfunds. Procurement would be made by users on the basis of internationalshopping through local representation,if available, or from foreignsuppliers using technicalassistance which MTRT would make availableto preparethe lists of spare parts,to carry out all the imports transactions,to obtainthe importlicenses and foreigncurrency. The consultantswill also ensurethat the procurementguidelines are adheredto in the process. Each user would be fully responsiblefor all the transactionsrequired for purchase,shipment and receiptof the parts in Madagascar. Total exceptionsto ICB would not exceedUS$3.0 million. All contractsabove US$100,000would be submittedto IDA for prior review.

3.27 All studiesand preparationof bid documentswill be carriedout by MTRT and SEPT with the assistanceof consultantsas appropriate. Expertsand consultants,financed by IDA, would be recruitedas needed, under terms and conditionssatisfactory to IDA and in accordancewith the Bank's 'Guidelinesfor the use of consultants".Training would be provided by specislizedinstitutions selected by Governmentin accordancewith the specificneeds, after evaluatingseveral candidates, and under terms and conditionssatisfactory to IDA.

H. Disbursements

3.28 Funds from the IDA Creditwould be allocatedas follows:

Table 3.5 IDA CreditAllocation

ThousandUS$

a) Civil Works: SEPT 1,400 Other 3,100 4,500

b) Cargo HandlingEquipment, FloatingCraft, Spare Parts, Navigationaids, Training Equipment,Tools and Materials SEPT 1,000 Other 4,500 5,500

c) Con:ultants'Services 1,000 - 25 -

t) Trainingservices and scholarships 2,000

.) Refinancingof PPF 1,000

f) Unallocated 2,000

Total 16,000

3.29 IDA creditfunds would be disbursedon the followingbasis:

(i) Civilworks: 100X of foreignand 75% of local expenditures;

(ii) cargo handlingequipment, navigation aids, floatingcraft, spare parts,tools and materialst100% of foreignand 60% of local expenditures;

(iii) consultingservices: 100% of foreignand 801 of local expenditures;and

(iv) trainingservices and fellowships:1001 of foreignand 601 of local expenditures.,

3.30 All claimswould be fully documented,except for claims relating to any contract,purchase order, or trainingactivity valued at less than US$20,000,which would be submitted under statementof expenditures.The documentationfor these claimswould be kept at MTRT and SEPT and made available for inspection by IDA supervision missions. In order to expedite and facilitatedisbursements, MTRT and SEPT would each open a Special Account in foreigncurrency at a commercialbank on terms and conditions acceptableto IDA. IDA would depositinto M!RT'sAccount US$600,000 equivalentand into SEPT'sAccount US$400,000 equivalent. The Accounts would be replenishedon the basis of withdrawalapplications. These applicationswould also comprisea statementof accountmovements since the last application,and a reconciliationshowing that the balancerepresents the originalamount deposited in the accountless paymentsfor which the applicationis submitted.

3.31 The estimatedschedule of disbursementsof IDA funds is shown in Table 3.6. It is about 5% fasterthan the standarddisbursement profile to reflectdisbursement of the PPF advance. The closingdate for the Credit would be March 31, 1993. - 26 -

Table 3.6 Estimateddisbursement schedule of IDA credit

Disbursement Cumulative Cumulative IDA fiscalYear During Disbursementat Disbursement and Quarter Quarter end of Quarter As Z of total

-US$ million-

1987 March 31,1987 1.0 1/ 1.0 6.3% June 30, 1987 0.6 1.6 10.0%

1988 Sept.30,1987 0.6 2.2 13.8% Dec.31,1987 0.7 2.9 18.1% March 31,1988 0.8 3.7 23.1% June 30,1988 0.8 4.5 28.12

1989 Sep.30,1988 0.8 5.3 33.1% Dec.3111988 0.8 6.1 38.1% March 31,1989 0.8 6.9 43.1% June 30,1989 0.8 7.7 48.1%

1990 Sep.30,1989 0.8 8.5 53.1% Dec.31,1989 0.8 9.3 58.1% March 31,1990 0.8 10.1 63.12 June 30,1990 0.7 10.8 67.5%

1991 Sep.30,1990 0.7 11.5 71.9% Dec.31,1990 0.7 12.2 76.3% March 31,1991 0.6 12.8 80.0% June 30,1991 0.6 13.4 83.8%

1992 Sep.30,1991 10.6 14.0 87.5% Dec.31,1991 0.5 14.5 90.6% March 31,1992 0.5 15.0 93.8% June 30,1992 0.4 15.4 96.3%

1993 Sep.30,1992 0.3 15.7 98.1% Dec.31,1992 0.3 16.0 100.0%

NOTE _1/s This amount is repaymentof the PPF.

November10, 1986 I - 27 -

I. EnvironmentalAspects

3.32 None of the proposedworks will affectadversely the ecologyof Madagascars maintenancedredging of less than 20,000m3lyear will be much less than what was done throughthe 1960's. Initialdredging will be less than 50,000m3; annualdredging, a lower amount. Dredgingspoils will be disposedof at landfillsites at all locations. The civil works envisaged consistmainly of pavingof work areas and repairsto old piers. There will be no changesin the demographicdistribution as a consequenceof the project,nor will there be pollutantdischarges into the sea. - 28 -

IV. ECONOMICEVALUATION

A. GeneralOblectives

4.01 As discussedin ChapterII, internationaland coastalshipping play an importantrole in Madagascar'stransport sector. Virtuallythe entire foreigntrade by volumeis carriedby sea while coastalshipping accounts for about 202, or some 245 millionton-km, of the total domesticmerchandise traffic. Shipping,however, suffers from severalconstraints at many of the nation'sports. The Government'ssubsector investment program, of which this projectis a major part, will attemptto alleviatethe most important constraintstv efficientport operation,and thus complementmajor rehabilitationefforts in other subsectors.

4.02 The proposedproject aims to reducethe cost of shippingprimary commoditiessuch as rice, sugar,salt, cementand petroleumproducts, and to fAcilitateexports through improved cargo handling. The main quantified direct resultof port improvementswould be improvedship utilization. Proposedinvestments will lower the cost of exportsof coffeeand cloves from Vohemarand Manakaratsisal from Tolagnero,textiles from Mahajanga and meat from Morondava. By 1990,some 85,000tons of these exportsare expectedto have significantlylower handling costs. Improvedcargo handlingin Toamasinawill reducethe cost of importsand exports. Safety and ship utilizationwill be greatlyimproved by rehabilitationof lighthouses,buoys and other navigationaids. Cargo losseswill also be reducedby better cargo handlingtechniques. Costly reconstruction of facilitieswill be kept to a minimum.

4.03 Whereverpossible alternative investment proposals were evaluated and the least cost solutionadopted. For example: no dredgingversus dredgingat Morondava,embankment versus pier on piles for the new pier at Vohemar,and repairsversus new sheetpilewall at Mahajanga.

4.04 While the basic infrastructureat Toamasinais generallyadequate, the coastalshipping ports need limiteddredging, rebuilding or repairingof quays,and some new cargo handlingequipment. Navigationis unsafeand delaysare .acurredbecause navigational aids are not in workingorder due to corrosionand decay. The Governmenthas been unableto allocate sufficientresources to the maintenanceof equipmentand infrastructure. Resourceconstraints dictate a selectiveapproach to capitalinvestments to be includedin this project. However,the institutionaldevelopment componentsof the projectwill addressthe resourcemanagement needs of the sectorglobally. An importantaim of this projectis to provideMadagascar with the capacityto preventthe recurrenceof these past problems.

4.05 Becauseof the difficultterrain and lack of adequate infrastructure,it has been said that Madagascaris an archipelago,rather than an island. For example,some freighttraffic between Antsiranana in the north and Antsirabe,or betweenToliara in the southwest and Antananarivois shippedto Toamasinaand is then trans-shippedby railwayto the centralhighlands (Mip IBRD #19595).The priorityports includedin the projectare vital nodal pointsof domestictraffic linking Madagascar's coastalregions to each other as thoughthey were islands. - 29 -

B. Forecqstof FutureTraffic

4.06 ' As for other transportmodes, port trafficlevels depend to a large extentlonthe conditionof and projectedgrowth for the overalleconomy. This has been particularlyevident for importsof petroleumto Toamasina, whereascoastal shipping has been less affectedby variationsin the economicconditions, as indicatedin Annexes 2.1 and 2.2. A forecastof cargo trafficby port is shown in Annex 4.1. Dry cargo trafficis projected to grow at about 12 p.a.; oil productstraffic at 3.6% p.a. through1995, for the main ports of Madagascar.

4.07 MTRT, with the assistanceof consultantsfinanced under the PPF, preparedtraffic forecasts under differenteconomic growth and development assumptions.The most conservativeof these forecastshas been adoptedfor the economicevaluation of the proposedproject. The proposedport investientshave been designedto complementthe ongoingprogram of road rehabilitation,taking into accountthe comparativecost advantageof coastalshipping in the long haul of relativelylow value commodities. Becauseof plannedroad developmentand the difficultand costlynature of port operationsin Morondava,on the west coast,traffic in that port is expectedto decline.

4.08 Currenteconomic trends support a GNP growthrate projectionof about 3% p.a. through1990, about equal to the projectedrate of population growth. Since 1979, importsof oil productshave been declining,partly becauieof substitutionby hydroelectricpower (Andekalekapower-station finan_edin part by Credit817-MAG), partly because of decliningexports, mostlybecause of economicstagnation. This has affectedthe overallport trafficvolume significantly.With resumedeconomic growth, a rate of growthof oil importsslightly higher than that for GDP is likely. Similarly,dry cargo importswill also increasethough at a lower rate than oil imports. Exportpromotion programs supported by the Bank group and other donorsare expectedto achievepositive results. Trafficforecasts have been establishedcommodity by commodityafter dividingthe countryinto economiczones for each port and under differentgrowth scenarios.

4.09 In additionto the main agriculturalexports such as coffee, cloves,sisal, fish and cacao,the trafficforecasts take into account projected domestic consumption of staples such as sugar, beans, bananas, salt and corn. Exports of chrome, graphite and mica, and petroleum trade have all been projectedseparately. The forecastof dry cargo trafficis summarized below:

1990 1995

Dry cargo exports 306,000tons 362,000tons Dry cargo imports 447,000tons 465,000tons Coastalshipping 236,000tons 286,000tons

4.10 As explainedabove, these trafficforecasts assume a low rate of economicgrowth. Less conservative,but plausibleprojections of economic growth would yield a forecastof 466,000tons of dry cargo importsby 1990, growingto 554,000tons by 1995. Very low levelsof rice importshave been assumedto reflecthigher domestic production which is expectedto result from the implementationof policy reformssupported by the Agricultural - 30 -

SectorAdjustment Credit (Cr.(1691-MAG).It was assumed that some of the cement importswill be replac4dby coal importsfor the new cementplant at Ibity,south of Antairabe. Oil producttraffic has been forecasted,but it is nbt expectedto have a significanteffect on port requirementssince loadingor unloadinginstallations in most ports are specialized,are adequatelyoperated by SOLIMA,the nationaloil company,and do not require improvements. l 4.11 Trafficgrowth prospects for the seven ports excludedfrom the project are limited. They are: Sambava,Antalaha and Maroantsetrain the Northeast,Mananjary, eventually to be connectedby the PangalanesCanal on the SoutheastCoast, Morombe, Analalava and Antsohihyon the West Coast. Total trafficin these ports in 1985 was only 46,300tons. The trafficof Sambava,Antalaha and Morombeis expectedto shift to other ports with better facilitiesand land access. Among the projectports, Vohemar and Manakarashow good prospectsfor coffeeexports, whereas sugar ports such as Nosy-beand Port St. Louis are likelyto experiencedeclining traffic. Toamasina,Antsiranana and Mahajanga,which are recoveringfrom the ravages of the 1984 and 1985 cyclones,are expectedto show moderatetraffic increasesin the early 1990'sas the economyimproves.

4.12 In 1984, only about 44,800 tons, mainly generalcargo importsand coffee exports,was moved in containersin Toamasina. RNCFM,SEPT and shippingagents are activelypromoting this trafficwith throughbills of lading. Containerizationis expectedto increasein severalports. The pace at which this will happenis difficultto forecastbut, judgingfrom other experienceswith similartypes of cargo,the proportionof exportsand importslikely to be shippedin containerswill grow to about one third of dry cargo traffic. By 1990, containerizedimports to Toamasina,Tolagnaro and Mahajangaare projectedto grow to 153,000tons and exportsto 108,000 tons. By 1995, they could increaseto 184,000tons and 123,000tons respectively.In addition,about 55,000tons coastalshipping traffic at Antsiranana,Manakara and Vohemarcan be expectedto move in containers after 1990.

C NavigationAids and Shipping

4.13 The conditionof the shippingfleet and lighthouses,buoys and other navigationaids is very poor becauseof age and lack of maintenance funds,particularly foreign exchange. Hydrographicsurveys have not been carriedout for some time. To avoid the risk of ship loss or damage, prudentshippers have been reluctantto sail at night or duringpoor visibilitywith the resultof increasingvoyage time and thereforecosts. Despiteprecautions, accidents have occurred: a numberof ships have sunk or have -un agroundbecause lights were off, shoal markingswere destroyed by storms,and shipswere poorlymaintained. Lossesof small passenger carriershave occurredand some operatorshave found the cost of insurance coverageto be prohibitive.Expected savings from the avoidanceof losses of human lives and ships have nQt been quantified. However,these losses are of such a magnitudethat the investmentin rehabilitationof lighthouses and buoys and the provisionof sparesfor the coastalshipping fleet could be fully justifiedon those groundsalone.

4.14 The only benefitswhich have been quantifiedfor this project componentare those relatedto improvedship utilization.The benefits - 31 - expectedto derive from improvedsafety of navigation, thoughsubstantial, have not been quantified. Ship utilisationwill improvemainly because shipsaill take less time than now to enter ports and they will be able to work at night at lighterageports. Savingsfor large ships,nearly all Malagasy flag vessels,have been calculatedon the basis of an averagedaily cost of US$4,800(FMG 2.9 million);for small vessels,US$840 (FMG 0.5 million)per day.

D. Cargo HandlingImlrovements and Dredging

4.15 The anticipatedeconomic benefit of this component,the project's largest,is a reductionin the transportcosts to the users. In additionto freight,transport costs includeother expendituressuch as insurance, interestfor capitaltied up in goods while in transit,delays and cargo losses. Many of these are very importantbut difficultto quantifyin direct relationto the conditionsprevailing in each particularport. For example,insurance rates in Madagascar,while very high, differentiateonly betweenports with directaccess from ship to shore and ports servedby lighterageoperations. The directbeneficiaries would be exportersand importers,freight forwarders and ship owners (para 4.19).

4.16 Cargo tariffsestablished by MTRT for coastalshipping only give a partialindication of relativecosts of differentports. Furthermore, as customary,these tariffsdo not apply to the use of charteredvessels. Over the longerterm, actualtariffs paid to ship ownersdo reflectthe relative costs of port handling,espe'cially since, due to the low productivityof most ports,Malagasy ships spend a disproportionateamount of time in port ratherthan at sea.

4.17 The best indicatorof port productivityis vessel turnaroundtime. If the rate is low, the vesselmust wait in port longerthan it would if cargo moved at a fasterrate. Ship'swaiting time affectsthe voyage turnaroundtime and, becauseships are expensive,the longerthis time, the higherthe cost of shippingwhich must be recoveredby the shipperthrough a higherfreight rate. As shown in Annex 4.2, currentcargo handlingrates at most ports are low. The itprovementsin productivityof cargo handling expectedto resultfrom projectinvestments in each port have been estimated and are also presentedin Annex 4.2. The savingsin ship waiting time which would derive from these productivityimprovements as well as from dredging, where applicable,provide a measureof projectedeconomic benefits. Annual benefitsafter projectcompletion were calculatedat about US$5.5million, equivalentto the annualcost of two typicaldeep-sea vessels and three coastalvessels. This saving is unlikelyto lead to a surplusof ships, becausemany ships need to be phasedout of servicedue to their old age and poor condition.

4.18 All factorsaffecting ship time have been taken into accountin this analysis. Each port has been evaluatedas a separatesub-project. All projectcosts have been includedin the analysisexcept training and the indirectcost of technicalassistance. In total about 861 of total project costs have been separatelyevaluated. The costs and benefitscalculations for the individualsub-projects are presentedin Annex 4.3. Detailsof the methodologyfor the estimatesare given in Annex 4.4 and a surnaryfor each sub-projectin Annex 4.5. -32 -

4.19 Financialcosts, excluding taxes and duties,have been used as the basis for the economiccost calculationsat price levelsprevailing in mid- 1986. Costs for Malagasyflag ships in port or at anchorageare given in Anneo 4.2,. One half of the typicaldemurrage rate, or some US$3,500per day has been used for all other flag vesselsto estimatefreight savings importersand exportersare expectedto make as a resultof reductionsin ship waiting time. An FOB value of US$2.50per kg has been used to calculatesavings in transittime for coffee. These assumptionsare consistentwith internationalcosts for similarships. Ship time savings will be monitoredagainst the operationaltargets presented in Annex 2.8 for Toamasinaand in Annex 3.4 for other ports. A reductionin anticipated damagesand cargo lossesof 12 of the cargo value has been used to calculate the economicbenefits of switchingfrom lighterageto directship-to-shore cargo handlingoperations. Current cargo insurancerates are as high as 4- 51 of the value of the goods.

4.20 Benefitswhich have not been quantifiedinclude institutional and technologicalimprovements this projectis expectedto help bring about. In additionto promotingstronger and more effectiveinstitutions, the project would facilitatethe processof containerizationalready underway. Equipmentwill be providedfor handling20-foot containers. This equipment would enableexporters to ship high value commoditiessuch as coffeeby containersfrom the port of originthrough Toamasina where the containers must now be stuffed. The use of LCT's on the west coastwill be encouraged, in additionto a generalimprovement of cargo handling. This will also make it worth-whilefor ship ownersto introducemore efficientvessels to take furtheradvantage of improvedport productivity.

E. EconomicRate of Return

4.21 The project'soverall economic rate of returnhas been calculated at 292. The economicrate of return for the navigationaids and shipping investmentswas calculatedat 26S. Returnsfor individualports were calculatedat rates rangingfrom 19% for Port St. Louis to 531 for Nosy Be. Detailsare shown in Annex 4.5. The sensitivityof the economicrate of returnto changesin the levelof costs and benefitswas testedfor each projectcomponent. Annex 4.6 shows the resultsof this analysisand a test of first year returnsassuming an economiccost of capitalof 121. If the project'seconomic benefits were 201 lower than estimated,the project's overalleconomic rate of returnwould stillbe satisfactoryat ;2%. Virtuallyall these tests yieldedrates of returnabove the economiccost of capital. In conclusion,even under the conservativetraffic assumptions adoptedand taking into accountonly part of the expectedeconomic benefits, the projectwould be economicallyjustified over a periodof less than ten years.

F. Risks

4.22 The main projectrisks are underestimationof costs and quantities of projectcomponents and overestimationof the possibilityof achieving meaningfulinstitutional reform. The first group of risks (costsand quantities)is mitigatedby severalfactors; civil works are limitedin scope and in most cases are not criticalfor the performanceof other projectcomponents; the equipmentincludes rather standard units for which quotationsare accurate,and if *Ete need shouldarise, adjustments could be - 33 - made in the quantitiesto be procured. The institutionalrisk is higher, but neverthelessworth taking,because Government has alreadyshown tangible signs of its commitmentto change:it has agreedto an excellentAction Plan for SEPT, it has acceptedthe provisionof technicalassistance for project implementationand for day to day ,perations.Restrictive covenants coveringall of the above are recommended.The port of Toamasinawith its powerfulunions and low productivitypresents an additionalrisk, which is addressedby the Action Plan discussedin para. 2.27, and by the changes alreadyintroduced by its new management. - 34 -

V. FItUANCIALEVALUATION

A. Societed'Exploitation du Port de Toamasina(SEPT)

1. Past Performance

5.01 SEPT's IncomeStatements for 1980-85are shown in Annex 5.1; BalanceSheets, in Annex 5.2; Funds Statementa,in Annex 5.3; and Ratio Analysisin Annex 5.4. Table 5.1, below,shows SEPT'sFinancial Highlights. Table 5.1s SEPT'sFinancial Hixhlights

1981 1982 1983 1984 1985 ------uneudited------audited (millionFMG*s)

Port Revenues 4,400 3.671 4,985 4,391 4,954 Other Income 136 155 368 368 344 Working Expenses 3,642 3,984 4,167 4,947 5,531 Net Income 115 (807) (196) (2,791) (2,091),

WorkingCapital 3,559 2,889 3,638 1,335 (941) Net Fixed Assets 6,229 6,011 5,677 4,502 4,364 Total Assets 18,075 17,199 17,707 13,051 13,350 EquityCapital 6,852 6,115 6,753 4,097 2,630

Traffic (thousandtons) 570 627 513 597 600 WorkingRatio 83% 1092 842 1132 1122 Receivables(days) 806 906 718 371 327

5.02 The above table shows that SEPT'soperating performance deterioratedsignificantly from a net incomeof FMG 115 million reportedin 1981 (1980,FMG 805 million)to lossesof FMG 2,791 million in 1984 and FMG 2,091million in 1985 (Annex5.1). While revenueswere ratherstable, salaries,paid to a work force averaging4,500, increased 39% from FMG 2,713 in 1981 to FMG 3,759 in 1985, largelyaccounting for the rising losses. In additiornto port and cargo handlingservices, SEPT ope-atesthe Toamasinacity buses,a forestry productdivision, and transportservices on the Pangalanescanal. A1l of these activitiesare operatedat a loss. The accountingfirm that carriedout the 1984 and 1985 externalaudits, the first ones in SEPT'srecent history, recommended extraordinary charges to earningsof FMG 1,487million in 1984 and FMG 766 million in 1985 to reflectphysical asset valuations,write-downs and loss provisions. Adjustmentsto the 1985 financialstatements may also be recommendedonce the draft financialrestructuring plan for SEPT is agreedbetween Governmentand the donors. Final approvalof such plan would be a conditionof Crediteffectiveness.

5.03 The recentgradual erosion in SEPT'searning power has adversely affectedits financialcondition, squeezed liquidity, and erodedits - 35 - capitalbase.. The current ratio has fallenfrom 1.5:1 in 1981 to O.9:1in 1985; in 1985, SEPT had a negativeworking capitalof FMG 941 million (Annex5.4). Thoughthe amountof long term debt outstandingis relatively low, the operatinglosses have createda need for a fresh infusionof equity funds into SEPT'scapital in 1986/7. The need is estimatedat about FMG 2.0 billion (US$2.7million), pending finalization of the financial restructuringplan.

5.04 Furthermore,during the periodunder review,SEPT's plant has deterioratedand collectionof receivableshas been slow, which in turn has forcedSEPT to delay paymentsto suppliers. Despitestagnant traffic and in the absenceof significanttariff increases, revenue turnover increased from 71% in 1981 to 114% in 1985 (Annex5.4), reflectinga drop in the boos value of net fixed assetsfrom FMG 6,229 millionin 1981 to FMG 4,364 million in 1985. This drop was the combinedresult of deferredmaintenance and lack of financialresources for equipmentreplacement.

5.05 Under pressurefrom the Ministerof Transport,who is also SEPT Board Chairman,SEPT's old managementattempted to improvethe rate of receivablecollection but the resultswere unsatisfactorysat the end of 1983, SEPT was carryingnearly two years - 718 days - of uncollected revenues on its books; in 1984,522 days; and, in 1985, an estimated630 days. Duringthe recentaudit, receivables were writtendown to 371 days for 1984 and 327 days for 1985. tack of financialcontrols, billing delays,and lack of customerfollow-up were part of the explanation,but weak managementappears to be the root cause of SEPT'spoor financial performancein this as well as other areas.

2. SEPT's Action Plan

5.06 At appraisal,the Governmentaccepted that Bank supportof the proposedproject be conditionalon a satisfactoryAction Plan for SEPT. In November1985, the Minister of Transportappointed an ipterministerial committee with a clear mandate to prepare a comprehensive recoveryplan for SEPT by the end of March 1986. At the Government'srequest, IDA provided financingfor two consultantsto the committeeunder a PPF advance. The draft recoveryplan was reviewedby an IDA missionin April 1986, discussed,modified, and approvedby the Councilof Ministersin October 1986.

5.07 An ActionPlan, essentiallya summaryof the recoveryplan preparedby the committee,waslagreed upon with SEPT'snew GeneralManager and is presentedin Annex 2.8. The ActionPlan includesspecific targets such as performanceindicators, staffing requirements, and financial provisions. More specifically,the initialAction Plan containsa list of actionsto be undertakenby SEPT in 1986, 1987 and 1988, sone of which are linkedto decisionsto be taken by other Governmentagencies and by donors.

5.08 In addition,the ActionPlan contains annualOperational PerformanceTargets agreed upon with SEPT. These performancetargets would be reviewedand revisedannually in consultationwith the Bank. At negotiations,implementation of the ActionPlan was reviewed,its content discussedand modified,.and assuran- as receivedthat the ActionPlan agreed upon will be carriedout as part of the project. - 36 -

3. SEPT'sFinancial Projections

5.09 The major assumptionused for projectingthe financialstatements of SEPT is the implementationof the Action Plan presentedin Annex 2.8. In particular,it was assumedthat SEPT will phase out its non-port activities,improve staff productivity,and sensiblyincrease the rate of receivablecollection. In additionto the tariff increaseapproved by the board in October 1986 (para 5.13),it was assumedthat SEPT'stariffs would furtherincrease by 20% in real terms in 1987.

5.10 Trafficdemand projections for generalcargo and oil are presented in Annex 4.1. and the projectedrate of inflationis the same as that used for estimatingprice contingencieson projectcosts (para 3.17). Project investmentswere added to SEPT'sassets. New and existingfixed assets were revaluedeach year and the added value creditedto equitycapital. Debt drawdown,amortization, inteest and fees reflectthe project financingplan (para 3.19) and proposedonlending terms (para 3.21). Detailsare shown in Annex 5.5.

5.11 SEPT'spro-forms Income Statements for 1986-95are set out in Annex 5.6; BalanceSheets, in Annex 5.7; Funds Statements,in Annex 5.8; and Ratio Analysis,in Annex 5.9. Table 5.2, below,shows a summaryof SEPT'sfinancial projections.

Table 5.2: SEPT'sSummary Financial Projections

1986 1987 1988 1989 1990 -p------Drojected------(millionFMG's)

Revenues 4,796 5,905 7,292 7,692 8,120 WorkingExpenses 5,153 5,388 5,632 5,895 6,174 Depreciation 526 668 810 892 993 Net Result (883) (151) 850 905 953

WorkingCapital 1,549 2,002 2,714 2,514 2,404 Net Fixed Assets 5,045 7,876 10,440 10,977 11,805 Total Assets 12,764 15,178 17,525 17,768 18,333 EquityCapital 2,538 3,136 3,498 3,672 3,789

Traffic(thousand tons) 590 580 570 560 550 @ 1986 FMG/ton 5,600 6,720 8,064 8,064 8,064 Annual increase 7% 20% 20% - - WorkingRatio 107% 91% 77% 77% 76% Receivables turnover (days) 415 323 252 197 153 CurrentRatio 1.3 1.4 1.6 1.6 1.7

5.12 Table 5.2 shows that SEPT would need to chargecustomers real tariff increasesin order to graduallyrestore profitability and generate sufficientcash to meet operatingexpenditures, to serviceits debt, and fund its share of projectinvestments. This goal is attainablesit would representa sustainableburden to port users who have benefitedfrom an erosionin real terms of SEPT'saverage unit tariffssince 1980 (para - 37 -

5.04). Users would willinglypay more than they now do for betterport serviceand savingsin ship waitingtime.

5.13 In order to enableSEPT to complywith the revenuecovenant proposedbelow (para5.27) and to ensurea smoothtutrnaround in SEPT's profitability,on October31, 1986, SEPT.sboard agreedto increasetariffs by 502 (about202 in real terms after accountingfor local inflationand currencydepreciation as explainedin para 3.20).

B4 The Ports Budget

1. FinancialCondition

5.14 With the exceptionof Tosmasina,the Malagasyports do not follow commercialaccounting practices, and do not issue incomestatements and balancesheets. The Ports Departmentof MTRT in Antananarivoprepares an annualbudget of operatingexpenditures, investments and receiptsof 17 main ports known as 'The Ports Budget'. This budget is prepared on a cash basis and does not account for depreciation of fixed assets. Consultants financedunder a PPF advancehave valuedthe ports' assetsand revisedthe 1984 Ports Budgetto includedepreciation charges and other accruals. The revised1984 Ports Budget is presentedin Annex 5.10. An explanationof the main accountsis given in Annex 5.11.

5.15 Annex 5.10 shows that, in 1984* five of the 17 ports includedin the budget,Antsiranana, Mahajanga, Morondava, Port St. Louis and Nosy Be reportedoperating receipts in excessof workingexpenditures, while only three,Mahajanga, Port St. Louis and Nosy Be had sufficientincome to cover estimateddepreciation charges. Becausethe profitableports are the ones with most traffic,the consolidatedPorts Budgetshows a cash surplusof FMG 40 millionor about 122 of gross receipts,after chargingtotal working expenditures.To cover depreciationcharges, estimated at FMG 230 million, receiptsshould have been 692 higher than they were. Revenue increases re4uiredin each port to balancethe budgetvary widelysin 1984, Manakara,for instance,recovered only 302 of operatingcosts excluding depreciation,while Antsirananahad a surplusof nearly602.

2. FinancialProspects

5.16 A five-yearfinancial projection of the Ports Budget is presented in Annex 5.12. The assumptionsadopted for the projectionare given in Annex 5.13. Essentially,the key assumptionsare that (i) the Ports Budget'srevenues will equal total expenses;(it) staffwill be reducedby 10%; (iii) the maintenancebudget will increasethreefold; and (iv) project investmentswill be depreciatedover their estimateduseful life. Individualfinancial projections of the six largestports, Antsiranana, Mahajanga,Hanakara, Nosy Be, Tolagnaroand Toliara,and aggregate financialprojections of elevensmall ports are in the projectfile.

5.17 The financialprojection of the Ports Budgetshows that it will be possibleto achievefull cost recoveryof the ports sector including adequatedepreciation charges for new and existingassets, a financial chargefor the use of Treasury funds, and adequate funds to catch up with deferred maintenance,provided that tariffsare graduallyincreased in real terms between 1986 and 1990. - 38 -

C. The Cargo HandlingCompanies

5.18 The Governmentgrants the exclusiveright to handlecargo to a privatecompany in each port. In Mahajanga,however, it is estimatedthat about one third of the total trafficis handledby others,wostly ship owners. The financialstatements of five of these companieshave been reviewedand filed. The analysishas shown operatinglosses and insufficientliquidity, resulting from inadequatetariffs and plethoric staff.

5.19 As was the case for the ports,the analysisrevealed great disparitiesin cost recoveryrates among the variouscompanies. However, unlike the ports,where the case could be made for attainingcost recovery globally,each companymust be financiallyviable for the obviousreason that one investorcannot offset his lossesagainst another investor's profits. It is the Government'spolicy to ensurethat investorsin companiesthat performa vital role in the economyof the country,as these companiesdo, earn an adequatereturn on their investment.

5.20 To implementits policy,the Governmentmust take concrete measures,including the settingof new rates for cargo handlingand lighterage,that would enableeach companyto pay MTRT adequateconcession fees (currentlythe sourceof about 50% of total receiptsof the Ports Budget),meet operatingexpenditures, and have a sufficientincentive to continueinvesting in their operationso as to reduceto a minimumthe financial burdenof the ports to the Treasury. At negotiations, assuranceswere receivedthat Government,with the assistanceof consultantsfinanced under the project, will reviewthe level and structure of all port relatedrates and will revisethem, in consultationwith IDA. While it is understoodthat the requiredrevisions may be taken in steps, the target date of June 30, 1988 was agreed for the rate revisionsto become fully effective(para 5.27).

D. FinancialObjectives

5.21 The main financialobjective of the proposedproject is to reestablishfull cost recoveryfor the port sector. Regardingthe port of Toamasina,implementation of the agreedSEPT's Action Plan (para 5.07) is expectedto ensurethe achievementof this objective.

5.22 Regardingthe ports budget,Government's objective is to set port tariffsat a level that would ensurethe recoveryof all costs,including depreciation,and the generationof a profit to financeworking capital and debt servicerequirements. Ideally, these objectivesshould be achieved for each port as well as for the consolidatedPorts Budget. However,in view of the great diversityof local operatingconditions, the low volume of trafficof the small ports and their vital role in providingwhat is often the only outletto the rest of the countryfor small isolated communities,it appearsreasonable to pursuethe priorityobjective of full cost recoveryindividually for the six largestports. These ports are Antsiranana,Mahajanga, Manakara, Nosy Be, Tolagnaroand Toliara. Together,they accountfor over 80S of trafficat the ports under MTRT's administration.In order to balancethe consolidatedPorts Budget,the six - 39 -

largestports need only generatea small extra profitto offset the losses of the small ports. !

5.23 Finally,regarding the cargo handlingcompanies, the objectiveis to enablethe privateinvestors to earn a reasonableafter tax returnon their investment. Becausethe six companiesin the largestports belongto five differentgroups of investors,the tariffadjustments must be made individuallyfor each of those ports taking into accountthe differencesin each local situations,the type of operation,the facilitiesand equipment currentlyavailable and individualinvestment plans.

5.24 It is expectedthat it will take about three years to bring about the overalllevel of rates requiredto ensurefull cost recoveryfor the ports sector. Therefore,this process,which startedin December1985 when the Governmentapproved substantial rate increasesin most ports,should be concludedin 1988. As furtherevidence of Government'scommitment to sector reform,and to ensurethat the right signalsare sent to private investors,ship ownersand traders,as well as publicsector entrepreneurs, the Governmentundertook a secondround of rate increasesin October 1986, before negotiationsof the proposedCredit.

5.25 The new rate increaseswere as follows:

Table 5.3: Rate Increases

Port: Port dues Cargo Rates

Antsiranana 40X 402 Mahajanga 45% 452 Manakara 302 302 Nosy Be 02 752 Tolagnaro 30X 302 Toliara 432 432 Other Ports 02 02

5.26 The above rate increasesare warrantedby the analysisof the existingsituation and the projectionspresented in this chapter. The increaseapproved for cargo handlingrates at Nosy Be is higher than that for other ports becausethe local cargo handlingcompany has experienced fallingtraffic and a four-yearrate freeze. By contrast,port dues at Nosy Be were increasedby over 1002 in 1985 and were not revisedin 1986.

E. FinancialCovenants

5.27 In order to assistthe povernmentand the Bank monitor financial performanceand the achievementof the projectfinancial objectives outlinedabove, the followingprotective covenants were agreed:

(i) SEPT and Governmentwill take all steps necessaryto ensure that, beginningin 1988, SEPT'soperating revenue will be no lower than the sum of total operatingexpenses, including a depreciationcharge calculated on revaluedassets, interest and amortizationon all borrowedmoneys as they may be adjustedfollowing currency fluctuations, and dividendsand other retributionson capitalif any; - 40 -

(i4) SEPT will not undertakeany investmentslarger than US$300,000,other than those includedin this and other ongoingdevelopment projects revimeed by the Bank withoutthe explicitconsent of the Bank;

(iii) Governmentwill not undertakeinvestments estimated to cost the equivalentof US$50,000or more in the ports subsector, other than those describedin the project,without prior consultation with the Bank;

(iv) Government will take all steps necessary to ensure that, beginningin 1988, the Ports Budget'soperating revenue will be no lower than the sum total of operatingexpenses, includinga depreciationcharge calculated on revaluedassets, and a capitalcharge of at least 102 calculatedon the value of net fixedassets in use by the 17 ports includedin the Ports Budget;

(v) by December31, 1987,Government will completea reviewof the structureand levelof port tariffs,cargo handlingcharges and concession fees, and consult with the Bank on the outcome of such review;and

(vi) by June 30, 1988,Government will revisethe level and structureof all port relatedcharges after takinginto account the Bank'scoaments.

5.28 Within six months of the end of each fiscalyear, SEPT will submit to the Bank its financial statements, includingstatement of expenditures (para.3.30), audited by independentaccountants acceptable to the Bank. The Governmentwill also submitto the Bank auditedconsolidating statementsfor the Ports Budget. The auditorswill be requiredto attacha report of compliance with financial covenantsto the audit reports. Finally, within six months of the closing date of the Credit, the Governmentand SEPT will prepare and submit to IDA a completion report for the project. _ 41 -

VI. AGREEMENTSREACHED AND RECOMMENDATION

6.01 Before negotiations,the Governmentapproved port tariff increases substantiallyin the amountspresented in para 5.25.

6.02 IAt negotiations,the followingmatters were discussedand agreementreacheds

(i) ProjectImplementation Schedule (para 3.22);

(ii) Ports performanceindicators (para 3.24);

(iii) SFPT'sAction Plan (para 5.08);and

(iv) Proposedfinancial covenants (paras 5.27- 5.28)

6.03 Executionof a SubsidiaryLoan Agreementand submissionof a FinancialRestructuring Plan for SEPT satisfactoryto the Bank would be conditionsof Crediteffectiveness (paras 3.20 and 5.02).

6.04 Subjectto the aboveconditions, the Projectwould be suitablefor a Creditto Madagascarof US$16.0million equivalent on standardIDA terms.

November14, 1986 - 42 - Annex 1.1 Psac 1 of 1 MADAGASCAR

PORTSREHABILITATION PROJECT PublicInvesetent Plans for the TransuortSector

1984 - 87 1986 - 90

FMG billions FMG billions Foroin Local Total Foreign Local Total Hiahway Infrastructue Rehabilitation 88.146 53.061 141.207 113.245 59.161 172.406 Workshop, equipment, 2.782 2.951 5.733 and studies 4.423 610 5.033 90.928 56.012 146.940 117.668 59.771 177.435 Rail Trgns2ort Rehabilitation 6.076 2.552 8.628 16.9S7 10.105 27.062 New Works -- 1.000 1.000 3.800 3.800 Studies& Tech.Asst. 2.502 711 3.213 6.076 3.552 9.628 19.459 14.616 34.075 Air Transport Rehabilitation -- 7.566 7.566 5.507 3.634 9.141 New Works - 168 168 Studies& Techn.Asst. 300 300 -- 7.734 7.734 5.807 3.634 9.44k MaritimeTransport Rehabilitation 8.073 819 8.892 8.129 2.776 10.905 New Projects 714 2.427 3.141

Studies & Techn. Asst. - - 1.759 42Z 2.181 8.787 3.246 12.033 9.888 3.198 13.086 Riverand CanalTransport Rehabilitation 13.310 1.490 14.800 19.976 2.219 22.195 (Canalof Pangalanes) Studies - 755 160 915 13.310 1.490 14.800 20.731 2.379 23.110 NationalTransport Plan 782 40 822 806 567 1.373

TOTAL 119.883 72.074 191.957 174.359 84.165 258.524

Sources MTRT

March 1986 - 43 -

Annex 2.1 Page 1 of 1

MADAGASCAR

PORTS REHABILItATIONPROJECT Developmentof Port Traffic1977-85 (000)tons

1977 1978 1979 1980 1981 1982 1983 1984 1985

Antsiranana 112.9 205.1 157.0 226.5 186.5 191.9 119.1 93.4 117.5

Vohemar 12.0 14.9 17.6 22.2 25.1 29.2 30.6 27.5 27.9 Sambavall 8.1 8.8 6.5 8.7 3.1 2.8 - - - Antalahal/ 9.3 4.7 5.2 5.0 6.4 4.6 5.1 3.4 10.0

Maroantsetral/ 11.2 14.7 13.6 13.3 11.9 8.1 6.9 6.1 9.5

Toamasina 1,363.41,148.5 1,252.7 1,429.9 1,167.6 1,222.7 954.5 921.8 1,194.0

Manakara 61.1 88.2 74.6 61.6 60.8 56.8 50.5 65.0 56.9 Mananjaryl/ 16.9 9.9 15.5 28.9 33.1 24.5 15.2 13.4 11.0

Tolagtaro 43.8 38.3 39.2 36.4 41.5 35.3 35.0 32.5 24.6

Nosybe-Port St. Louis 150.7 156.8 130.9 175.2 117.0 172.5 234.3 236.9 123.7

Analalava-11I Antsohihyl/ 24.0 42.5 60.7 57.2 36.8 29.8 12.4 27.9 9.4 Mahajanga 351.5 386.0 423.0 385.6 307.0 319.6 243.3 197.9 183.7 Morondava 16.4 16.5 17.3 22.9 20.8 15.2 15.7 34.9 55.3

Toliara 93.4 92.4 78.4 96.9 97.8 97.6 76.0 66.9 66.5 Morombel/ 13.6 16.4 9.1 8.3 5.2 5.0 9.2 10.4 6.4

2,288.32,243.7 2,301.3 2,578.6 2,120.6 2,215.6 1,807.81,738.0 1,896.4

Source: Servicedes Douanes

May 1986

/1Not a projectport. - 44 -

ML8X 2. MADAGASCAR

PORTS REHABILITATIONPROJECT

Develoomnt of Toamasinatraffic 1978-84

a 7.L 1 71 1980 9fi 1982 1983 1984 cargo (000) tons Imports Rice 86.7 91.0 122.4 134.2 232.8 150.2 100.5 Other dry cargo 205.0 241.1 251.3 153.3 153.7 151.1 199.9

Exports 175.3 193.9 175.1 150.5 151.4 124.4 189.2

Cabotage 69.4 118.8 118.1 129.8 88.8 87.1 107.3

Total 536.4 644.8 666.9 567.8 626.7 512.8 596.9

Petroleumproducts 612.1 607.9 763.0 597.8 596.0 441.7 324.9

Total traffic 1,148.5 1,252.7 1,429.9 1,167.6 1,222.7 954.5 921.8

Source:S.E.P.T.

January1985 - 45 -

Annex28 MADAGASCAR PORTSRNASILITATION PROECT CobotOeoFleet as tf Novgemr 19865 Draft Comrnny Shi OW -- T e Current Rout CMN Onib SW0? 6.6 a. 197w OC Toes.lna4oAfr-Comors-O Iego-Toss Ontlaby 6827 8.6 1979 CC maheJenlo-Mozem-mahaJangs Se,iboks 100 7.5 1962 QC Toam-SoAfr-Colomb.-Slngapore- Reunlon-Mouritius-Toe. V.deMsnnknre 1550 4.0 19"1 C Toua-Mnakera-Toe. Vetay 1460 4.6 1957 CC TowamDIe"o-Nosy Be-Uhmianga-To lIars- Menkeara-Toam Vat.y 4 ' 1014 2.9 1960 LCT Tonm-ToIare-Morondava-Tollara-Toes Vatty8 1014 2.9 1979 LCT Tim chartered for drilling support Vatay2 2C0 2.1 1979 LCT Toem-Mroanteetra-Toam J. Ream 1t0 1.8 1977 LCT Tollare-Morondava-Tollara Trans7 Vole 120 3.0 (ost)1969 CC (1) Toa.-Voh.ar-Dl.go-MahaJ nga-Toam (2) Tom-Manakakre-Toe. Baby 106n 8.0 (set)1972 CC Tomn-TToliara-NahaJsng*-Manakara-Toam Kait Kartal 1400 3.5 (..t)1964 QC Soliu Tlsirero 68S0 7.2 1978 Butan-/Oll Toam-RoundIsland Bemeolng 4060 6.0 1962 Oil ' Tolsisnraka 28S0 4.8 1987 Oil ' t Cap d'Ambro 206 1.9 1906 Oil Localdelivery from Mahajanga Tongatetpa 10 2.0 1970 Oil Islede France 106 2.0 1970 Oil 5 Socotrat Ce..Pau 250 2.6 1919 QC West Cost service Hoded 250 2.2 1910 CC * YealyRaded 10 1.9 19.r PL Localservice ftro Mahajanga Sofia 120 1.2 197W PL ' S Mountaxar 90 2.2 1970 PL *3 S Mareebitey 90 1.0 1940 PL a 5 U r Eric ExpressNo. 1 860 2.6 (set)1945 LCT WestCoast service Tawakal Ravinala 60 1.t 1964 PL Localservice from Mahajanga (oxFiama) Hereul gO 1.5 N/A PL * I Vitaforns 120 2.8 PL ^ * a LewisUpton Msjungais 20 2.6 1987 Cc WestCoast service Wubbind 210 2.2 1980 cC * a* Transmed St.Louis 06 2.2 (set)N/A PL Localservice West Coast No. 2 69 (ent) 1.5 (*et)N/A PL - 46 -

Annex 2.8 Pose2 of 2

Draft Company Ship G;;dtW- Built TYD CurrentRoute Foul Bay Cheelanol 100 1 2 (st) N/A 8 Loeal eirviceWest Coast Nafoia 3o 2.0 ("ot)N/A T/C ' r * No. a S (eat) 1.5 (set)N/A PL Portservicte i Mahajasna Sto Trans- Pangalans U1 N/A, 1062 CC East Cost Service portsMarl- timseCot. Est Caroi Premier so 2.0 (set)N/A ac Nose Be-Ambanjn CIC N/A 1 (ett) 2.6 (set) N/A QC Local servicefrom Mahajanga

Aximar Fast 1 8 .8 1984 LCT Oil tioldservico from Merondava Legend: OC - ConeralCargo Vessel PL - PoworedLighter LCT - BeachLanding Vossel B SC- rge Oil - Tankor T/C - Tug with cargo capacity Sourco:MTRT, tonsultants February1988 - 47 -

PTS R BILUTAIN FJCT Port 1Iatllatla9n Po"t _dLJ ubdirn, ;i.LIiM 2t11akLn

ANTSIRANANA WelI Eoy Dir.ct 801 8.50 1.4o 18,000 9,000 protected to 4uay 62 4.50 Good 15 81 2.00 Gootd 000 9,000 VOHS"IR VeolI a. DiOect 80 8.20 0.98 diuo protected to Quay B00 SAM4AVA Estuary Badly LiGhterage cited wood 0.98 modius Little 8.000 dock improvedbeach 700 AN-ALAMA Eapo.d Difficult Lightersge wood do1ck 0.98 medium 2,000 563 MAROANTSETRACalm Peor Lighterego 20 wood 0.70 medium Bosch 800S away 450 TOASIN Good EASY Dir ct 259 8.80 0.70 0ood to Quay 1oo 6.80 80,000 67,000 1I0 9.00 171.8 12.00 192 3.80 41 10.00 354.8 10.00 190 3.80 200 8.80 MANANJARY Exposed Poor Lighteruo 3 x S0 0.80 (actual) 0.80 Nsd)ua 6,S00 3,400 Siltod 30 1.40(in theory) MANAKARA Expo.ad Poor Lighttor 1Jo00 4.50 Suited 0.80 Needs re- S21pey 7.800 2,000 388 t.so1920 contutt6o5 1833 21 6O TOLAO4AR Expoaed Exposed Lightersge 48 0.80 0.30 Good Slupwa;O 8,800 3.000 71. 1.00 (actual) Cron* 0 8.80(,n theory) TOLIARY Eellay Direct to 120 7.80 (actual) 2.10 Good 7.800 2.100 sheltered Quay and 90 *8:0(,n theory) lighteraes 2 32 x 2.00 (actual) Meadium 8.500 2 x 82 2.50(Cn theory) EORBE Sheltered Easy Lighterage 1S 0.00 2.70 - - MORW.VAVA Expoa.d Difficult Lighterage 50 Si ltitxg 2.80 2.40 fedius beaching by 13,425 AMOCO 2.575 MHAAJANCA Sheltered Difficult Lighterage 183 Silting Dry at low tide 2.90 ledium S chnpcyOIC 88,000 184 Port Schneider 17.800 109 1.00 164 1.00 IS0 1.00 ANTSOHIHY River Difficult Quayaem l00 8.0 3.00 Good Beaching Coastere 100 11.000 1,000 NOSY-BE SheItered Esey Lighterage 160 1.80 2.80 Hediuo Ports of: 20.000 3,380 as 2.00 SOLIMA 50m 100 0.00 PEOE jetty SLICR8IE 100. PORT SAINT Exposed at hi,h- Lighterage 100 1.00 ;LOUIS atoor,ng tide 2.20 2 -lipwaya 2,000 s9.000 SO 0.00 crane of Ist

Source: Consultants F*bruary 1986 - 48 -

Annex 2.5 Page 1 of 4 Hadagascar

Ports RehabilitationProject

Physicaldescription of the port sector

East coast

1. Antsiranana. The main activityof the city in which the port is locatedis the SECRENshipyard, even thoughthe port does serve as an evacuationpoint for local produce(mainly salt), reception point for local consumption,and in a reducedrole as transshipmentpoint for export.The port has 414 m of piers, generallyin good condition,of which 301 m have 8.5 m water depth,and the rest is used for coastalshipping, and small craft.The port is locatedin an excellentsite, with good depth, easy access,and year around shelter.However the productivityis very low due to limitedport handlingequipment, particularly cranes, tractors and chassisand due to poor conditionof the pavementand rollingsurfaces, which worsens the cargo handlingequipment situation, by acceleratingits wear and tear. During 1984 cycloneKamisy produced damages to the infrast;ucture,which have now been repairedthrough an IDA Emergency Credit.

2. Vohemar.The main acti'tityof the port has been exportof coffee for transshipmentat Toamasina,Its role will be increaseddue to a recent Governmentdecision to re-routeport trafficfrom SambavLand Antalahato Vohemar.The port is locatedin a shalteredbay, with a rather limited access,but sufficientfor the largestcoastal ships operatingaround Madagascar.The port's only pier is a T-shapedinstallation, with a 50 m long pier, connectedto land by a 37 m trestle.The pier needs repairsdue to a collisionwith a ship, a completereconstruction of its fendering system,and possiblyreconstruetion of the superstructureand additional piles.There are very limitedstorage yards and a small warehousein the vicinityof the pier. The productivityof the port is limiteddue to the conditionof the pier, to the difficultoperation resultingfrom a narrow trestleconnection to an equallynarrow pier, to the lack of nearbyyards and warehouses,and to the lack of suitableequipment: chassis, forklift, and a crane which would permitthe shipmentof coffeedirectly in containers.Also indispensableare a line handlingworkboet and wood pallets.

3. Toamasina.The ma..nport of Madagascar,located in a rather exceptionalsite on the east coast,Toamasina is naturallysheltered by reefs and the coastlineconfiguration, and has excellentnatural water depth.Toamasina has been developedby stages,the latestof which (extensionof pier C and prolongationof the breakwater)was completedin 1975. Like the rest of the ea3t coast,the port is vulnerableto Indian Ocean cyclones,and was setiously damaSedby Honorininain March, 1986. The port has relativelygood access,but large ships requiretug assistance. Though litoraldrift may cause some siltationproblems in the future,it is not at presenta seriousproblem. I - 49-

Annex 2.5 Pasge2 of 4

4. The port, with 1300 m of piers and depths rangingfrom S to 12 m, can accommodatesimultaneously four ships,one tanker,three coastal shippingvessels, and a numberof small craft.The availableyard surface is about 80,000m2, and the combinedsurface of sheds and warehousesis about 60,000m2. In addition,there are specializedhandling and storage facilitiesfor bulk, grains,and liquids,as well as refrigeratedstorage. The generalcondition of the infrastructureis satisfactory,except for the yards and tollingsurfaces which arp in very poor condition,the inadequate drainageand electricand water distributionnetworks, and the loss of fill materialbeing experiencedat Mole C, where the newestand deepestpiers are located.Moreover, there is need for improvementsto the maintenance shops and for lightingof some storageareas. The equipmentexisting at the port though generallysufficient in quantity,is in very poor state of conservationdue to very poor maintenance;much of it needs replacement. Additionally,there is the major problemof the inadequacyof the chrome ore handlingsystem, which needs to be reconstructedto be able to take large lumps.The damagesto the breakwater,caused by Honorinina,are extensiveand need to be repairedurgently, which will be carriedout under the SupplementalCredit for EmergencyCyclone Repairs.

5. Toamasina,in spite of havingsufficient physical plant as well as reasonablecargo handlingequipmen,t and facilities,has an extremelylow productivity,one of the world's lowestfor a similarlyequipped port. The port'spoor performancecan be attributedprimarily to managementand labor problems,and to a lesserextent to lack of accessto foreignexchange for procurementof spare parts, and an almostincessant rainy season,which interfereswith daily stevedoringoperations. As illustrationof how low productivityreally is, the port of Mahajangausing lighterageand even poorerworking conditions,has consistentlyhad betterproductivity than Toamasina.The problemis institutional.In April 1986, SEPT initiateda major plan to improvethe situation,which was consideredacceptable by a Bank mission,and which is coveredin more detail in Annex 2.8

6. Manakara.The main coffeeexit point for Madagascar,and serving the hinterlandsof Parafanganaand Fianarantsoa,Manakara is an important lighterageport, oqapableof receivingcoastal steamers, provided they are equippedwith gear to carry out lighterageoperations. The port is located at the estuaryof the riverManakara, fully shelteredagainst the seas; it has about 250 m of shallowpiers, part of which are in urgent need of repairs;the yards behindthe piers are in very poor condition,in need of repairsand paving.There is also need to providelighting in order to commenceloading of bargesbefore daylight. The equipmentis quite suitable to the needs, and only a forkliftand an additionalbarge are required,as replacementof very old units which are about to be decommissioned.

7. The main problemof this port is to keep the 'pass"or access channelopen to the lighters,a task which requiresperiodic dredging. The existingdredge has done a satisfactoryjob, but requiresspare parts,as well as some major repairs;also there is a need for a new slipwayto repairsmall craft, as the old is completelysilted, and it would be more expensiveto repairit than to build a new one. - 50 -

Annex 2.5 Page 3 of 4

8. Tolagnaro.Taking advantageof a naturalbay, but having limited protectionagainst the seas, reducedat presentto about 2.5m water depth, Tolagnarois a lighterageport servingthe area of the some name. The physicalinfrastructure consists of about 100 m of piers,a rather restrictedstorage area, a siltedslipway and a barge maintenancearea with a heavy lift. Generallythe conditionof the installationis reasonably good, except for the yards and rollingsurfaces, which badly need repairs. Also the port has no securityenclosure, and the electricdistribution systemneeds to be worked over. The liftingequipment is very old and spare parts are no longeravailable for some of it. The bargesused in lighterage operationsare in terriblecondition, and it is not practicalto continue rebuildingthem periodically.

West Coast

9. Toliara. A shelteredport, built on an reef and connectedto the shore by a trestle,provides 8.5 m depth berth side mooring,as well as lighteragepossibility for largervessels. Though it is generallyin good condition,repairs are requiredfor tht accesstrestle, the pier, and the yards.Lack of area lightingprevents night operations.A small amountof dredgingis requiredperiodically, and becauseit has not been done the availabledepth at pier side has been reducedconsiderably. Some of the equipmentis very old and needs to be replaced;there is currentlyno tug availablefor the lighterageoperationa; and given the distancebetween the port and warehousesin the town, it is indispensableto acquiresome chassisto completethe existingfleet.

10. Morondava.The port is currentlythe only availablemeans of communicationbetween the area and the rest of the country,but this situationwill shortlychange as a new road will be open towardsthe plateau region.Port Bebe is situatedon a canal accessiblevia the mouth of the Morondavariver througha "pass"subject to continuoussiltation and erosion.Dredging was carriedout periodicallyuntil about 10 years ago, and it has not been done since.Even thoughthe pass is dry at low water, there is always a 2.Om tide which allows lighteragevessels to enter or exit in a narrowbut well definedtime window.Oil explorationhas been been very active,based on Morondava,and the firms carryingit out have used LCT vessels,which can be "beached"directly, without need to access the canal and Port Bebe. This approachwas studiedby the consultantsas the normaloperation of the port, and discardedas impractical;instead the recommendationis to use shallowdraft, beaching type motorizedbarges, in conjunctionwith a "beach"inside the pass, next to Port Bebe. This approach,though a still lighterageoperation, would renderdredging unnecessary.Also requiredwould be resurfacingof the yards, lightingand drainageworks, and replacementsfor aged equipment,tractor, chassis, and forklifts.

11. Hahajanga.A lighterageport, locatedin the estuaryof the Betsibokariver, it has been the secondport of Madagascar,and in the past has competedwith Toamasina.There has been significantchanges of the estuaryconfiguration due to the siltationproduced by the river sediments, but these have not yet seriouslyaffected the port operations.In spite of the absenceof dredging,smaller coastal vessels (150 dwt or less)can continueto berth alongside.The largerones (over lOOOdwt).were never able - 51 - Annex 2.5 Page 4 of 4 to anter the harbor.The productivityof the port Is comparableto that of Toamasina,which is an achievementconsidering that it requires lighterage. Damage producedby the 1984 cyclone(Kamisy) is largelyrepaired and some new equipmentis alreadyin operation.However, repairs to very old piers are neededto prevent their completedestruction, and the yards need to be paved to reducedamage to cargo handlingequipment. Efficiency would be enhancedif the port'svery l4mitedcapability for handlingof containers would be increased.Some of the lighteragebarges are no longersuitable to be repaired,and thus new ones shouldbe acquired.In additionto the above a hclearing'of rip-rapwhich was displacedIs urgentlyrequired to prevent damage to the vessel'sbottom, as "bottoming"occurs at every low tide.

12. Nosy-Be.The public facilityat Hellvilleis an important lighterageport. In additionthere are private facilitiesoperated by sugar, fishingand oil interests,which permitdirect accessto coastal vessels and lighteragefor deepse4vessels. The public pier, a very old structure,is in need of repairs,and it also requiressome paving to increaseits efficiencyand reducedamage to the equipment;the lighterage craft is in extremelypoor condition,and replacementbarges and a small tug are urgentlyneeded.

13. Port Saint Louis.A privateconcession to SIRAMAa sugar and molassesexport company, it is lo9 ated at the estuaryof the river Mahebo. It is a tidal lighterageoperation, in which the bargessit in the bottom at every low tide, and exit or returnonly duringthe high tide periods. Dredgingwas carriedout continuouslyuntil 1981, but it is not certain that it shouldbe re-started,as the costs do not seem justifiedby the benefits,and the exportscan in fact continueby lighterageat hign tide. The pier is very old and needs repairs. - 52

ANNEX2.6 Pag. 1 of 1 MADAGASCAR

PORTS REHA ILITATIONPROJECT

NEW ORGANIZATION ICIVIL AVIATION SERVICES

FINANCES

X METEOROLOGY NAVIGATIONAIDS SERVICES DIVISION_

INFRASTRUCTURE _ SEAWAYS SERVICES_ DIVISION MERCHANTMARINE 1 RR. ~~SERV2CES i. FDREDOINGDIVISION |-__ _A

LOCAL PROVINCIAL 1 REPRESENTATION SERVICES

OPERATIONS [ PORT 41 SERVICES J

ADMINISTRATION

FINANC TARIFFSAND STATISTICS_ ELUP- -53- ANNEX2.7 Page I of I

PORTSREHABILITATION PROJECT

ORGLNIZATIONCHART - SEPTEMBER1985

CIVIL AVIATION| SERVICE_

METEOROLOGY | SERVICES

xAVIGATIONArDS MERCHANTMARtINE DIVISION _SERVICES _

. DREDGING MARITIME j DIVISION __ SERVICES _

HYDROGiAPHY _ Co j DIVISION _ 0

zI PORT EXTERNALMARINE | AUTHORITY SERVICES _o

OPERATIONS _ DIVISION _ INVOICING. OFFICE_ TREWASURY DISBURSEMENTS __ OFFICE

| SUPPLIES ACCOUNTING PORT I OFFICE r | DIVISION SERVICES

PERSONNEL |_ OFFICE|

| PROCUREMENT - OFFICE

STUDIES DIVISION

June 1986 - 54 -

Fe-g I of 4 MADAGASCAR--PORTSREHMSIUTATION PROJECT SEPT ACTIONPLAN

(tNt oaone:this schedule Indicates the proposed date for voriousmeaours. Actual dateswould dependon certainexternal fators descrlbedherein as constraints) Coementaor Nr. C A T E 0 0 R Y DATE Constraint* Explanation A. ORGANIZATION Rolinguiehingsubsidiary activities la stop bus operationsand l1y-off Spt,.1980 done staff lb divestitureof municipalbus-lines DOc/S1/W ye To be takenover by a munieipal transportauthority 20 stop forostryoperations and lay- end 1908 off staff 2b divestitureof forestryoperations 1937 y AgreementwIth a firs yet to be Identified 3a Stop Inlandwater transport service nd 1993 3b divestitureof the PangalanoeCanal 1"7 Yes To be negotiatedwlth IMI TransportAuthority - Internalreoranization 4 New managementteam Jan. 1987 6 reorganization Jan 1937 With the help of consultants financed under PPF e training of new managers

a) In general managment July 1937 In conjunction with the uni- versityand projecttraining component b) in port management 1938

Reductionof personnel: 7 Introductionof earlyretirment program 8 Divestitureof subsidiaryactivities project

period

*Actionsby Institutionsother then SEPT. - 55 -

Annex2 Pae 2 of 4

Nr. C A T E 0 0 R Y DATE ConstraintCoements or Explanation 9_ SOlectiveanalysis of 658fi%ed-term contracts 10 Abolitionof automaticconfirmation of dailyworkers Moy I988 done

11 Introductionof uniformconditions of pro1act yes Study Included In the projeet *mployment poriod 12 Creationof a Dmaortmentof Human Rolatlona: Sop 198B done 13 M"suresrogarding punctuality and Sep 1986 attendonce done 14 Restorationof tho administrative buildingsof SEPT May 198 15 Developmentand Introductionof new project ye. Study Included In the projeet EDP system poriod B FINANCES 18 Firstmodification of tariffs Jul 198 yes Approvalof Ministryof Flaonces-- done 17 1988budgot review Oct 1988 done 18 Preparation of 1987budget Nov 1988 done 19 Introductionof manageont information system; monthly follow-up on budget Feb 1987 20 Monthly cash-budgeting system Fob 198? 21 Analyticalaecounting system project period 22,23 Instantbilling July1988 done 24 New procedurefor preparingbudget July1988 done 25 Procedurefor purchaseof spareparts: Approvalot Ministryof Finance- - EPI ACCOUNT June 1988 yes VERYIMPORTANT STEP--done 28 Newtariff structure 1989 yes Must follow the introduction of analytical accounting system TechnicalAssistance to be providedunder the project 27 Roconcilingor reschedulingof credits July1988 and debt. 28 Auditingof 1985accounts Sep 1986 done 29 Introductionof a systemof debt I recoverywith aceptabledolays Apr 1907 - 56 -

Abmx2

Nr. C A T E 4 0 R Y bATE Constralnt Explanation

- C EXPLoITAiON.OERATIONS. PRODucTiVIY 30 Clean up of port fscillties2 *crap end 19s I Pon 81 Pavingof terrainand accessroads: tillingof potholes end less 32 flushingof gutters Oct low done 83 Lighting Jan.log? ye Dependson JIRAM 34 Securityagainst ptifering Project period 36 Sectorization Apr 1987 To be folloed up 38 Unloadingof riceIn bulk end 19BW yoe Dependson political decisions;purchase of two pices of mtahinery of the Vigan or Vacuvttor type; typo; oval labilIty of pares--done 87 Continuousloading of chromeore Apr 1mW yes sIgningof concessionagreemnt withKRASMA; fInancing of mdficationsto conveyor beIt(CCCE) B8 Constructionof 2 containerterminals end 18 Ye finaneingof 2 PPMtyp cranes and spreae (se 89) go Purchaseof 2 PPM or selotticranes end yefunds sW *valabilly; pving of 0 MAINTENANCE 40 Inventory of machineryon hand end 1989 yes technicalassostnce 4i. Listof neededspare part end iWO yoe techalcalasistnce 42 Repalrsto fork-lifts id-1987 yes MOSTURGENT On conditionexternal fundsfor spare parts aremade ovaltable, 43 Rehabilitationof workshop end 190f ye If fundsavailable for reassembly of hanpr and A.? 44 Systemof mnagemnt of stocks Feb 1m7 Yes finaneinof otudies,mtril (andcomputer) 45 Systemof supplies(procurement center) Apr 1N7 yts followup on Nr. 44 48 Purchaseof fiveS-ton to'kilfts end 1908 yoe fi"nancin 47 Manufactureof largepaddles 19W6(and after) 46 Purchaseof fIve25 ton trailers end 1907 y financing 49 Rehabiltationof tractors end 1Wt? yes financingfor Sparepart so Constructionof line-handlingboat end 1a80 yes purchanof 100 hp motor PRmDUCTIVITY 51 ProfIt-sharing by longshoreon end 1987 ContractualpoliCy 62 Introductionof a third shift,on May 1984 dne as neded basis MADAGASCAR- PORTS REHAILITATI0k PROJECT SEPT ACTIONPLAN - PERFORMANCEINDICATORS iTEII UN4IT 1/1/S6 1/1/Bt 1/1/66 1/1/89 1/1/90 1/l/9 1/1/92 1/1/95 1/1/94 1/1/95 Tehnical

Employes Nller 4200 31S60 no $61 3440 837? 33ff 830 a m30 5;f 0 Containera: TEU/gang/hour -Fu II cont. ship 4 6 1 10 10 1i s 10 19 1 -sime tship 4 6 a 8 8 9 a 9 1 Rice bags Ton/shift/ship 1ff 140 10 2f 210 220' 229 220 220 229 Chrom ore Ton/day 7f0 710 209 20 f 2009 29ff 2000 20 223 Barrel* Ton/shift/ship 70 s0 119 lO ll 1ts 11i l1 l1 1i General cargo Ton/shift/gang 26 86 79 7i 70 70 79 79 70 79 Borth Occupancy U -7* - 6S So sio 6S0 so W 5C Ratiq waitgtime to 38 230 1O 1O 1O 1i 19 10 is 19 5Xtt co tim x

Ti Watin Days/ship 2 1.6 1 1 1 1 1 1 1 1 Mean port time: Hours/ship losethen LOA 196 199 1SO 120 120 120 120 120 120 129 -mers then ISO LOA 142 1SO l1 90 99 s9 96 90 90 96 Financial

Current ratio 1.2 1.2 1.C 1.6 1.5 1.5 1.5 1.6 1.5 1.5 Recoivables Turover 709 Sf 403 Bff 260 1i9 1S 159 159 1SO Workingratio 1 l1 96 S0 so s0 76 75 75 7C 7i OperatingRatio X 126 119 95 96 999 es eS eS as Return fixd assets X 6 6 6 9 9 9 9 9 0X D.btto oqsity 1 42 as es 09 SO 80 09 56 69 45 t; - 58 -

ANN*t 8.1 MADAGASCAR Pag 1 of 8 PORTSREHABILITATION PROJECT DETAILEDPROJECT COSTS - MID 1908 PRUCES REHAULTATIONAtC) ENHANCEMENT OPPORTS IVPRASIRUCTUB

PORT LOCAL TAX & FOREIGNTOTAL TOTAL DUTY EX.T.&0. ----- MILLION FMG------811 22% 47% 1991 79X A. qUAYS,SLIPWAYS AND TRESTLES A.1 Repair* to quay Coste MAHA P4 69 129 272 212 A.2 Forryaccess ramp MAHA 26 19 41 66 67 A.) Motorized Barge accos rap MORO 17 12 25 65 48 A.4 No QuaySo a long VONE of 68 146 262 223 A.5 EmbankmntWhind pier VOHE 46 8 69 140 116 A.* Repairs to access;enbnkment TOLU s 26 57 121 95 A.? Rpire to quay TOU 4 8 6 13 9

A.6 Repirs to sheetpilequay MAMA 1s 11 23 48 as A.9 NW Slipway MAMA 19 14 28 61 47 A.19 Repair8to quay CS TOMA of 42 99 193 l15 A.11 Repairs to quay STLO 46 82 66 145 118 A.12 Reptirsto quay NOBE 7 5 12 25 20

SUBTOTALqUAYS, ... 441 815 898 1,449 1,14 B. YARDS

6.1 20,009m2 prop.and paving MAMA 168 111 192 490 847 8.2 60690 .2 prep. and paving MORO s9 22 47 100 78 H.8 4,900 .2 prop. and paving tOLI 1 11 28 46 38 8.4 4,909*2 prop.and paving TOLA 16 11 28 46 38 8.6 Extension of craneyard TOLA 7 6 12 24 19 8.o #,NO m2 prep,and paving MAMA 21 1i 32 67 S8 B.7 Loadingplatforms MANA 4 8 7 16 12 B.8 56,99002 quayC pavments TOMA 195 76 159 389 264 8.9 18,000 m2 quay8 pavements TOMA so 26 66 116 9g 8.10 2,09f.2 prep.and paving STLO 12 6 17 37 26 8.11 18,669.2 yard repairs ANTS 41 29 08 188 194 SUBTOTALYARDS 441 816i 88 1,366 1,071 C. WUILODVGS

C.2 Administrationbuilding TOLI 2 0 8 8 a C.8 Maintenancesheds L.S. TOMA 61 9 89 120 120 SUBTOTALBUILDINGS 68 0 68 126 126 0. UTILITIES 0.1 Lighting quays'area TOLI 22 18 84 72 57 0.2 Electricdistribution TOLA 8 2 5 12 9 D03 Fencearound port TOLA 7 6 12 24 19

D.4 Lightingquay's area MANA 4 a 7 16 12 0.6 Lightingcontainer park TOMA 38 26 67 121 96 0.6 Drainageolder area TOMA 22 16 34 72 57 0.7 Waterand eloctricdistrib. TOMA 64 52 161 264 231 0.8 Lighting,drainage, sewage MORO 9 6 15 89 24 SUBTOTALUTILITIES 169 126 815 69 504 TOTALINFRASTRUCtURE 1,184 758 1,791 3,691 2,68 m - -_ - 59 -

ANNEX8.1 MAOAOASCAR Pag 2 of 6 PORTS ASITATION POECT OLTAILEDPROJECT COSTS - MID19 PRICES MOOIFICATIuAN rwRyEMETSTO ;AQ0 HANDLONG

POIRT LOCALTAX OEI4NTOTAL TOTAL DMTY EX.T.&0. ----- ILLIGON _MQ_----- A. EqIuvmENT A.1 Mobile ra" f at S MAIA 18 72 290 209 217 A.2 i Two25t chassis MAHA 2 a 14 22 16 A.3 OnePs MPtretor MAMA 2 3 11 16 13 A.4 OneofMPtractor MORO 2 8 11 16 18 A.$ Two 25tchassis MORO 2 6 14 22 16 A.6 Two St forklift MORO 5 14 S9 s8 44 A.? Mobilecrano 2t at go VOHE 13 42 126 181 139 A.$ On. St forklift VOQE 3 6 20 29 23 A.9 Thre 25tchnssl VONE a 9 21 84 24 A.10 FourSt forklifts TOLa 11 27 76 1l6 68 A.11 Five25t chassls TO" 5 16 36 55 40 A.12' Two mobilecranes 4t at o TOLA 8 29 64 122 92 A.13 One St forklift MAMA S 6 20 29 23 A.14 Two mobilecreae. 3t at Sm TOMA 36 146 399 580 435 A.1S Reconstructionof conveyors TOMA 114 121 820 653 438 A.16 One25t forkiIft ANTS 14 J9 113 166 127 A.17 Two25t chasses ANTS 2 6 14 22 16 A.1S OnesoP tct.or ANTS 2 8 11 16 13 A.19 One St forklift NOSE 8 6 26 29 28 A.20 Oneof HP tractor NOSE 2 8 11 16 13 A.21 Two 26t chessis NOSE 2 6 14 22 16 SUBTOTALEQUDIPMENT 262 567 1,576 2,894 1,827 S. FLOATINGCRAFT 8.1 Four160t barge MAMA 34 46 105 165 139 9.2 Two 60t landingcraft MORO 1S 32 106 161 126 8.3 One 76 H linelaunch VOHE 14 13 68 84 71 8.4 One 16OHP tug TOLI 11 17 62 109 92 8.5 Four Oftbaree TOLA 84 16 97 162 136 3.6 Two Oftbersee MANA 23 16 34 72 57 8.7 One 160HP tug NOSE 11 17 82 109 92 8.6 Thre 8ft bargeo NOSE 36 24 so 109 85 8.9 OneOt barge ANTS 12 8 17 37 28 SUBTOTALFLOATING CRAFT 169 189 630 1,08 819 C. SPAREPARTS AND MATERIALS C.1 3,000pallets 37 5 0 42 37 C.2 Stoelplate and electrode. 0 1i 38 63 38 C.3 Spars,tool., shop rehabilitation 131 709 1,936 2,866 2,067 and equipmentreplacemnt Toameasins_l/ C.4 Sparoparts and tools,other porto 21 189 426 630 441 SUBTOTALSPARES A MATLS. 189 1,966 2,894 3,591 2,583 TOTALCARGO HANDLING .30 1,764 4,609 6,098 6,229

NOTES: 1. To includofive St foeklifts,fl4o 25t chassis,and one 4x4 vehicle. - 60 -

ANNEX3.1 MADAGASCAR Pagea of 6 POM RAITATION PROJECT DETAILEDPOJECT COS"S - MID106 PIRICES __ ENANCMtS TO INTERNATIONLAD COASTALSHPING

PORT LOCALTAX & FOREIGNTOTAL TOTAL DUTY EX.T.&D. eM--MILLION fMG e .. A. DREDGING A.1 Bar ounted buckt dredg MAMA 42 126 857 626 899 End Iplt botttoe bar A.2 Suction pumpon a barge and TOLI 37 74 164 274 261 490 I.*. of flexible duet A.8 Rehabilitationof existing MAmA Ili 52 10D 272 219 Hydrolandtype dredge SUBTOTALDREDGING 19 262 on 1,571 619 B. NAVIGATIONAIDS

5.1 Combinednavigation side/ 26 862 484 a96 hydrographicsurveys lounch 3.2 Supplyof buoys,reconstruc- 26B 216 C6 1,076 662 tionof lighthouse,rpair of lights,spores, shops and rediocaumunIcation

SUBTOTALNAVIGATION AIDS 2C2 262 1,666 1,612 1,280 C. SPAREPARTS FOR THECOASTAL SHIPPIN SECTOR C.1 Spar perts for Mto coastal 68 169 544 76C 6 shipping sctor - --- TOTALENHANCEMENTS TO SHIPPING 64 698 2,142 $,8$8 2,646 ------61 -

ANNEX 8.1 Page4 of 6 MADAGASCAR 'PORTSREIHAIUTATION PROJECT OETAILEDPROJECT COSTS - MID19O PRICES INSTIIUTIONALDEVELOPMN AND REFORM

MAN LOCALTAX FOREIGNTOTAL TOTAL MONTH DUTY EX.T.& 0.

A. TECNICAL SUPPORT A.1 Ministryodvisor 6s 81 9 862 891 891 A.2 Accounting 24 11 0 186 147 147 A.$ Administration 10 4 0 5? 61 01 A.4 Dredging 12 S 6 es 78 78 A.S MaintenancesTamatavo 40 18 0 227 245 245 Otherports 20 9 0 118 128 123 A.6 Navgatlon aide 12 5 O 66 78 78 A.7 Cargo handling:Tamatave 40 18 0 227 246 245 Otherport 20 9 0 118 12$ 128 A.8 Hydrography 12 6 9 66 78 78 A.9 Miscellneoua aesietnc. 24 11 0 186 147 147 SUBTOTALTECONICAL SUPORT 274 126 0 1,57S 1,791 1,791

S. TRAININ 0.1 Training specialist 24 14 9 186O I1 Is 8.2 Traningmaterials - 16 10 16 16 17 s.8 Scholarships - 454 464 464 B.4 Training of 99 staff - 222 47 791 971 924 SUBTOTALTRAININ 262 68 1,449 1,704 1,701

TOTAL NST.DEV. AND REFORM 878 683 ,024 8,406 8,402 I aaa inu ame - 62 -

ANO4EX eeee3.1

MDA"" Pap t ofG PORTSRE3ABIUTATION PROJECT COSTESTIMATE - iD6 186 PRICES

LOCAL TAXA FOREIGNTOTAL TOTAL DUTY EXTI ------ILLION FM0 e

S. PORTSINFRAS7RUCTURE A. QUAYS,SLKPWAYS AND TRSES 441 315 09 1,449 1,134 S. YARDS 441 315 63 1,866 1,571

C. BUILDNGS 68 a 63 120 120 0. UTILITIES 139 126 316 688 W64 SUBTOTALPORTS INFRAST CTURE 1,134 750 1m1 3,591 2,B3 1I. CARGO HANDLING A. EqJIPWEI 252 507 1,575 2,894 1,627 B. FLOATIN CRAFT 100 139 630 1,55 B10 C. PAREPARTS AND MATEtIALS 19 1,m 2,394 3,591 2,663

SUBTOTALCARG HANDLING 6U 1,764 4,999 0,993 5,229 IlI. SHIPPIN A. DREDGIM 1t9 262 63 1,571 819 B. NAVIGATIONAIDS 252 252 1,553 1,612 1,269 C. SPAREPARTS FOR COASTAL SHIPPIMG 68 160 6" 750 667 SUBTOTALSHIPPING 604 093 2,142 3,339 2,646 IV. INSTITUTIONALDEVELOPMENT A. TECHNICALSUPPORT 126 6 1,S76 1,701 1,761 B. TRAINING 252 63 1,449 1,764 1,701 SUBTOTALINSTITUThTNAL DrVELOPMENT 873 68 3,024 3,405 3,402

V. ENGINEERING,BID DOCUMENTSANM SUPERVISION 132 25 1,810 1,406 1,443

TOTALBASELINE COSTS 2,778 3,301 12,776 18,865 15,565 =~ wnausas rn= zuau

PHYSICALCONTINGENCY 278 U30 1,278 1,38I 1,656 PRICECONTINGENCY 066 998 3,951 5,855 4,86? ssa - _ n TOTAL PROJECTCOSTS 3,912 4,62413,005 28,642 21,010 C' I

- 63 -

ANMN8.1 MADA"SCAR Pae. 6 qt 6 PORTSRAtUTATION PROJECT COSTESTIMATE - MID lo6 PRICES

LOCALTAX A FOREIGNTOTAL TOTAL cm EX TAD - nasLLION FMG------

I. PORTStNVRASTRUCTURE A. qUAYS,SLIPWAYS AND TRESTUS 621 441 977 2,640 1,698 B. YARDS 621 441 988 1,981 1,609 C. BUILDINGS 89 0 so 177 178 D. UTILITIES 2" 176 444 867 710 SUBTOTALPORTS INRASTRUCTURE ' 1,9 1,O96 2,897 6,065 8,9 zx.CAOO HANDLING

A. EUIPUENT 8U5 794 2,220 8,870 2,574 B. FLOATINGCRAFT 266 26 888 1,419 1,154 C. SPAREPARTS AND MATERIALS 266 1,412 8,874 5,656 8,04 SUBTOTALCARGO HANDLNG 887 2,471 6,461 9,48 7,88 III.SHIPPING

A. DREDGING 266 858 688 1,566 1,164 S. NAVIGTtONAIDS 866 85$ 1,421 2,128 1,775 C. SPAREPARTS FOR COASTAL SHIPPING 69 28 710 1,084 799 SUBTOTALSHIPfIN 710 971 3,019 4,7a 8,76 IV. INSTITUTIONALDEVELOPMENT A. TECHNICALSUPPORT 177 0 2,220 2,394 2,397 B. TRAINING 855 88 2,942 2,488 2,897 SUBTOTALINSTITUTIONAL DEVELOPMENT 682 88 4,262 4,977 4,794

V. ENGINEERING,BID DOCUMENTSANDSUPERVISION 186 85 1,646 2,086 2,088

TOTALCOSTS (IncludTn contTng.ncleu) 8,912 4,624 10,085 26,642 21,918

*Smalldiscrepancies are due to riundingof figures. - 64 -

Annex 3.2 page 1 of 11

MADAGASCAR

PORTSRF.RAMILITATInN PROJECT

A. TrainingProgram: MTRT

1. This Annex deals with project training arrangements for the ports MTRTsupervises, which are listed in Annex 2.4.

2. This Annex is comprised of the following sections:

General considerations concerning the organizational structure and personnel of the headquarters departments responsiblefor managingthe secondaryports.

- Personnelsituation of the iey divisionsresponsible for managing the secondary ports.

- Situationof the provincial departments responsible for managingthe secondaryport*.

- Generalsituation of the lighteragecompanies and assessment of,their trainingneeds.

- Trainingneeds of the headquartersdepartments and the secondaryports.

- Trainingresources - 65 -

Annex 3,2 .page2. of '11

Generalconsiderations concerning the organizationalstructure and Personnel of the headQuartersdeoartments resoonsible for managingthe secondaryports

3. In accordancewith a recentdecision by the Malagasyauthorities, the SeawaysDepartment (Service des VoiesMaritimes) and the PortsDepartment (Servicedes Ports)have been radicallyreorganized. Henceforth the Seaways Departmentwill comprisethe followingdivisions: Lighthouses and Beacons, Hydrography,Dredging, Infrastructure, and Administrativeand Financial Affairs. The divisionsof the PortsDepartment will be: Port Operations, Tariffsand Statistics,Port Equipment,Port Administration,and Financial Affairs.

4. Decentralizationof headquartersauthority has becomea realitywith the creationof a Departmentat the levelof each Province(Toamasina, Antsiranana,Mahajanga and Toliary). Each departmentis responsiblefor coordinatingactivities in its provincein all threeaveas: Seaways,Ports Management,and MerchantMarine. As will be mentionedlater on, thisnew structuremeets a real need for efficiencyin managementbut has not been installedwithout numerous difficulties, both humanand physical.

S. The new departmentsare in processof organization.They stillneed time to definetheir relationships with otherthe other headquartersand provincedepartments and also to draw up distributionsand definitionsof tasksfor the staffof theircomponent divisions and sections.The directors have good universitytraining and substantialfield experience (above 15 years service).However, most of the sectionchiefs have only a baccalaureat(high school)education and have difficultyin conductingtechnical studies or in efficientlyperforming the managementtasks of a maritimeadministration (tariffstudies, statistics processing, spare parts inventory forecasting, studyof laborand servicecontracts, and so on). Personnelage structures are, overall,still good and do not pose successionproblems for the moment.

6. The staffhave civilservice status. Basically,account is takenof the diplomasthey hold, not of the poststhey actually occupy. To change grade,a staffmember must in principleobtain a diplomagiving access to the highergrade. A disadvantageof this systemof gradingby diplomalevel is that it fails to takeaccount of skill levelsacquired through basic, refresherand advancedprofessional training. That is a fundamentalobstacle to the trainingefforts recommended by the Project. Moreover,the salary systemcompares very untavorablyto thatof the lighteragecompanies. For example,a divisionchief has almonthlysalary in the rangeFMG 74-107,000, whereasa mechanicalworkshop cAief of a lighteragecompany can earn FMG 110,000a month-- justover twiceas much as a mechanicin a technical departmentof the Administrationat the end of his career. -*66 Annex 3.2 page,3of 11

Personnelsituation of the key diviiionsresgonsible for managingthe

7. The personnelsituations of the key divisionsof the Seawaysand the PortsDepartments have been studiedto definetheir training needs precisely. Thesedivisions are: Lighthousesand Beacons,Hydrography, Dredging, Infrastructure,Port Operations,Tariffs and Statistics,Port Equipment,and PortAdministration.

- The Lighthousesand beaconsDivision comprises S specialistswith secondary-leveleducation diplomas. Two of themhave received 12 monthsof additionaltraining in a technicaltraining center at St.-Nasaire.Taking into account the country'scorps of 44 lighthousemasters and keepers,the Divisionhas a not inconsiderablemanpower potential. According to Crown-- a firmof consultantscommissioned to do a studyof M1adagascar'slighthouses and beacons-- many of thesestaff members are adequatelyqualified to performmaintenance of the existingequipment. All that is neededis to ensurean adequatesupply of spare partsand to motivatethe personnelthrough a more appropriatebonus system. However,they will need refreshertraining in electricityand maintenanceengineering.. As regardsthe new typeof equipmentto be furnishedunder the Project(21 solarenergy lights and 14 solar energybuoys), Crown proposesto train2 engineersand 8 technicians in this specializedfield. The trainingprogram would be drawnup by the supplier,in agreementwith the technicaldepartments concerned.It wouldalso be necessary,in the provincedepartments, to buildor renovatestores and maintenanceworkshops and to provide basicor refreshertraining for the mechanicsand storekeeperswho are to operatethem. The numberof mechanicsto be givenbasic or refresiiertraining would total12 (3 for each province).

The HydrographyDivision still lacksa divisionchief. At the momentit comprises3 secondary-leveltechnicians. Two of them have takena 12-monthcourse at the Schoolof Hydrographyin Brest. The thirdis specializedin shippingmaneuvers. They are all former staffmembers of the CartographyDivision. The Divisionis awaiting the arrival,expected soon, of a Frenchcooperation expert, a highly qualifiedengineer. He will assistthe Divisionto draw up a programof activitiesfor the next few yearsand to definethe physicaland human resourcesrequired to carryit out. The ordering of a 300-hphydrography motor boat,provided for underthe Project, will affectthe trainingprogram, which will take intoaccount the typeof equipmentimported. It is plannedto assignthe motor-boat to the west coastand to equip it with radiolocationand sounding gear. In the initialstage (12-18months), it wouldbe desirable that,the supplier,in additionto ensuringthe installation,entry intoservice and operationof Chisnew equipment,also concern himselfwith trainingof the Malagasyteam. In the secondphase, the teamwill take over entireresponsibility, with the supplier providingsupport, targeted to specificproblems, every b monthsfor A periodof 2 years. - 67 -

Annex 3.2 page 4 of 11

The DreduingDivision Is the one most shortof personnel.rt does *pt yet have a divisionchief. Its staffis limitedto a Studies 'Sectionchief with e technicalsecondary school education. This Division,too, will receivetechnical support from the French cooperationexpert mentioned above. The dredgingprogram provided for in the Projectwill in fact be carriedout by private companies.It wouldnevertheless be desirableto includea training componentin the dredgingcontracts concluded with thesecompanies. That wouldallow the Malagasypersonnel to familiarizethenselves with the techniqueunder real workingconditions. At the management level,the Divisionneeds to be strengthenedby 2 publicworks engineers,who will receive12 monthssupplemental specialist trainingabroad in dredging.

The tnfrastructureDivision comprises a DivisionChief (engineer),a technicianwho doublesas chiefof the New Works3anagement and DevelopmentSection and chiefof the MaintenanceSection, 3 technicians and a 6-man maintenance squad (masons, carpenters, etc.). While the Division is adequately staffedto preparethe technical documentation for maintdnance work of secondary importance and to superviseand monitorits execution,it is not totally equippedto performthe technicalstudies for majorport works. This situationis not critic*l,since preparation of the documentationfor majorworks will be entrustedto private consultants.rn the future,however, it will be importantto strengthenthe Division'stechnical capacity so that it can monitor, superviseand controlthe consultants'work.

The Port OperationsDivision has a staffof three. The Division Chiefholds a universitydiploma and has in additionreceived 12 monthstraining in Antwerp. However,it is absolutelynecessary that the Divisionbe strengthenedby the additionof a contracting specialist.This need is all the more urgentin that the existing contractshave not been reviewedfor a very long time,they are no longersuited to the currentsituation, and many of themhave expired.

The Tariffsand StatisticsDivision consists of a Divisionchief with a higher-leveldiploma in management,a StatisticsSection chiefwith a secondaryeducation, and two secretaries.None of thesepeople have receivedstatistics training.

The Port EquipmentDivision has a staffof 15. The DivisionChief is an engineer.The chiefof the LighterageEquipment section is a formerharbormaster and a formerdirector of a privatelighterage company. He appearsto have appropriateexperience. However, the chiefof the Service Equipment Sectionappears to have very little experiencein that field. Bothappear to need trainingin contractingprocedures since, while it is plannedto have consultantsdraw up the technicalspecifications for the equipment to be purcnasedunder the Project,neither really has any training in the arganizationoe publiccontracts. -68- Annex 3.2 page-5of I1

The Port AdministrationDivision is responsiblefor managingthe ,portpersonnel covered by theappended budget. Only the Division Cliefis a universitygraduate. None of theDivision's IS staffhas been trainedin personnelmanagement.

Situation of the 2roviAcialdepartments

8. At the provincelevel, the now structuresare stillin the embryonic stage,whereas the heavywork will have to be done there: compilationof trafficstatistics, billing, managemeit and operationof the ports,safety control,loading control, mzintenance of lighthouses,beacons, equipment and port infrastructure,and so on. rt is noteworthythat a numberof contracts with concession-or license-holdershave expired. Theseneed to be revisedto spellout the rightsand obligationsof each partyand prescribea formula and/orprovisions for periodicaladjustment of tariffsin lightof economic indicatorsand tonnagesactuaily handled. The presenceof an ever growing numberof permit-holdersalso poiesan urgentproblem.

9. Moreover,a numberof conceptsare very impreciselydefined and vary fromone provinceto another: definitionof taskswithin each department, mannerof performanceof thosetasks, work procedurestailored to specific cases.and limitsof legalcompetence vis-a-vis concession-holders. rt would be helpfulif trainingand coordinationseminars could be organized,with the assistanceof a Le Havreexpert, during the secondproject preparation financingperiod, The purposesof theseseminars would be (M) to definethe functionsann responsibilitiesof the provincedepartment, its organization and its relationswith the headquartersdepartments; (ii) to identifythe most urgentproblems common to the provincpdepartments, and (iii)to work out solutionsto the problemsidentified or recommendationsfor more detailed studies.

10. The provincialport administrationssuffer from a very serious shortageof humanand physicalresources. By way of example,at Antsiranana, apartfrom the departmentchief and the harbormaster,all the staff(10) are of the executiongrade; none has receivedaccounting training. Means of communicationwith the lighthousefacilities are lacking-- the departmentis not informedof a lighthousebreakdown until a week after it has happened. Supplyof thesestations with gasolineor gas-oilis very difficult,for lack of meanaof transportationfrom depotto quay. Moreover,supervision of the concession-holders'work is littlemore than symbolic.rhe trafficstatistics are basedessentially on thesecompanies' own statements. Generalsituation of the lighteragecompanies and assessment of theirtraining needs 11. Generallyspeaking, the performanceof the lighteragecompanies is good - particularlythat of the CompagnieMalgache de Manutention(CDt). Tonnageloaded and unloadedat Mahajangatotaled 73,710 tons in 1985,against 96,031tons in 1984;that handled by the Companyat Antsirananatotaled 84,653 tons in 1985,against 77,215 tons in 1984. The CODM'spotential has not been fullyexploited because traffic throughout the countryhas been falling sharpLyfor a numberof yearsfor economicreasons. MDM'spersonnel at Mahajangatotals 249, including 5 mechanicsand 3 mechanic'smates responsibe - 69 - Annex 3.2 page 6 of 11

for thb mechanical maintenance repair workshop. Its Antairanana staff totals 210, inclt4ing6 mechanics.The equipmentis well maintainedand the workshop well organised.The personnelare well qualifiedto maintainand repairthe Company'sequipment properly, much of which is fairlyold and has been in departmentfor about 20 years. Thereare no major imediate trainingneeds, exceptfor trainingin hydraulicSear and refresher trainingfor crane operators.With respectto managementtriining, CMDM officialshave expressed the wish to participatein visitsto portsabroad to observethe organization and also the evolutionof handlinge4uipmant. The CMDM moreoverspent FMC 85 millionin 1985 on the purchaseof spareparts and some new equipmentfor its .¶ahajangabranch.

Traininsneeds of the headquartersdepartments and of the secondaryports 12. A preliminarystudy has been done of the headquartersand provincial departmentstructures to identifythe most urgenttraining needs for the next four years. This programwill compriselocal training of: 3 provincial departmentchiefs, 11 aeputyharbormasters (I for each secondaryocean-going shippingport and each principalcoastal shipping port), 20 bookkeepers(for the headquartersand provincedepartments), 30 generalmaintenance mechanics, 30 dieseland gasolineengine mechanics, 20 electriciansand refrigeration mechanics,8 lighthousemasters and 50 lighthousekeepers. This programdoes not includetraining of hydrographers;this will be definedin detaillater, 4n lightof the type of equipment(radiolocation, echo-sounding, hydrographic data processing)that comes with the hydrographicmotor-boat to be supplied under the Project.

3. Apart from this,the emphasiswould be on seminarson work organizationand management,communication techniques, statistics, planning, tariff-setting,contracting procedures, and humanresource forward planning. Theseseminars would be organizedfor headquartersand provincedepartment managementstaffs by Localtraining institutions, such as CFC/Antsirabc, CFCJTanaand IMATEP,with the assistanceof the Projectconsultants.

14. Finally,provision would be includedfor trainingfellowships abroad,as follows: (i) sevenobservation fellowships in Africanand European ports for headquartersand provincedepartment chiefs; (ii) five fellowships for instructors(I in the organizationand planningof in-housetraining, I in electricalmachinery, I in automatedequipment, 1 in hydropneumatics,and I in data processing);(iii) two in hydrography,and (iv) two in dredging.The durationof the observationcourses would be 6 weeks. The other fellowships couldvary from 6 to 9 months. Detailsof trainingin radio-navigationand hydrographicdata processingwould be firmediup laterby the equipment supplier,

Trainingorganization and resources 15. A DAC.IMMofficial will have to be appointedas training coordinator.He will be the assistantto the HumanResources Officer. His functionswill be (i) to identifythe qualitativeand quantitativetraining needs;(ii) to updatethe trainingplan and drawtip a timetableof training activities;(iii) to draw up the trainingprograms, with the assistance oe :;e trainingcenters and proressionalgroups: (iv) to rnoni:or-rnd superv:se cae - 70 - Annex 3.2 page 8 of 11

MADAGASCAR

PORTSREHABILITATION PROJECT

B, TrainingProgram: SEPT

Backtround

1. In January1986, SEPT had a staff of 4200. The educationallevel of the personnelis very low: less than 2% have the Baccalaureat(high school diploma)or equivalent. The age distributionis good. From now until 1991, those who will be 55 years old number 398. If dockersare not included,66% of employeesare less than 50 years of age.

2. SEPT is facingseveral difficult problems which are commonto most public enterprisesin Madagascar,namely: (i) too many unproductive employees,(ii) too few skilledpersonnel for an enterprisethat is seeking to modernizeits equipmentand introducenew operatingtechniques, and (iii) a state of organizationaldesarray that makes adaptationto the efficiencystandards targeted by new managementproblematic.

Staffingsituation

3. In January1986, the OperationsDivision had the largeststaff, 2360 in number,of which 1300 are dockers. Accordingto port operations specialists,it is advisableto maintainthe numberof dockersin the range from 1000 to 1100. Disciplineneeds to bh strengthened,in particularwith regardto work qualityand employeeattendance. It is importantto note that some measuresof controlhave alreadybeen introducedby the new Managementand as a consequence,overtime has fallenby 15% to 20%.

4 A unit was also createdby the new DirectorGeneral to study how to reducestaff, whose numberhas increasedby about 1000 since 1982. Severalsolutions are being studieds (i) loweringthe retirementage to 55: this would reducethe total numberof staff by 389; if adopted,this solution would cost SEPT 745 millionFMG for compensationpayments to early retirees,but SEPT would save about 433 millionFMg on overtime, allowancesand benefits;(ii) appealto voluntarytermination in returnfor compensationpayment equivalent to 12-18months' salary; (iii) systematic use of disciplinarymeasures against undisciplined staff (theft,repeated absencewithout permission ... ); (4v) reductionof staff on the basis of SEPT's real needs.

5. The rehabilitationplan for SEPT could not reasonablysucceed without accompagnyingmeasures to reducethe size of its staff;but in the social and economiccontext of Tamatave,the problemhas becomevery delicate. Moreover,to establisha personnelreduction plan, several preparatorymeasures would be necessary:(i) raisingstaff awarenessof necessarymeasures for increasingproductivity, (ii) inventoryingof SEPT Annex 3.2 page 7 of 11

training,and (v) to evaluatethe trainingactivities. It would also be desirable,. set up aTraining CoordinationComittee, composedof the departmentchiefs, the lumanResources Officer and the TrainingCoordinator, to expressopinions on the trainingplans and programsand on the qualityof the trainingimparted, particularly the match betweentraining and job.

16. As regardstraining resources, maximum advantage should be takenof the trainingcapacity of the centersin Madagascaritself. rn particular,the National.Maritime Instruction Institute (Institut National des Enseignements Maritimes-- INEM)will be used to train harbormastersand deputies,general mechanics,engine mechanics, electricians and refrigerationtechnicians. To that end, financingwill be providedunder the Projectto strengthenthe teachingequipment of the electricalmachinery testing laboratory, the .%ca-Autoworkshop, the automatedequipment laboratory and the hydropneumatic workshop. In addition,a pilotdata, processing program for tahajangatraffic statistics(vessel type and tonnage,nature and tonnageof goods loadedand unloaded)will be installedat INE! (at very littlecost, since IYE?Malready possessesa data processingunit). The lighthousesand beaconstraining centerat Antsirananawill be reopenedunder a new system. It will be transferredto the lighthousemaintenance and repairworkshop, to facilitate organizationof the practicalwork and also to reducethe capitalcost. The basic electronicstraining for lighthousemasters could be givenat Mahajanga at INEM, while the specifictraining will be organizedat Antsiranana. -.72 - Annex 3.2 page 9 of 11

human resourceswith analysisof its currentlabor force in terms of number,qualifications, and distributionby units, (iii) collecting informationon the short and medium-termneeds expressedby divisionsand units; (iv) identifyingthose sectorsor specialitieswhere overstaffing exists.

Personnel manaRement

6. SEPT has for the moment 7 categories of personnel statutes. Two categoriesare directlygoverned by SEPT personnelpolicies; they include 1912 employees,administered under a labor-managementagreement (Convention Collective)signed in 1969, and 533 on fixed-termcontracts, that are systematicallyrenewed without any considerationof Individualperformance. The five others includestaff detachedfrom other agencies. The systemof personnelmanagement is srill embryonic. There is no clear job classification.Data on personnelsituations, which are often incomplete, have hamperedManagement decisions in personnelmatters. Recruitment, promotion,and assignmentprocedures have yet to be workedout. In addition,without professional specifications and job descriptions,the links between staff assignmentsand skillsare poorlydefined. The new Management has put an end to a number of bad practices that SEPT inherited from past administrations: (i) laxityin checkingovertime and staff attendance, (ii) automaticpromotion to positionsof responsibilityfor union leaders at the end of their assignments on the sole basis of their unions activities, (iii) countingregular night shift as overtime.

Salary tructure

7. SEPT staff are, in general,reasonably well paid comparedwith other public sectoremployees in Madagascar. However,dockers' wages are relativelylow, in spite of their pqor working conditions. It may be noted that monetarycompensation accounts for an average f 58% of total compensation;42% accountsfor socialbenefits, allowances and the thirteenthmonth salary. As the thirteenthmonth salaryhas become an entitlementand there is laxityin checkingovertime, the harmful consequencesof this situationare quite obvious. In severalcases, there are reportsof lack of motivation,a relaxationin disciplineand careless handlingof productionequipment, high rate of absenteism.Management is fully aware of this situation,butS EPT has limitedleverage in terms of wage policy. Motivationfor high productivitycannot be matchedby monetary increasesas long as the'socialbenefits and non work-related allowancesconstitute the bulk of total pay.

ImprovementIn personnelmanage_ent

8. Under the new organizationof SEPT, the structureof the Direction of Personnelis adequateand includes4 divisions:Personnel Management, Training,Human ResourcesDevelopment and SocialAffairs.

Recommendations.The new Directionof Personnelshould includeamong its tasks: (i) establishmentand updatingof job descriptions;(ii) establismentand updatingof individualrecords (human resources inventory); (iii) 73 Annex 3.2 page 10 of 11

collectionof informationon the short-and medium-term staff needs as expressedby variousdivisions and services; (iv) analysisof these needs in relationto the numberand qualifieqtionsof existingstaff in each specializedarea; (v) preparationof a personnelforecasting plan with the assistanceof a consultantprovided under the proposed project;(vi) the formulationof personnelmanagement proceduresthat definethe conditionsfor selection, recruitment,promotion and appointment.

Trainiks

9. The organizat:',nof the TrainingDivision is still embryonic. Its staff is limitedto two employees. Althoughboth seem dynamicand cooperative,neither has any real experiencein vocationaltraining. This is a major handicapfor SEPT since it needs experiencedstaff who can be productiveimmediately.

Recommendations.A trainingprogram should be preparedfor the staff of the Training Division. This could compriseof: (i) a visit to nat4onaltraining centers in Madagascar (INPF,CFC/Ansirabe' CFC/Tananarivo), to study their organizationand to look into any possibilitiesfor future cooperationin implementingSEPT trainingplan; (ii) in- house trainingthat could be handledby the technical assistantsof the proposedProject; and (iii) additional overseastraining over a three to six-monthperiod in organization,in-service training methodology, and the planningand evaluationof training.

The role and functionof the TrainingUnit shouldbe defined and understoodby all personnel,and in particularby supervisorystaff and consultants.The approachwould be for trainingto be providedto staff by a specializedunit and also as part of theit daily jobs. Based on this conception, sipervisorystaff and consultantsshould be preparedfor their role as trainers.The functionof the TrainingUnit would be : (i) to identifytraining needs, both qualitative and quantitative,in accordancewith the needs of each unit and SEPT personneldevelopment plan; (ii) to participatein the draftingof job descriptions;(iii) to proposea trainingprogram and a scheduleof trainingactivities; (iv) to draw up the trainingprograms with the participationof professionalassociations or trainingcenters, and to determinethe material,human, and financialmeans required to implementthese programs;(v) to proposesuitable measuresto associatesupervisory staff closelywith trainingactivities; (vi) to providefor monitoringand controlof training;(vii) to evaluatetraining actions; (viii)to assistthe,Himan Resources Division in establishingthe qualificationsrequired for each occupationalcategory and settingup carreerplanning for personnel. I - 74'- Annex 3.2 page 11 of 11

1987-90Training Plan

10. The detailedtraining plan will be developedby a consultant financedunder PPF2,tbdsed on the analysisof existingpersonnel preparAd by SEPT. The generalobjective of the trainingplan is: (a) to improvethe competenciesof staffwho can benefitfrom furthertraining; (b) to train new staff to either replaceShose who will retireor increasethe staffing level in accordancewith SEPT's developmentplan for the concernedperiod; and (c) to improvethe managementand organizationskills of managersand supervisors.

11. This plan will involvethe trainingof about 350 staff members in severaltechnical areas: general mechanics, auto-mechanics, diesel engines, radio equipment,electronics, electromechanics, electrical machines, heavy equipmentmaintenance and operation,hydropneumatics, accounting, general management,inventory control, training and personnelmanagement, etc. In addition,overseas training will be proposedfor 30 senior staff in management and technicalareas for which group trainingof one or two peoplewould no longerbe economical.

Recomendation.Heads of divisionsand servicesshould work- closelywith the Directionof Personnel,to identifytheir own skills,to evaluatetheir staff and to anticipate upcomingretirements, promotions and reassignments.The qualityof the trainingplan will depend essentiallyon their contribution.To this end, seminarsto raise awarenessand introducepersonnel management and planning conceptsshould be organizedwith the assistanceof specialistsfrom local firms and the from consultantin trainingplanning and organization.

With a view to increasingthe TrainingDivision's effectiveness,SEPT should encourageits best staff to participateas part-timeinstructors through an appropriate system of incentives.

November1986 - 75 - Annex 3.3 page 1 of 1

PORTSREHABILITATION PROJECT

D_WU SaWME

1986 1987 1988 1989 1990 1991 1992 1993

1 213141121 _46 112 314 1 21 4 1121 4 11213141 2 3 4 1 234

mmr~rfrPMSTWJCf I A. Iretio of ,erl, speifti_a- tiou andbid dooumatts B. Mvertisirg, receivigcbids, eI a_i_ and awid C. Q,nstrution

II.CA O HAMG BUIEP A. Preperatimnof spafiainsad bid dOAAuattS B. Adverisirg, receivirWbids, ealuation andsamad --- c. Ioliwey, instullation or comnnssiIm of equiipmet D. tolvery and cowIssion of floatng_ craft E. Deivery of spare parts and mterials | IIt.SHEPPINQ A. Drsi apupme parts &mterials Ao.lPrepwration of specifications and bid s0Oxits A.2 A rtisii, receivirg 1 evaluatimnand siarda .k3 Delivery, installati or o__md __ion B. Navigtion aids B.1 Pblration of ccation d bid &oWnmnts 3.2 Advrtislg, receivingbids, evabdatimnad a-mrd B.3 Deliveryand cud.siotn of oarapradcairve lamch 3.4 Dalivery, IZutallation andcon- truction of navgationaids, shop,

A. TeuC~~~at96pport m Of -MttWnfersne for 1------I I I I I - -__1 andtraining B. Invite mWibusso, alalye, mard

June 1986 -76- Annex 3.4 page 1 of 1 MADAGASCAR

PORTSRF.HAIT.ITATION PRnO.FCT Other portsperformance indicators

Drycarso tons varshi. Per day tort 1U1986 1990 1992

Antacraaan Intl. 2S0 300 350 400 Cabot.

tohr Cabot.- 170 200 250 300

Manakara Cabot. 160 200 240 260

Tolagnaro Intl. 300 350 380 400 Cabot. 200 240 260 280

Toliary Intl. 270 300 350 400 Cabot. 170 200 230 260

Morondava Cabot. 90 120 140 160

Mahajanga Intl. 210 240 270 300 cWt. 200 230 260 280

Nosy Be Intl. 160 200 250 300 Cabot* 100 130 160 200

St. Louis Intl. 450 450 450 500 Cabot. 170 170 170 190

June 1986 - 77 -

Annex 4.1 PaM 1 of 1

Kg&GASCAR

PORTSRERABILITATION PROJECT

Forecast of Port Traffic 1990 - 1995 (000) tons

1984 1990 1995 Actual Forecast Forecast Dry Cargo Oil Dry Carao Oil Dry Carao Oil

Antsiranana 74.0 19.4 132.4 36.8 147.1 41.1

Vohemar 22.1 5.4 25.7 8.0 27.9 9.0

Antalahal/ 3.4 -- 4.3 -- 5.2 --

Maroantsetral/ 5.5 0.6 5.3 1.1 5.8 1.1

Tosmasinas International 489.6 248.0 450.0 } 450.0 483.2 1 600.0 Cabotage 107.3 76.9 102.9 1 115.9 }

Manakara 52.7 12.3 57.2 20.0 62.6 25.9

Mananjaryl/ 11.7 1.7 13.6 4.0 14.6 4.5

Tolagnaro 26.0 6.5 33.9 9.0 44.5 10.1

Nosy Be 120.6 116.3 } 34.7 23.0 37.2 26.2 Port St. Louis } 40.8 9.0 53.4 10.1

Mahajanga 148.5 49.4 184.6 61.6 191.9 73.2

Morondava 29.1 5.8 126.0 10.0 31.0 10.0 Toliara 51.9 15.0 *69.6 14.5 65.5 16.3 Morombel/ 8.8 1.6 9.8 2.5 14.6 2.9

Total: 1151.2 558.9 1210.8 649.5 1300.4 830.4

Source: Consultants,MTRT

May 1986

1/ Not a project port. - 78 -

Annex 4.2 Page 1 of 1

MADAGASCAR

PORTS REHABILITATIONPROJECT

Ship Loading/UnloadingRates

Ship Cost Loading/UnloadingRates Ton/Day Ship Days FHG/DaU Actual 1985 WithoutProlect With Project Saved 1990

MahajlMa Deepsea 3.9 213 293 78 Coasters 1.7 180 180 220 121

Morondava 1.65 53 90 160 126

Toliara Deepsea 3.9 270 400 33 Coasters 1.56 233 170 260 53

Tolagnaro Deepsea 3.9 300 400 19 Coasters 1.56 153 200 275 16

Vohemar Coasters 1.38 133 170 300 } 168 Petroleum 1.38 260 260 } Toamasina Deepsea 3.9 450(1984/85)400 500 367 Coasters 1.7 137-143 140 200 316

Nosy Be Deepsea 3.9 160 300 41 Coasters 1.4 99 100 200 46

Antsiranana Deepsea 3.9 184 250 350 43

St. Louis Deepsea 3.9 450 500 9 Coasters 1.4 155 171 190 11

Manakara 1.56 258 160 260 102

Shipdayst 590 deepsea+ 959 coasters- 1549 days

Source:Consultants, mission estimates

May 1986 I - 79 -

MDAOAGSCAS Annex4.3 PORTSREHABILITATION PROJECT page1 of 1

Suws.y of coo and boneft.e

Year Neveid.Mahajanga Morondava Toilers Tolagnaro Voher To_*lna Nosy-be St.Lou.s AnteirenanaManakers Total

COSTS: FU millions1 1987 127 164 268 701 1288 19a8 496 8a3 162 178 S 440 206 2471 19S9 651 sF. 9 110 175 220 1gb 205 2974 1990 714 87 178 296 138 1204 Is$ 34 2819. 1991 888 ?8 61 151 1us 8 s82 59 860 2862 1992 522 8S5 23B 230 47 1691 BENEFITS:FUG maillions 1988 0 0 1989 336 240 241 8l8 1990 670 491 209 212 97 232 681 80 2852 1991 870 494 216 218 102 264 1722 162 3833 1992 679 422 224 199 90 218 1722 202 52 162 185 4206 1993 870 426 232 201 96 8904 1691 207 s6 162 156 4188 1994 870 428 240 202 102 382 1691 212 so 181 158 4248 19, 870 482 246 204 106 883 1691 216 s6 170 16l 4316 1 670 452 248 24 106 363 1691 224 W6 170 le 4321 1997 679 482 246 204 109 363 1091 280 s6 170 181 4327 1998 670 432 246 204 106 888 1891 289 s6 170 6s 4234 199 670 299 246 204 108 188 1691 230 SO 170 o 3?37 RATEOF RETURN:X 28 22 41 29 26 26 82 53 19 88 26 29

Source: Consultants, Mission estimates

May 1988 - 80 -

MADAGASCAR Annex 4.4

PORTS REHABILITATIONPROJECT

Detailsof economicbenefit calculations

WITHOUTPROJECT WITH PROJECT BENEFITS ANTSIRANANA SHIPDAYSCost/day SAVINGS Handlingrates SAVED FMG FMG/year Deepseavessels 250 tons/day 350 tons/day millionsmillions

Shipdaysneeded for loadingor unloading 1990 37400 tons 149.6 days 106.8 days 42.8 3.9 166.9 1995 46600 tons 186.4 days 133.1 days 53.3 3.9 207.9

MANAKARA Handlingrates Coasters 160 tons/day 260 tons/day

Shipdays needed for loading or unloading 1990 42500 tons 265.6 days 163.5 days 102.1 1.56 159.3 1995 46300 tons 289.4 days 178.1 days 111.3 1.56 173.6

MAHAJANGA Handlingrates Deepseavessels 213 tons/day 293 tons/day Large coasters 213 tons/day 293 tons/day Small coasters 180 tons/day 220 tons/day

Shipdaysneeded for loadingor unloading 1990 tons Deepseavessels 61000 286.4 days 208.2 days 78.2 3.9 305 Large coasters 75000 352.1 days 256 days 96.1 1.7 163.4 Small coasters 24600 136.7 days 111.8 days 24.9 0.9 22.4 490.8 1995 tons Deepseavessels 61000 286.4 days , 208.2 days 78.2 3.9 305 Large coasters 82400 386.8 days 281.2 days 105.6 1.7 179.5 Small coasters 24600 136.7 days 111.8 days 24.9 0.9 22.4 506.9 MORONDAVA Handling rates Coasters 90 tons/day 160 tons/day

Shipdaysneeded for loadingor unloading 1990 26000 tons 288.9 days 162.5 days 126.4 1.65 208.6 1995 31000 tons 344.4 days 193.8 days 150.6 1.65 248.5 - 81 -

WITHOUTPROJECT WITHPROJECT BENEFITS NOSY-BE SHIPDAYSCost/day SAVINGS Handlingrates SAVED FMG FMG Deepseavessels 160,tons/a. 300 tons/day millionsmillions Coasters 100 tons/id 200 tons/day

Shipdaysneeded for loadingor unloading 1990 tons Deepseavessels 14100 88.1 days 47 days 41.1 3.9 160.3 Coasters 9100 91 days 45.5 days 45.5 1.4 63.7 1995 tons 224 Deepseavessels 15800 98.7 days 52.7 days 46 3.9 179.4 Coasters 10400 104 days 52 days 52 1.4 72.8 252.2

ST.LOUIS Handlingrates Deepseavessels 450 tons/day 500 tons/day Coasters 171 tons/day 190 tons/day

Shipdaysneeded for loadingor unloading 1990 tons Deepseavessel 41500 92.2 days 83 days 9.2 3.9 35.9 Coasters 19300 112.9 days 101.6days 11.3 1.4 15.8 51.7

TOAMASINA Vessel savings Handlingrates Deepseavessels 400 tons/day 500 tons/day Coasters 140 tons/day 200 tons/day

Shipdaysneeded for loadingor unloading 1990 tons Deepseavessel 450000 1125 days 900 days Coasters 103000 735.7 days 515 days Total days needed at berth 1860.7days 1415 days Berth utilization 0.73 0.55 Days waitingfor berth Deepseavessel s 168.7 days 27 days Coasters 110.4 days 15 days Waitingtime/Service time 0.15 0.03

Total days in port DeepseaMalagasy flag 362.2 0.28 259.6 days 102.6 3.9 400.1 DeepseaForeign flag 931.5 0.72 667.4 days 264.1 2.1 554.6 Coasters 846.1 530 days 316.1 1.7 537.4 1492.1 Cargo savings Coffeecan move throughthe port in an averageof two weeks less time

40000 tons x 1.5 millionsFMG x 14 days x 0.1 230.1 365 interest

Total savingsin 1990 Vessel time savings 1492.1FMG millions Cargo savings 230.1 1722.2 - 82 -

WITHOUTPROJECT WITH PROJECT BENEFITS SHIPDAYSCost/day SAVINGS f SAVED FMO IWO TOLAGIARO millionomillions Handlingrates Deepseavessels 300 tons/day 400 tons/day Coasters 200 tonsiday 275 tons/day

Shipdaysneeded for loadingor unloading 1990 tons Deepseavessel 22500 75 days 56.3 days 18.7 3.9 72.9 Coaoters 11400 57 days 41.5 days 15.5 1.56 24.2 1995 tons 97 1 Deepseavessel 27700 92.3 days 69.3 days 23 3.9 89.7 Coasters 16800 84 days 61.1 days 22.9 1.56 35.7 125.4 TOLIARA Deepseavessels 270 tons/day 400 tons/day Coasters 170 tons/day 260 tons/day

Shipdaysneeded for loadingor unloading 1990 tons Deepseavessel 27600 101.2days 69 days 33.2 3.9 129.5 Coasters 26000 152.9dayd 100 days 52.9 1.56 82.5 1995 tons 212 Deepseavessel 28600 105.9days 71.5 days 34.4 3.9 134.2 Coasters 26800 157.6days 103.1days 54.5 1.56 85 219.2 VOHEMAR Vessel savings Handlingrates Coastersdry cargo 170 tons/day 300 tons/day Coasterspetroleum 260 tons/day 260 tons/day

Shipdaysneeded for dry cargo 1990 27900tons 164.1days 93 days 71.1 1.378 97.8 1995 30500tons 179.4days 101.7days 77.7 1.378 107.1 Shipdaysneeded for petroleum 1990 8000 tons 30.8 days 30.8 days 1995 9000 tons 34.6 days 34.6 days Totaldays needed at berth 1990 [utilization] 194.9 (.53] 123.8 1.341 1995 (utilization] 214 t.591 136.3 (.3?1 Days waitingfor berth 1990 146.2days 49.5 days 96.7 1.378 133.2 1995 241.8 days 61.3 days 180.5 1.378 248.7 Waitingtime/Service time 1990 0.75 0.4 1995 1.13 0.45 - 83 -

VOHEMAR Cargo savings SAVINGS Cargo transforred from Antalaha FHG Road transport(19%41 2200 tons x 22800 FMGIton Road cost millipno less lighteragelobas FMGmillion 1 percentof cargo value 1.5 PMG mill. 15000TMG/ton 1990 2200 tons x 7800 a 17.2 1995 2600 tons x 7800 - 20.3 Ship handlingrates Antalaha Vohemar 45 tons/day 170 tons/dayShipdays Cost/day Shipdaysneeded for loading or unloading saved FMG millions 1990 2200 tons 48.9 days 12.9 days 36 1.38 49.6 1995 2600 tons 57.8 days 15.3 days 42.5 1.?8 58.6

Total savings FMG millions 1990 1995 Ship working time 97.8 107.1 Ship waiting time 133.2 248.7 Cargo savings 49.6 58.6 less cargo costs (17.2] (20.31 263.4 394.1

NAVIQATIONAIDS AND SHIPPINGASSISTANCE SAVINGS FMG Savingsin enteringports vesselstsavings per/shipeall: FMG millions millions Deepseavessels 0.33 250 ten hours 3.9 135.1 Coasters 0.33 1350 ten hours 1.5 281

Savingsin night operations Deepsea vessels 75 one day 3.9 292.5 Coasters 450 one half day 1.5 337.5 1046.1

Source:Annex 4.1 and 4.2

:,ay1986 - 84 -

MADAGAC Annex 4.5 PTS REHILITATION PRO.JECT Page 1 of 2 Suiry tfor eah projec

Ant eanns Morenava Year costs befit. not r cots befits not 1986 0 1 64 196 0 0 1987 6 6 1907 6 0 1988 0 0 6 low 162 0 -162 1989 0 6' 6 1009 99 0 -9 1990 18 0 -188 19o 17 209 88 1991 59 0 -9 1991 1 216 18 1992 286 102 -40 1992 1 224 198 1993 so 1to 152 1998 81 282 201 1994 88 199 161 199 81 240 2" 1995 so 200 170 199F 81 248 217 1996 8U 208 170 1996 81 240 217 1997 as 209 176 1997 $1 248 217 1998 8s 208 170 199 81 248 217 1999 88 208 170 19" 81 240 217 rate of rourn 881 rate of return 41%

Manakaer Nosy-be Year cost be1fts net Year coot benetits net 198 0 0 10 0 0 1987 0 6 1i97 0 O 1988 6 6 a 18" o a 0 1989 206 0 -265 1909 0 0 O 19 84 80 46 1990 a a 0 1991 85O 162 -19 1991 882 0 -802 1m 4 1in 110 1092 22 224 202 1093 18 19 1S5 199" 22 229 207 194 18 171 150 1994 22 284 212 1995 18 174 161 1995 22 240 218 1996 18 174 161 190 22 246 224 1997 18 174 161 "19? 22 252 280 198 18 07 74 109 22 252 280 1999 18 18 1 19" 22 252 286 rate of return 26% rate of return 681

Mahajanga St.Louis Year cost. benefits net Year costs benefits not 1986 0 a 190 6 0 1987 154 -154 1997 0 0 1986 888 -888 1900 0 6 0 1989 551 246 -811 1909 6 a 1990 67 491 424 1996 6 0 6 1991 76 494 416 1991 a0 0 192 75 S 425 1992 288 52 -184 1998 75 08 420 1908 2 52 Sa 1994 75 WI 482 1994 2 52 ca 1993 75 U 482 1995 2 52 so 1990 75 67 482 1096 2 52 60 1"9 75 56 482 1997 2 52 s6 199$ 76 607 482 10" 2 52 s6 19" 6 200 26 199" 2 52 so rote of return 221 rate of return 195 - 85 -

IMAOASCAR Annex 4.C PORTSREILIUTATIN PROJECT Page 2 of 2

Toams I no Vohmar

Year costs bentfit. not Year costa beofitt not 1988 9 9 1908 9 0 1987 701 -701 1987 268 -298 1988 288 0 -2980 188 440 0 -440 1989 1is" 9 -1683 1999 220 241 21 1968 1264 s61 -498 1ow 81 268 232 1991 868 1722 659 1991 81 236 254 9m926 1722 1o" 1992 81 889 278 1998 81 1722 1691 1988 81 8S5 894 1994 81 172 1891 1994 81 868 882 1995 81 172 1891 1995 81 394 868 1996 81 1722 1691 1998 81 894 8e8 1997 81 1722 1691 1997 31 894 s68 1998 81 1722 1691 198 81 894 868 1999 81 1722 1691 1999 81 197 160 rota of roturn 825 rata of return 265

Tolagnaro Shipping and novelds

Year costa benefit not Year costs benefits net lea. op.cost 1988 0 0 1966 9 9 1987 9 a 1987 127 -127 1988 80 0 -89 198 495 0 -495 1989 175 o -17t 199 651 836 -216 1990 188 97 -86 19" 714 670 -44 1991 17 102 85 1991 898 707 -18 im 17 lo7 68 1m 522 679 148 1998 17 118 96 1998 0 679 879 1994 17 119 102 1994 a 670 670 1995 17 125 1q 1995 9 679 O67 1996 17 125 1 1998 9 679 679 1997 1725 1997 0 6e 879 1998 17 125 198 1m 9 679 676 1999 17 125 198 1199 a 679 676 rataof return 26X rata of return 26%

Toli ra Total portproject

Yoer costs benefits net Year costs benofits net 1986 lesa op.cost o 9 1988 9 9 1987 9 o L987 1266 -1268 1988 173 0 -178 1988 2471 0 -2471 1989 li1 0 -110 1980 2974 61e -2158 1999 296 212 -66 1990 2819 2852 33 1991 151 218 62 1991 2862 3888 1181 1992 15 214 19 1992 1891 4206 2516 1993 16 216 291 1998 0 4168 4183 1994 15 217 242 1994 0 4246 4248 1996 15 219 294 1995 1996 0 4816 4816 15 219 20b 1996 0 4321 4821 1997 15 219 294 1997 0 4327 4327 1998 1S 219 204 1986 0 4234 4234 1999 1S 219 294 1999 0 3737 3737 rota of return 29i rata of return 29% - 86 -

M&DAGABCAR Annex 4.6

PORTSREHABILITATION PROJECT

Economicreturns and sensitivitytests

Sub-project Best BenefitsCosts Benefits-10 First year estimateless 20% plus10 Costs+102 returns

Antsiranana 38 25 33 27 2 35 %

Mahajanga 22 15 19 16 2 24 %

Manakara 25 16 22 17 X 20 X

Morondava 41 31 36 32 Z 37 2

Nosy-be 53 40 47 42 % 48 %

St.Louis 19 10 15 11 2 19 %

Toamasina 32 25 29 26 % 30 2

Tolagnaro 28 19 24 20 % 26 Z

Toliara 29 21 25 21 % 27 %

Vohemar 26 19 23 19 2 22 1

Navigationaids and Shipping 26 17 22 18 2 21 2

Total project 29 22 26 23 % 23 %

Source:Mission estimates

June 1986 - 87 -

MADAGASCAR- PORTS REHABILITATION PRMJECT Annegx5.1

S E P T

IncomeStatemnts fortho yers endedDecember 81st

(millonFMO)

1930 1981 192 INS 1984 1is6 ------unudtd ------audited

PortRevenue: Portdues: - on cargo 126 128 123 126 1a1 628 - on ships 898 88 86 446 416 444 Cargohandling 1,844 1,004 1,787 1,440 2,159 2,479 Storageand Rentals 1,951 662 829 2,877 946 1,142 Other 584 1,116 622 597 787 875

4,898 4,400 8,671 4,996 4,891 4,964

OtherIncome 584 186 155 868 a88 844

WorkingExpenses: Salaries 2,864 2,718 2,947 B,087 1,481 8,759 Materials 924 727 616 619 869 1,156 Other 840 22 421 481 597 61U

3,626 3,642 3,984 4,107 4,947 5,681

OperatingResult 1,854 694 (158) 1,186 (188) (238) Depreciation 410 642 610 1,254 957 944

Not OperatingResult 944 252 (668) (86) (1,145) (1,177) InterestExpense 139 137 139 128 1S9 148 .ExtraordinaryIteos(net) (1,487) (768)

Net Income (Loss) 805 115 (8907) (196) (2,791) (2,091)

November196 - 88 -

MADAGCR - PORTSREHBILITATION PROJECT Annex 6.2

S E P T

Bl once Sheetsat Dacember81st

(mIllIonFMG)

1980 1981 1902 1988 1964 1905 ----- unaudited---- - audited

ASSETS

Cash 839 179 147 168 1,439 1,714 AccountsReceivable 8,249 9,068 9,238 9,988 4,622 4,50O Inventories 688 667 711 704 692 1,99

CurrentAssets 9,26 19,72210,9,4 10,828 6,852 7,397

FixedAsst. 6,471 6,229 6,911 5,677 13,616 14,147 AccumulatedDepreciation 9,114 9,?78

.NetFixed Asets 8,471 6,229 6,911 6,677 4,592 4,864 DeforredCharge 14 4 OtherAssets 1,311 1,124 1,094 1,207 1,638 1,675

TotalAsset 17,84710,075 17,199 17,7M718,061 13,859 mon ------m

LIABILITIES

CurrentLiabilities 5,780 7,163 7,205 7,18656,517 6,240

Long Term Debt 8,249 8,089 2,829 2,619 2,487 2,171 Provisions 1,621 1,021 1,960 1,159 8C1 PaldIn Capitol 8,761 8,761 3,761 8,781 6,710 6,798 Reserves 2,428 2,976 8,161 8,188 170 (1,962) CurrentIncom" en5 116 (807) (198) (2,791) (2,091)

TotasEquIty 6,909 6,852 6,115 8,758 4,097 2,68

Liabliltiesand Equity 17,947 10,07617,199 17,79718,051 18,859

Novembr 1996 - 89 -

MADAGASCAR- PORTS REAS!LZTATION PROJECt Annex58

Fund Statent.

(million1U1'.)

1W0 1931 1002 1038 1904 1065 ------unauditd------audited

SOURCESOF FUNDS

Net Income 665 115 (667) (190)(2,791) (2,691) Depreciation /_ 41 642 539 1,8S4 (198) 1,245

Fun ftromOperations 1,216 767 (266) I,I56 (2,064) (6")

Net Borrowings (21) (216) (210) (182) (2") Equity Capital (252) 76 684 18 624

Financing (462) (140) 624 (47) 858

Totol Source8 295 (403) 1,762 (8,981) (466)

USESOF FUNDS

WorkingCapital 82 (876) 749 (8,868) (1,276) Net Plant and Equipment 4660 292 920 (218) 60 Other Inveetamnt (107) (86) 118 490 (18)

Total Ues" 295 (408)1,762 (8,631) (488) ummus gauss muu musums m

I_ Includes aortization and other non-cashcharge.

November10 - 90 -

MADAGASCAR- PORTS REHABSLSTATION PRWOJECT Annex5.4

S E P T

RatioAaalye1s

180 1981 1982 1988 1984 1985 ------unaudited------audited

EffI cIency:

lovonueTurnover SO-O% 79.6% 61.1% 67.8% 97.6X 118.6% Receivable.Turnover /_ 6'74 6O6 966 718 871 827 InventoryTurnover /a 68 s8 64 61 6e 71

Productivity:

Numberof staff 4,468 4,681 4,815 4,528 4,480 4,460 Rovenue/amploy. /_b 1.11 0.93 0.89 1.18 1.6? 1.20 Tonsof cargo/employs 149 117 146 118 186 18

Pricing:

Gon'lcargo (thous. ton) 607 576 627 518 597 6n O FUC/ton 6,129 5,226 4,289 7,686 5,420 0,892 Numberof vessel 411 892 896 878 868 8s0 o millionFMG/vessel 0.98 0.77 0.91 1.18 1.15 1.28

ProfItabi IIty:

WorkingRatio 82.6X 82.81 168.51 88.6% 112.7% 111.6% OperatingRatio 91.8% 97.4% 122.4% 100.7%184.5X 130.7% Return-in Fixed Assets 14.6% 4.6O -10.8X -1.2% -22.5X-26.6%

Liquldity:

WorkingCapital /c 8,477 3,669 2,889 8,688 336 (941) CurrontRatio 1.60 1.56 1.40 1.51 1.06 0.89 QuickRatio 1.53 1.47 1.38 1.48 0.88 0.68

Capitalization:

Debtto Equity 31.7% 80.7X 81.6% 27.9% 87.3% 45.2X AssetLeverage 69.0% 62.1% 64.4% 61.9% 68.6%X 0.8%

/a Averagedays on hand /M MillionFPU's M/MillIon FUG'.

November1988 - 91 -

MADAGASCAR- PORTS REHABILUTATION PROJECT AnnoxS.6

S E P T

Financial Forecast

Assumptions

198 11? 106I 1989 19U9 1991 19 1991 1994 1995

Traffic: sonlIcargo (thou*. ton) 59o 680 670 S"8 55"60 670 o89 S9o s9e Numberof vesselsa 38 856 354 852 850 348 846 844 842 840

Tariffs:

I16 FMU/ton 5,809 8,?20 6,964 6,964 8,064 8,064 0,964 8,964 7,741 7,482 19M millionFUM/vosset 1.80 1.66 1.87 1.87 1.87 1.67 1.67 1.67 1.80 1.73 AnnualIncrease TX 20# 20% Exch;ng rateUSIFiMC 08g 689 680 689 880 6ss 630 689 689 689 Exchangerat. USSlFF 6.80 6.69 S.6O 6.60 S.69 6.89 S.69 8.89 6.68 6.80 Inflation 7.2% 6.6X 6.61 7.OX 7.1X 4.9% 4.09 4.O% 4.9x 4.0% 1.009 1.972 1.145 1.223 1.896 1.401 1.457 1.516 1.576 1.839 1.796 TotalStaff 4,400 4,290 4,189 4,970 83969 3,859 8,749 8,689 8,620 3,413

InterestRate 9.10% 9.10% 9.19X 9.10X 9.10X 9.109 9.19% 9.19X 9.1G9 9.10% CapitalInvestments: 997 2,997 2,710 711 1,986 104 97 48 O 9 Cyci. project: 6,999 15C 46% 49% Port project: Equipment: 8,890 5% 29X 29% 29% 85% Civilworks: 979 B% 29% 29% 29X 20X 1OX 6X DepreciableLife (years) 80 s9 80 80 as 3a 89 38 30 30

Technicalassistance: 0 0 0 ° USM 9 Borrowings 884 2,865 2,921 1,409 2,211 840 170 85 0 0 CaisseC'lo:FF 68,000 6X 29% 29% 20% 85X 0% OX O% IDA: 8o% 22X 17X Port project US$ 2,700 Ss 6X 29% 29% 29% 20% 1x 5% RailwayIII USS 1,999 15% 45X 49% CyclonoII USS 5,000 15X 46% 40X DebtAmortization 260 260 260 260 502 1,087 1,160 1,150 1,159 1,160 Cash: Rovonue 14% 15X 12% 12X 12X 12X 12X 12% 12X 12X Recelvables: Revenue 115X 9OX 79% 55% 48% 83X 26% 29% 29% 261 Inventory: Revenue 17% 17% 17X 17% 17X 17X 17% 17% 17% 17% Current Llablts:Expenses 116 98B% 6OX 6X 66% 49X 86X 88%8X 38X 8

November1988 - 92 -

MADAGUCR- PORTS R4IUTATIOSN PROJECT Anne%6.6

S E P T

Pro-toem ncoe St*at.wtt tor the years endedDecmber 81st

(mIllIonFM*)

1966 I"97 1i96 1899 190 1991 19m 1998 1994 190S

Revenue: Cargorelated 3,642 4,442 5,620 5,808 6,216 6,601 6,9s8 7,872 7,487 7,062 Vesel related 499 66 610 862 919 949 982 1,016 1,008 1,000 Other 766 on6 81 921 947 1,626 1,06871,11 1,165 1,201

4,796 ,9806 7,292 7,692 9,120 8,667 9,616 9,497 9,649 9,803 WorkingExpensoe: Salaries 8,629 8,997 4,149 4,828 4,606 4,666 4,602 4,646 4,864 4,719 Materials 922 972 1,92C 1,688 1,144 1,201 1,260 1,821 1,886 1,454 Other 401 429 468 490 526 U68 s67 647 787 641

6,168 6,388 5,682 6,695 6,174 6,J61 6,429 6,618 6,80 7,014

OperatingReoult (387) 517 1,666 1,797 1,94$ 2,266 2,667 2,694 2,841 2,769 Deprociation 526 688 616 992 998 1,089 1,084 1,129 1,174 1,221

Not OperatingResult (0880) (11i) 6S0 90S 958 1,217 1,608 1,7S6 1,687 1,586 Interest Expens 109 261 488 781 O86 992 92 689 742 688

Net Income(Loss) (1,001) (402) 862 174 117 225 576 916 926 930 Before Extr'y Its" 3 uan , uainin mm. m mm.. minm

November1996 - 93 -

MADAGASCAR- PORTS REHADILITATION PROJECT Annex6.7

S E P t

Pro-form* BalanceShoets at DocemberU1ot

(millionFAG)

106 1987I 1900 1O9 low9 1001 1M 19 1994 1996

ASSETS

Cash 1,190 688 67t 928 974 1,02? 1,082 1,140 1,168 1,176 AccountsReceivable 5,525 5,906 5,111 4,206 3,482 2,848 2,889 1,922 1,968 1,984 Inventories 0 992 1,224 1,292 1,U88 1,487 1,614 1,595 1,620 1,048

CurrentAsets ?7,620 7,184 7,210 8,420 5,799 5,819 4,935 4,057 4,781 4,809

Fixed Assets 15,777 29,061 24,868 28,779 29,768 81,176 82,624 88,875 85,2W0 88,689 AccuoulatedDeprociation 10,782 12,175 18,818 15,798 17,976 19,778 21,696 23,786 25,909 29,214

Not FixedAset. 5,045 7,676 10,440 10,977 11,069 11,896 10,928 10,187 9,322 8,425 3t,orred Chargs 8 8 8 a 8 a 8 8 S 3 OtherAsstet 196 116 (126) 866 726 882 782 1,871 1,961 2,641

------TotalAssets 12,784 15,178 17,525 17,786 18,888 17,348 16,498 16,188 16,017 15,876 am uaus m= au.. aam aua aaag

LIABILITIES

CurrentLiabillties 6,971 6,182 4,498 3,906 3,395 2,676 2,486 2,W65 2,579 2,857

Long Term Debt 2,755 5,360 8,031 9,190 10,809 10,208 9,228 8,156 7,008 6,68 Provisions 1,56W 1,500 1,560 1,000 260 250 260 Paid In Capital 6,7W 6,710 6,710 6,710 6,710 8,710 6,710 8,710 6,710 6,710 R"erves (1 ,00) RetalnedEarnings (3,172)(3,574) (8.212) (8,038) (2,921) (2,896) (2,121) (1,205) (280, B65

TotalEquity 2,586 8,136 8,496 8,672 3,789 4,014 4,589 6,505 6,480 7,860

Liabilitiesand Equity 12,7U4 15,178 17,526 17,766 16,388 17,848 16,496 18,168 16,017 15,9?6 maa m aum =am g

November1966 - 94 -

MADAGASCAR- PORTS REHAILITATION PROJECT Annex 6.8

S£EP T

Pro-forme Funds Statements

(millionFMC'a)

1986 1987 1988 1989 1990 1991 199 1993 1994 1995

SOURCESOF FUNDS

Not Income (1,081) (402) 3862 174 11? 226 675 916 925 930 Depreciation 528 668 816 892 993 1,039 1,084 1,129 1,174 1,221

Fundsfrom Operatlons (555) 268 1,172 1,066 1,110 1,264 1,869 2,946 2,099 2,151

Not Borrowlngs 584 2,006 2,671 1,159 1,709 (608) (9t0)(1,0B5) (1,10) (1,159) Equlty Csplt.l 989 1,000 0 0 0 0 0 0 0 0

Financing i,573 38605 2,671 1,159 1,709 (6ON) (090) (1,086) (1,159) (1,165)

Total Sources 1,019 8,871 3,848 2,225 2,619 56 679at 9 949 1,001

USES OF FUNDS

Working Capital 2,499 458 712 (209) (110) 3o 65 (347) 0 (3) Net Plant ond Equipment 1,207 3,499 3,374 1,429 1,621 632 514 438 369 324 Other Investments (2,879) (81) (243) 998 1,108 (94) 190 889 590 680

Total Ues 1,018 3,871 3,843 2,225 2,819 588 879 9890 949 1,001

November1986 - 95 -

MADAGASCAR- PORTS REHABILITATION PROJECT Annex 6.9

S t P T

Pro-form,Ratio Analysis

I988 1997 1900 1989 1't; 1991 1992 198 1994 1995

Efflelncy:

RevenueTurnover 95.1% 75.9X 09.8% 70.1% 08.*X 75.1X 88.8% 98.7X 188.5% 116.4% ReceivablesTurnover /a 415 828 252 197 1s8 120 98 78 78 78 InventoryTu ...over /_a C 8 s8 78 79 79 82 86 87 8 64 Productlvlty/bt 1.02 1.20 1.48 1.44 1.44 1.58 1.59 1.08 1.67 1.69 /;_ 184 185 180 188 189 145 162 189 168 176

Pricing: d-n'lcargo (thou*. ton) o6o 669579 5 560 589 670 580 590 8s * FMC/ton 8,098 7,894 9,888 10,56W 11,889 11,752 12,222 12,710 12,690 12,870 Number of vessels 868 a85 854 852 360 848 848 844 842 840 A millionfUG/vessel 1.89 1.79 2.29 2.45 2.62 2.78 2.84 2.96 2.95 2.94

Profitability:

WorkingRatio 107X 91X 77% 77% 78% 74X 71X 7?x 71X 72X OperatingRatlo 118X 108X 88X 88X 88X 8tX 88X 82X 88% 84% Returnon FixedAssets -18.5X -2.8x 9.8% 8.6X 8.4% lO.SX 18.5% 18.7% 17.1X 17.7% Not Return(after mnt.) -22.8% -4.2X 4.09 1.8% 1.OX 1.9X 5.2X 8.7% 9.5X 10.5%

Liquidity:

WorkingCapital /d 1,549 2,892 2,714 2,514 2,404 2,484 2,499 2,152 2,152 2,149 CurrentRatio 1.8 1..' 1.6 1.8 1.7 1.8 2.0 1.9 1.8 1.8 QuickRatio 1.1 1.2 1.4 1.4 1.4 1.5 1.8 1.4 1.4 1.4

Capitalization:

Debt to Equity 62X t3X 70X 71X 74X 72X 67X se% 52% 44% Asset Leverage 80X 79X 80X 79X 79X 77X 72X seX 69% 54% Self Flnancing/_.e -9X -11X 11% 12X 8% 8t% 112% 209% 258X 287%

/_a Average days on hand /_b 1985 million FMG revenue per employee /Ic Tons of cargo/employ. MidlIlion FMG's N.Not Income: Net CapitalExpenditures

November198B MADAGASCAR

PORTS REHABILITAXOlh rKUJzCT A- 5 10

1984 lITS MI00

ATSMr- rStEows- mDdT- AN" K1JA TOLIAY TOLAI4ARO MANM(ARA MAMW OREVA 3tOIeE MSY-GE V0EIM APTM4a SM@AvA TR IR At ETStHINV AALAVA Sr AlUS TFLTAL

PO.t 0Doe 3.907 3.189 2,754 1.344 873 610 439 250 3.416 5St 301 0 53 46 S.rth... Foos 64 60 1,324 19.046 4,236 5.142 4,159 4.909 3.258 2.306 5,442 484 3.771 451 4* 0 14 Cargo h" 64 340 414 4.3=6 41.363 dIlh Foos 7,76M 1.,564 7,036 1,977 2.962 509 5,723 764 20.436 1,427 315 64 32° 0 434 361 a #1.866 Passenger 0 12 0 0 0 0 0 0 2 0 0 0 0 0 0 P;loot. 3.0646 0 0 14 0 1o414 0 0 0 0 0 0 0 0 0 0 Cooc"oto 0 0 0 0o .060 X49,74? 95,220 24,582 0 354 0 3,768 0 16,319 5,735 0 0 0 0 332 0 7,134 204.99 loW.. U.-e..to 69,422 115,335 39.92S 8,230 7,44? 3.225 IS.372 1.690 45,944 0.131 461 64 392 112 seo 835 4,7eS4 S2.167

E.prwi tow,*

Staff 12.221 16,791 14,344 6.l86e 7.7s5 1,639 2,085 822 2,670 3.759 679 739 746 1.974 2,264 0 0 74,s4 S,.ppi 2.86s 2.875 2.856 1.133 1,395 739 s1 365 1.294 480 279 130 200 2m9 327 126 4.930 SW 16,343 4,930 74.01 4,375 292 1.316 645 48 632 2,631267 2.901 1,361 1.701 e-..rh. 1,55 2 A.665 09 S364 42.476 23,846 29.268 29,627 13.925 14,410 4,399 3.824 2.m 7.853 7.29S 4,595 2,655 3,247 4,532 5,092 1,233 907 £5,934 To1.4 Ep,p**" 43,872 53,854 54,506 25.619 26,442 8,093 7.035 4,09S 14,448 13,421 0,4S4 4.,6s b,974 0,338 9,366 2,232 1,669 292.337

Op.e'al.. Result 25.S50 61,2S5 (14.503) (17.389) (18,%") (4.660) 6,337 (2,397) 31,496 (5,290) (7,993) (4,021) (S,562) L.a. (8.226) (0.378) (1,397) 13.113 39*,63 Opfrc.atie 67,100 57,100 44,900 6,400 35,000 3,300 16,400 0 24,0D0 4,300 0 2,000 0 3.600 4,000 270,1D0

met 0 otpt;"i R 8 It (61,5S0) 4,1SI (S9,483) (23,789) (33,995) (6,168) (10.063) (2,397) 7,496 (9,590) (7,993) (4,821) (1.502) (6,226) (11.978) (1,397) 9.1t5 (20 o270)

R.q.i.ra Tariff so 70 -3 6% 149 0a 209 1 456 60 253.30 6555 141.202 -16.31 117.90 1733.6% 7532.6 1934.25 7344.61 3209.910 ltcre...* 167.31 -61.70 693

June 1986 - 97 -

Annex 5.11 Page 1 of 2

MADAGASCAR

PORTSREHABILITATION PROJECT Ex3lanation of Main Accounts

The sourcesof revenueof the port authorityare:

Entry feos, based on the tonnageof all ships exceeding50 tons deadweight,vary accordingto port.

Berthingfees, computedby the hour, accordingto lengthof vessel moored alongsidequays, or accordingto displacementtonnage when at anchorage;these also vary accordingto port.

Fees for vilotinaand tugboatservice are parceivedin a lump sum where the serviceis mandatory(Antsiranana, Toamasina, Toliara).

Cargo chargesare calculatedby the gross ton or by head of cattle,the dutiesat unloadingexceeding the chargesat loading by more than 502. Fees are also collectedon each passonger.

All the aforementionedfees havo been last revisedin 1979 (increaseof 302).

Rentals from concessions include:

- a rentalby the m2, which,maynot be modifiedduring the contractperiod,

- a fee based on a certainpercentage of the volume of businessof the contractingparty.

In ceztainports these revenuesamount to 50% - 75% of the total port revenues.

Expenses

Lxpensesare dividedir.to nine budgetheadings according to function,and a singleheading for investment.

Function 81 Personnel: salariesand entitlements 82 Miscellaneouspersonnel expenses 83 Equipmentand services 84 Materials 85 Port maintenance 86 Contributionsand subventions 87 Contingencies 88 Transportof personnel - 98 - Annex 5.11 Page 2 of 2

Capital 81 Capitaland investments

The total budget for expenditures in 1984 amountedto 364 million FMG, whereasthe revenuesdid not exceed292 millionsPMG.

The figuresfor the 1984 budget indicatethat the gap between revenuesand expensesfall mainly under two headings:

1. Perconnelexpenses, which were 28X below budget allocation under the two pertinentheadings.

2. Maintenancecosts, which were also 28X below the sums allocatedfor this purpose. This fact is indicativeof the operationaldifficulties experienced by the administration, particularlyif one considersthe unmet requirementsof maintenanceof ports installationsand equipment. - 99 -

MADAGASCARPORTS REHABILITATIONPROJECT Annex 5.12

Pro-formaPorts Budget

(millionFMG's)

1986 1987 1988 1989 1990 1991

Revenue 589 747 867- 972 1,088 1,201

Expenses

WorkingExpenses 319 353 393 '41 500 572

Depreciation

Existingassets 270 259 249 239 229 220 ProjectAssets 0 38 67 115 163 199

270 297 316 354 392 419

589 650 709 795 d92 991

CapitalRecovery 97 158 177 196 210 (@ 102 factor)

Tariff Increases In real terms 19.6% 9.3% 5.3% 4.9% 3.3% In currentterms 26.8% 16.1% 12.1% 11.9% 10.4% - 100 -

ANNEX 5.13 Page 1 of 1

MADAGASCAR

PORTS REHABILITATIONPROJECT

Pro-formsPorts buitaet Assumtions

1. Traffic (see Annex 4.3)

2. Inflation(see Annex 5.5)

3. Personnel. From 1986 on, personnelexpenses decrease by 4% less than the rate of inflation.

4. Other OperatinaExpenses. Increasein line with rate of inflation.

5. MaintenanceExpenses. The budgetallocation for maintenancewill increaseby 2002 over a periodof five years in real terms.

6. CapitalRecovery Factor. 10% p. a.

7. Depreciation. Straightline over the estimateduseful economic life. All civil works, infrastructuralworks, and equipment,are depreciatedby the Ports budget.

8. Overhead. Under this category,a share of the cost of operation of the centralservices in Antananarivo (takingthe inflationrate into account)has been includedin the operationscost of each port.

9. Revenues.It zas been assumedthat the revenueswill equal expenses.

November1986 I ' IBRD 195951

32- MADAGASCAR 12* PORTSREHABILITATION PROJECT Antsimnanu

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