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CYPRUS Public Disclosure Authorized Document of The World Bank FOR OFFICIAL USE ONLY Public Disclosure Authorized Report No. 186 lb-CY STAFF APPRAISAL REPORT Public Disclosure Authorized SECOND PORTS PROJECT CYPRUS Public Disclosure Authorized March 7, 1978 Public Disclosure Authorized Europe, Middle East and North 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. CURRENCYEQUIVALENTS (AS OF JANUARY 1, 1978) Currency Unit = Cyprus Pound (EC) (1,000 Milliemes) US$1.00 E£C 0.40 US$1.0 million E£C 400,000 £C 1.00 = US$2.50 £C 1.0 million = US$2,500,000 WEIGHTS AND MEASURES Metric British/US 1 meter (m) = 3.28 feet (ft) 1 kilometer (km) = 0.62 miles 1 kilogram (kg) = 2.20 pounds (lbs) GLOSSARY OF ABBREVIATIONS MCW - Ministry of Communications and Works PWD - Public Works Department DCA - Department of Civil Aviation CPA - Cyprus Ports Authority (formerly Cyprus Ports Organization) LBI - Louis Berger International, Inc. RPT - Rendel, Palmer & Tritton CP - Coode and Partners NRT - Net Registered Tonnage DWT - Deadweight Tonnage GDP - Gross Domestic Product MILS - Milliemes REPUBLIC OF CYPRUS FISCAL YEAR January 1 to December 31 FOR OFFICIAL USE ONLY STAFF APPRAISAL REPORT SECOND PORTS PROJECT REPUBLIC OF CYPRUS Table of Contents Page No. I. THE TRANSPORT SECTOR ...........................................1 A. The Transport System ........ 1..................... B. Transportation Policy, Planning and Coordination.. 1 C. The Ports and Port Planning ................... 2 D. Previous Bank Group Transport Sector Operations in Cyprus .......... 3 II. THE PROJECT PORTS ..................................... 3 A. General .......................................... 3 B. Port Facilities at Limassol and Larnaca .......... 4 C. Port Administration ..... ............... 5 D. Operations ....... .................. 7 E. Finance, Accounting and Audit .................... 7 III. THE INVESTMENT PLAN AND THE PROJECT ..... .............. 9 A. The Port Investment Program .... ............. 9 B. Project Objectives, Dimensions and Timing ........ 10 C. Project Description .............................. 11 D. Engineering Evaluation ............. .. ............ 12 E. Cost Estimates ................. .. ................ 16 F. Financing Plan .. ...... ....... .. 18 G. Project Execution, Supervision and Reporting ..... 19 H. Procurement and Disbursement .......... .. ......... 20 I. Environmental Impact ........................... 21 J. Impact on Employment ................ ............. 22 IV. ECONOMIC EVALUATION ......... .......................... 22 A. General ....... ............... .................... 22 B. Traffic Analysis ..................................... 22 C. Project Benefits ................................. 28 D. Economic Costs of the Project .................... 30 E. Economic Return and Sensitivity Analysis ........ 31 This documenthas a restricteddistribution and may be usedby recipientsonly in the performance of their officialduties. Its contentsmay not otherwisebe disclosedwithout World Bankauthorization. Table of Contents (Continued) Page No. V. FINANCIAL EVALUATION ............................ 32 A. General * ** *** ** ** *** ** *** ** ** **............*.*......32 B. Forecast Financial Performance (1977-1986) ....... 34 C. Financial Covenants- ...... .. .. 36 VI. AGREEMENTS REACHED AND RECOMMENDATIONS ................. 37 ANNEX Documents Available in Project File 39 MAPS Republic of Cyprus - IBRD 13170R2 Port of Limassol - IBRD 13172R2 Port of Larnaca - IBRD 13171R1 This report is based on information provided by the Cyprus Ports Authority, on consultants' studies and on the findings of an appraisal mission in September 1977 composed of Messrs. J. Burns (Senior Financial Analyst), G. Unda (Engineer) and P. Nichols (Consultant Economist). I. THE TRANSPORT SECTOR A. The Transport System 1.01 Cyprus has an area of 9,251 km2, 64% being agricultural land of which about four fifths is cultivated. The main geographical features of the island are two east-west mountain ranges (Kyrenia and Troodos) which cover about half its area, separated by a broad central plain. The foothills of the mountain ranges and the central plain are the principal cultivated areas. This configuration facilitates east-west transport but is an impedi- ment to north-south transport. 1.02 The transportation system in Cyprus prior to the 1974 events was reasonably balanced, comprising roads, ports, airports and a limited amount of coastal shipping. The 1974 events, however, resulted in significant dis- ruptions to the transport sector. There is little movement between the southern and northern parts of the island, although this situation could improve if and when an island-wide political situation is found. 1.03 Since the 1974 events, the Government has undertaken to improve the essential parts of the transport system to make existing facilities to serve the economic needs of the area it controls. With the closing of the Nicosia Airport (it is now under United Nations control), the Government has extended the airport runway at Larnaca to accommodate medium- and long-range jet aircraft so as to reestablish international communications with southern Cyprus. 1.04 As Cyprus has no railway system, highways are of critical importance. The highway network radiates from the capital, Nicosia, to the main coastal centers, Limassol and Larnaca, and to the hinterland. The total network of national highways for the southern area makes up 1,472 km, about 90% of which are paved and the remainder gravel-surfaced. B. Transportation Policy, Planning and Coordination 1.05 The Planning Bureau centralized economic planning for the Government integrating development plans for all sectors including transportation. The events of 1974 interrupted implementation of the third Five-Year Plan (1972-76) which has since been replaced by the first and second Emergency Economic Action Plans (1975-76 and 1977-78). After the disruptions of 1974, the Government concentrated on immediate transportation needs but it is now beginning to focus on long-term planning. 1.06 The organization of the Transport Sector follows the pre-July 1974 framework. The Ministry of Communications and Works (MCW) through its Departments of Public Works (PWD) and of Civil Aviation (DCA) is responsible for main roads and airports, the Cyprus Ports Authority (CPA) for ports, and the Ministry of Interior, the Forestry Department of the Mlinistryof Agri- culture and the Municipalities for the remaining roads. 1.07 The Government regulates public passenger and freight transport under the Motor Transport Regulation Law of 1974 as amended; the law is ad- ministered by the semi-independent Licensing Authority and by the Licensing Department in MCW. The Government controls fares and schedules for public transport routes and imports of buses and trucks. These controls and regula- tions are administered flexibly and there is competition in the industry. C. The Ports and Port Planning (Map IBRD 13170R2) 1.08 Until July 1974, the main general cargo port in Cyprus was Famagusta; in 1973 it handled over 80% of the total traffic passing through Cyprus ports. Next in importance were the ports of Limassol and Larnaca both located on the south coast, 55 miles and 23 miles from Nicosia. Two other ports, Paphos in the southwest and Kyrenia on the north coast, handled onlj minimal amounts of traffic. 1.09 There are also two privately-operated mineral exporting ports - Karavostassi and Vassiliko/Zyyi; the first is on the northwest coast and the latter on the south coast between Limassol and Larnaca. Oil imports are handled at an offshore terminal at Larnaca. 1.10 As a result of the events of July 1974, general cargo ports of Famagusta and Kyrenia and the mineral port of Karavostassi are under Turkish control. This led to the entire traffic for Cyprus being handled through the ports of Limassol and Larnaca totalling some 2.3 million tons in 1976 compared with 1.8 million tons in 1973 (including Famagusta). 1.11 The ports of Limassol and Larnaca were developed during the period 1970-1974 (the former with Bank assistance) to provide berthage and equipment sufficient to meet a forecast traffic demand of some 600,000 tons by 1978 (against 2.3 million tons handled in 1976). 1.12 These two ports are capable of considerable development beyond the then planned capacity. Further studies for their expansion were undertaken in 1975 by Louis Berger, Inc. (USA) financed under the Highway Loan (904-CY) who also examined in 1976 the feasibility of developing the port of Paphos. 1.13 The proposed project for the ports of Limassol and Larnaca is intended to meet traffic demands until 1986/87. The Project also provides for the continuation of institution building initiated in the first ports project which was delayed by the events of 1974 and which is now more than ever essen- tial to ensure that CPA's management and operational capabilities continue to develop in keeping with the growth of the ports now and in the future. Further investment in port facilities will be kept under review and the Government and CPA have agreed not to undertake except with the Bank's agreement any major investments in port facilities unless they are justified by all appropriate financial and economic criteria. The proposed port developments at Paphos to which the Government is already committed are exempted from these restrictions. -3- D. Previous Bank
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