SECOND PORTS PROJECT Public Disclosure Authorized March 14, 1978
Total Page:16
File Type:pdf, Size:1020Kb
Document of FILE COPY The World Bank FOR OFFICIAL USE ONLY Public Disclosure Authorized Report No.P-2255-CY REPORTAND RECOMMENDATION OF THE PRESIDENT OF THE Public Disclosure Authorized INTERNATIONALBANK FOR RECONSTRUCTIONAND DEVELOPMENT TO THE EXECUTIVEDIRECTORS ON A PROPOSED LOAN TO THE CYPRUS PORTS AUTHORITY Public Disclosure Authorized WITH THE GUARANTEEOF THE REPUBLIC OF CYPRUS FOR A SECOND PORTS PROJECT Public Disclosure Authorized March 14, 1978 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 (As of January 1, 1978) Currency Unit = Cyprus Pound (LC) (1,000 Milliemes) US$1.00 = SC 0.40 US$1.0 million = LC 400,000 EC 1.00 = US$2.50 EC 1.0 million = US$2,500,000 Fiscal Year - January 1 to December 31 ABBREVIATIONS CPA - Cyprus Ports Authority (formerly Cyprus Ports Organization) DCA - Department of Civil Aviation LBI - Louis Berger International, Inc. MCW - Ministry of Communications and Works PWD - Public Works Department FOR OFFICIAL USE ONLY CYPRUS LIMASSOL AND LARNACA PORTS EXPANSION PROJECT LOAN AND PROJECT SUMIARY Borrower: Cyprus Ports Authority Guarantor: Republic of Cyprus Amount: $8.5 million Terms: 15 years, including three years of grace, at 7.45 percent per annum. Project Project provides for expansion of port facilities at Limassol Description: and Larnaca as well as technical assistance, including the following: (1) At Limassol: Construction of about 480 m of quay, 11 m in depth, with two berths for container vessels, one for passenger ships and a roll-on roll-off ramp; paving and surfacing of roads, open storage and parking areas in the port area; construction of transit sheds, warehouses, passenger terminal, port administration and ancilliary buildings; provision of utility services for expanded facilities, including water supply, electricity, drain- age, sewerage, etc.; purchase of cargo handling, con- tainer handling, and workshop equipment. (2) At Larnaca: Construction of a transit shed, baggage hall, port administration building and ancilliary build- ing; paving and surfacing of open storage and parking areas in the port area; and provision of utility ser- vices for expanded facilities, including water supply, electricity, drainage, sewerage, etc.; purchase of cargo handling and workshop equipment. (3) Technical Assistance: Consulting services for (a) engi- neering design and supervision of all civil works at both ports; (b) assisting CPA to improve management and opera- tional policies and procedures; and (c) for training of CPA personnel. Project Objectives: To relieve congestion at the ports of Limassol and Larnaca and to accommodate future traffic growth at these ports up to 1983; to improve the management and operational efficiency of the Cyprus Ports Authority; to introduce new technology in the form of specialized container cargo handling equipment, and to create employment opportunities. This document hasa restricteddistribution and may be used by recipientsonly in the performance of their official duties. Its contents may not otherwise be disclosedwithout World Bank authorization. - ii - Risks: The project provides for sufficient port facilities to cope with forecast traffic up to 1983 at minimum cost and accords with an investment policy which minimizes risks since it takes account of the possibility that other ports might become available. Project Costs: Local Foreign Total % of Project Costs ------US$ million------ 1. Limassol 7.24 10.82 18.06 61.00 (a) Civil Works 7.12 7.74 14.86 50.00 (b) Equipment 0.12 3.08 3.20 11.00 2. Larnaca 1.58 1.87 3.45 12.00 (a) Civil Works 1.58 1.12 2.70 (b) Equipment - 0.75 0.75 3. Consultants and Training 0.30 1.20 1.50 5.00 4. Contingencies 2.96 3.50 6.46 22.00 (a) Physical 1.43 1.55 2.98 10.00 (b) Price 1.53 1.95 3.48 12.00 5. Total 12.08 17.39 29.47 100.00 Financing Plan: Local Foreign Total ----- US$ million------ % IBRD - 8.50 8.50 29.00 Internally generated funds 12.08 - 12.08 41.00 Other (suppliers credits and through Government) - 8.89 8.89 30.00 Total 12.08 17.39 29.47 100.00 Estimated Disbursements: FY79 FY80 FY81 FY82 ----- … US$ million--------- Annual 1.4 3.4 2.9 0.8 Cumulative 1.4 4.8 7.7 8.5 Rate of Return: 31 percent Staff Appraisal Report: No. 1861b-CY, dated March 7, 1978 INTERNATIONAL BANK FOR RECONSTRUCTIONAND DEVELOPMENT REPORT AND RECOMMENDATIONOF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN TO THE CYPRUSPORTS AUTHORITY WITH THE GUARANTEEOF THE REPUBLIC OF CYPRUS FOR A SECOND PORTS PROJECT 1. I submit the following Report and Recommendation on a proposed loan to the CyprusPorts Authority, with the guarantee of the Republic of Cyprus, for the equivalent of $8.5 million to help finance a second ports project. The loan would have a term of fifteen years, including three years of grace, with interest at 7.45 percent per annum. PART I - THE ECONOMY 2. The last economic report on Cyprus (1151-CY) was circulated to the Executive Directors in May 1976. The Country Economist who visited Cyprus in April 1977 to update the information and analysis, also visited the economically important areas in the northern part of the island and held discussions with Turkish Cypriot officials. Since sufficient reliable data are still not available for the northern area, it is only possible to review adequately the economic situation and prospects for the southern Government- controlled part of the island. Findings of the April 1977 visit are reflected herein. General Background 3. Cyprus' economy grew at 7 percent per annum between 1960 and 1972, despite tension between t:heGreek Cypriot and Turkish Cypriot communities. The major contributing factors to this growth were: a competent Government, dynamic entrepreneurs, a high rate of investment especially in the private sector, a rapid increase in agricultural exports contributing to strong over- all balance of payments, and flexible fiscal and monetary policies, which helped to stimulate growth while maintaining domestic price stability. * 4. The unprecedented drought of 1973 caused serious economic difficul- ties, and subsequently the events of July/August 1974 shattered the growing economy. Since then, Cyprus has been divided into two parts by a cease-fire line, with little movement of people or goods between them. The southern part, under the Government's control, constitutes 64 percent of the area of the island; the northern part, 36 percent of the land area, is under Turkish Cypriot control. About one-third of the total population was displaced, with over 150,000 Greek Cypriots moving south and approximately 45,000 Turkish Cypriots moving north. 'he displaced population has, in good part, been resettled with humanitarian assistance provided largely through the UN. In 1976, the Government-controlled area had an estimated 480,000 people; with 150,000 in the area under Turkish Cypriot control. Pending an island-wide political solution based on the principle of federation, the Turkish Federated State of Cyprus was proclaimed in February 1975. UN-sponsored intercommunal talks towards such a possible solution have been held intermittently, but have so far not been productive. With new initiatives recently undertaken by UN Secretary General Waldheim, such talks are scheduled to resume shortly. 5. The division of Cyprus into two zones has resulted in significant structural changes and difficulties for the island's economy. Immediately following the events of July/August, 1974, GNP per capita dropped by some 19 percent and the unemployment rate jumped to approximately 25 percent of the labor force in the Government-controlled area. The northern part of the island also faced a similar loss in income and increase in unemployment. The balance of payments position also suffered as both exports and imports of the area under Government control fell by about 55 percent in the second half of 1974. The drop in export earnings in the Government-controlled area reflected the loss of over 47 percent of Cyprus' cultivated land area in the north (including areas which produced over half the Island's agricultural exports), but which have only partially been exploited since 1974 by the Turkish Cypriots. Recent Developments 6. The Government, through bold measures, succeeded in arresting and, in 1976, reversing the economic decline in the area it controls. In August 1975, it consolidated initial and new measures for economic recovery into an Emergency Economic Action Plan for 1975 and 1976. This Plan called for fixed investment of $275 million to create 16,000 to 20,000 new jobs, and efforts to reactivate industry and agriculture. In industry, it aimed at a major revival of industrial activity, through the creation of additional capacity in labor- intensive, export-oriented industries to rehabilitate the available labor force, and increase the utilization of existing capital. These efforts led to a rapid recovery of GDP and employment in 1975, from their very depressed levels at the end of 1974. The Cypriots were also successful in earning foreign exchange and obtaining significant employment opportunities abroad by winning construction contracts in the Middle East. In addition, the inflow of refugee aid reached $57 million. Despite these improvements, the balance of payments remained in deficit and reserves fell to the equivalent of six months' imports of goods and services. 7. There was a further strong export-led recovery in 1976, with a revival of private sector confidence and initiative stimulated by Government fiscal policies and direct investment in rehabilitating and expanding produc- tive capacity. GDP increased by 14 percent in real terms, a remarkable achievement, with value added in both agriculture and industry up 20 percent.