R E S T R I C T E D
R ep o r t N 0o TO-250b
Public Disclosure Authorized This reportwas preparodfor u5e within tho Bank. It mcynot be publis'iod normay it be quotedas representino the Baonk'sviews. TFheBank accepts no rosponsibilityfor tho accuracyor completeness of tho contents of the report.
INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPNIENT Public Disclosure Authorized
APPRAISAL OF
THE
ISRAEL PORT DEVELOPMENT PROJECT Public Disclosure Authorized
August 25, 1960 Public Disclosure Authorized
Department of Technical Operations CURRENCY EQUIVALENTS
$U.S. 1 = IL1. 80 IL 1. 00 - $U.S. 0. 55 APPRAISAL OF T1h,EIS1-lJI:L PO'iT DBVELMOPI43NTPROJECT
Table of Content-s
S UA. i - ii I. INTRODUCTION 1
II. EXISTINGPORT SYSTEM 1 A. GeneralRurpose, Function, and ServiceAreas 1 B. Organization,V.anage-rent and labor 2 C. ExistingPort Facilities 2 D. Port Operations 5 E. Amountof Traffic 6 F. Rate Structurear.d Tariffs 6 G. PresentPort Finances 6 H. Earnings
III. PORT DEVELOPMENTPROGRAM 10 A. The TrafficOutlook 10 B. The Ten-YearProgram 1960/70 11
IV. THE PROJECT 12 A. General 12 B. PlannedNew Facilities 14 C. Constructionand ContractProcedures 15 D. EconomicJustification 16 E. ExpectedFinancial Results of Project 18 V. FUTUREPOAiT AUTHORITY 19 A. Establishmentof Authority 19 B. Facilitiesand Properties 19 C. FinancialAspects 20
VI. CONCLUSIONSAMD RZCOMk2KDATIONS 22
Table No. 1 ManpowerEmployed in Israel'sPrts - 1959 Table No. 2 Port of Haifa- Dry CargoTraff-:z - 1955-1959 Table No. 3 Dry Cargo Traffic,Ports of Jaffa and Tel Aviv, 1956-1959
Table No. 4 Dry Cargo Traffic, Port of Eilat - 1957-1959 Table NTo.5 Growthand Compositionof Dry CargoTraffic of Israel's Ports 1955-1959 Table No. 6 IncomeAccount of Israel'sPorts, 1954/55-1959/60 Table No. 7 Comparisonof 1959 with 1965 and 1970 Port Trafficby Commoditiesand Routing Table No. 8 Fixed Assets and W4orkingCapitai of Future Port Authorfity as of March 31, 1965 and 1970 Table No. 9 Punded Debt of Future Port Authority as of March 31,1965 & 1970 Table No. 10 Estimated Income Account of Port Authority for 1969/70 Appendix A The NTewPort of Ashdod
Map No. 1 Ports of Israel Map No, 2 Port of Ashdod APPRAISAL OF THE ISRAEL PORT DEV]LO?T1,CNTPROJECT
i. The Government of Israel has prepared a ten-year program of port development (a) to enlarge the countryts main port of Haifa, (b) to build a new port at Ashdod, and (c) to develop the port of Eilat. The first part of this program is to be executed in five years, by 1965, The proposed loan of US"27.5 million eauivalent (Ir 49.5 million) from the Bank would help to finance constructionof the port of Ashdod.
ii. The estimated total cost of the Ashdod port project is IT 98.4 mil- lion (us$54.7 million), includingworking capital and interest during construc- tion. Assuming that a loan is made by the Bank, the Government would assure the availability of the balance of the funds reql red, IT-L8.9 million eQuiv- alent to 1US%27.2million, to carry out the projec.,. Since thneforeign e:- change costs (including interest during consttr-uc:.on on the loan amount) w'ould total US$i8 million (I= 32.4 million), the remair:ler of US.Q)9.5million wculd be applied to local costs of construction, equipr.^nt and engineering.
iv. Foreign ex.-erts have advised the 11iinistry of Transport on -he KeSigA1 and layout of Ashdod port, and qualified consulting engineers are preparing de- tailed plans. The cost estimates are realistic. All major construction con- tracts will be awarded through international coinetitive bidding. Consulting engineers will supervise construction. The project is technically sound and well conceived, and the arrangements contemplated for its execution are satis- factory. The port should be ready to handle citrus in 1963 and be fuflly opera- tive (first phase) in 1965. v, On the basis of the 1965/66 traffic volume and a reasonable allowance for growth, present tariffs (with mninor adjustments), wages and prices the earnings of the new7 port of Ashdod wo-uld be sufficient to meet the debt service on a US.$27.5million Bank loan repayable at 5-3/L, Bank agrees that there should be a Port At.'.uotlty, The cond tions under which it ,Tould be establi-'v!ed,as well as the terms on vThichthe ezisting por'ufacil- ities would be transferred to it by the Gover,:ur.ent w,ill recuire the Bank'1 s agreement. It is expected that the Authority will be established early in 1961, when the Government would transfer to it (a) all eaxisting port facilities, (b) all port works in progress, and (c) responsibi-ity for existing contracts for the port developmentprogram. vii. T'e Government'spresen-t intention is to supply all construction funds and that the Authority should incur no debt (apart f'ron that of the pro- posed Bank loan, wlhich woul-d be mranAuthori ty obibation to the Government) for the development program. up to 1965. rT-eAuthority w,ould be expected to co,pen- sate the Government for the value of all capital assets acqui ed from it, the rate of payrm'ent to be related to the useful life of the asset, but the Goovern- ment has assured the Bank that it will draw no cash for interest or amortiza- tion on its investment until the port of Ashdod shall have been built, and thnat withdraials thereafter would be limited to afount.,3 consistent wTith the Author- ityts o-in needs. viii. Estimates of the earnings of the combined port system in 1965/66 (Haifa, Ashdod and Eilat) indicate that the Port Authority would have ample funds to service the Bank loan for Ashdod, that wjithin only a short time it could begin to amortize the Goverm¶entts investment at 6% interest over La yrears, the average useful life of the assets, and to retain adequate worldng capital. ix. The Ashdod project is suitable for a Bank loan of US$275 million equivalent. The Government would be the Borrower. A term of 25 years, in- cluding a five year period of grace, would be appropriate. I. Iti1T RODJCTION Israel Governmient'sReques-t to Bank 1. The Government of Israel is undertakLng a port developmnnt pro- grams Israel has seaports on the Mediterranean and the Red Sea (see 1Mlaa 1). A ten-year program has been prepared to enlarge the m.ain port of Haifa, build a new port at Aslidod, and develop the Red Sea port of Eilat. Planned expendituresfor th'eworks to be comnpletedand the operational equip- ment to be installed by Karch 31, 1965 would tot-albout US$81 million equiv- alent at the official rate of exchange. 20 The Bank is considering a loan of US!$27.5 million equivalent to help finance the construction of Ashdod to its planned capacity as of early 1965. The proposed loan is equal to about half the estimated project costs totalling some Us5%5 million equivalernt including interest during construction and initial working capital. Approximately a third of the costs, or an es- timated $j18Q0million, would be foreign exchange expenditure for goods, serv- ices, and financial charges. 3. The Governmenitwill establish a Port Authority to develop and operate the port system of Israel as a whole. Responsibilityfor the Ashdod works and for the management of the future port will be transferred to this Authority as soon. as it is established, probably no later than April 1, 1961l 4. 1 The project appraisal set forth in this report is based on the find- ings of a Bank Mission which visited Israel in March/April 19603 on subsequent discussionswith a Govermmentdelegation which came to the Bank, and on inform,- ation supplied by the GovernmentIsconsultants. II. EXISTING PORT SYSTEiM A. General Purpose, Function, and Service Areas 5. Haifa, Tel Aviv and Jaffa on the JMediterranean serve primarily for trade with Western countries, while Eilat on the Red Sea is a port for trace with Africa, Asia and the Far East. Haifa is a deep-water port of direct loading and discharge; it is protectedby a breakwater, completedin 1933, behind which ships can berth safely throughoutthe year. Tel Aviv and Jaffa are open-roadsteadlighterage ports, situated less than six km apart, about 100 km south of Haifa. There has been a port at Jaffa since Biblical times9 but Tel Aviv is a new port dating back to 19380 Eilat, at the head of the Gulf of Aqaba, is a deep-water port in service since November 1956. 6. Haifa is Israel's largest and best equipped port; it serves the whole country for imports of grains, industrial materials and heav,yequipment,a and is also the local port of the northern region (see Map 1). Tel Aviv and Jaffa are well situated to serve the central region, Israel's most densely po<--Uted and rapidly growing area, but have limited capacity. Eilat is pri- marily an outlet for potash, phosphates and cement from the southern region, -2- 7. The ports supplement each other; for example, during seasonal con- geE ±oi cargo can be diverted from Haifa to Tel Aviv/Jaffa, or vice versa, and at times of storm from Tel Aviv/Jaffa to Haifa. B. Organization,Management and Labor 8. The ports of Haifa, Jaffa and Eilat are owned by the Govern.wnt ard operated by the MKnistry of Transoort and Com%muaaications through a Division of Shipping and Ports in Jerusalem. The porG of Tel Aviv is owned by Marine Trust Ltd. - a private company three-fourths of whose shares are Governr.ent- owned, but is operated,for all practical purposes, like the public ports. 9e The Shipping and Ports Division is headed by a capable, efficient Director. He is assisted by Section Chiefs responsible for ports, shipping and other services, and by an Engineer for Harbors and Coasts. The level 5f administrative and operational efficiency is high, 10. Day-to-day operation of the ports is left to competent local Direc- tors. They are servedby efficient staffs responsible for the various functionsof management, accounting,engineering, harbor services, traffic, etc. 11. The longshore3 stevedoringard lighterageworkers at each port fCorM a permanent labor force organized in trade unions. About 3,000 men supplement- ed seasonallyby casual labor are normally er,mployedin this work (see Table 1); they are among the highest paid labor in Israel, and their productivity is equal to Western European standards. Management-laborrelations are good. C. Existing Port Facilities a) Haifa 12, The city of Haifa wit'Haifa Bay is the only natural indent in Israel's smooth coastline; t1he port is protected from southwesterly gales by Miount Carmel and from ncrthern gales by breakwaters. It can accom.odate 10 - 15deep-sea freighters of a maximum draughtof 33 feet. Normal tidal range is only 0,6 metters, Tankers can load and cLischarge through submarinepipelines offshore; there is also an oil dock within the main har- bor. 13- To the east of the main port -ties the small coastal harbor of Kishon, also protected by breakwaters,which is used as an auxiliary port to Haifa by lighters and other small craft up to 300 feet in length and 18 feet draught. 14. The present transit sheds provide covered storagel for about 34,000 tons of dry carg,o; this is supplemented oy 70,000 so. m. of ope:. storage space. The storage tarnks for the oil 2efinery near the port can -3- hold more than 4.0 millfon barrels; almost all -the crude oil is no; brmiEght in by an overland pipe-line sfrom2Uilat 0 WithJin ,he port area are a r.crn silo with storage facilities for 20,000 tons of grain- and a transit shed, sct aside for potash, of about 8,ooo tons capacity. C-utsi.d.cethe port area are ccld storage facilities for about 12,O0O tons. The port is -well-equippedwith cranes, forklift truck s, tracto r-`ra;ilers and conveyors for handling general cargo. There is also specialized equipment for discharging bulk graini and for loading b.ulk potash, Passengers are accopmodated at temporary facilities in a transit shed, There are th-ree privately-owned shipyards at the pot equipped to do most types of ship repair; they lhave the use of a modern 7,500 ton fioating dock owned by the port adidn,stration. -- ess than half of the inland traffic to and from Haifa is moved b- railway, mrorethan half by truck; the proportion of truck-hauLed cargo is .`ncreasing. The State Rail- ways' main line skirts the port, making it necessary for all road traffic to cross the rail track in order to get JI or out of the port area. This causes considerablecongestion on the access roads and streetse b) Tel Aviv and Jaffa illf~~ .1 u At each Port there is a s.a'l bas-infor lighters;the depth of water at each is less than three meters, Both have enough storage area, transit sheds and cargo-handlingequipment on shore, and enough harbor craft afloat, to be useful lighterage ports of limited capacity. Neither port has railway service. Ocean-going vessels have to anchor about a half mile offshore. During periods of heavy seas, which occur from *December to April, all lighter- age must stzdp, c) Bilat 16. Eilat is a natural deer.pwater port.> It is built on a coastal strip at the head of the Gulf of Aqaba, where the t-errain slopes steeply to a narrow beach shelving quickly to deep water. The maxi-nmumdifference between .igh and low water is 1.4 rm, There is no railway service; all cargo is brought to or carried from Eilat by trucks which cross the Negev. The port is es- sentially a single "T"'-headed pier capable of barthing two freightersvwith draught up to 30 feet, Tankers discharge crude oil at two offshore submarine pipelineswhich feed into a 16 inch diameter overland pipeline to the Haifa refinery about 300 km away, Covered storage capacity is inadequate 'but a new transit shed is being built,, Condition of Existing 1ort Facilities 17. The facilities of all the ports are well-maintainedand in a good state of repair. The entrance to Haifa port has been virtually free from siltationbut there are now signs that the built-in sard catchment area formed by the main breakwater is about full. Studies will soon be made to determine how best to remove the sand and prevent it from encroachingon the harbor entrance. 4- Do Port Operations 18. A11 ports are w;ell managed and efficiently operated. Modern cargo handling techniques are employed and mechanizedequipment is used extensively. Operations at the Mediterranean ports have to cos -with seasonal traffic. Haifa is the home port of Tsrael's merchant marine, Kishon the base of the Mediterranean fishing fleet+ 19. The Haifa port administration provildes for the pilotage, moving, berthing, shifting, fire fighting and salvage of ships, and repairs and main- tains all the Government-owned facilities such as the quays, sheds, and portal cranes. Stevedoring, lighterage and porterage are done by private cargo handling finrs which work urnder the contrcl of the port adrrLnist"ration. They own, operate and maintain their own lighters, mobile cranes, forklifts, etc. The facilities for handling bulk grain, potash and petroleum are owned, operated and maintained by the local silo, potash and refinery enterprise. Kishon Harbor, although Government property, is operated by a private cornces- sionaire. 20. Cargo at Haifa is palletized whenever practical and worked by fork- lift trucks and tractor-trailerunits; this equipment is used intensively. The tonnage of general cargo handled per foot length of quay, 600 tons a year, is among the highest in the world. Labor prcductivity is good. The turn- around time of ships averages about five days for an average loading or dis- charge of 2,200 tons of dry cargo; this is a good rate of dispatch. 21. The Haifa facilities are overtaxed} particularly during the citrus export season. As a result, ships are delayed awaiting berths, have to be moved frequently between berths, and the port s orage and wnrking areas are congested. The port is ncw comoelled to work oi.a two-shift basis all vhrough the year, and to make increasing use of lighterage during traf Pc pea1.s. The tourist season coincides with the neavies-t cargo movement3 the resulting oc- cupation of berths by large passenger ships for days at a time causes serious delays in the flow of goods. Haifa is now at the linit of its sustained wor.<- ing capacity and must have additional facilities. 223 All port services at Tel Aviv, Jaffa, and Eilat are provided by the port administration which also owrns all the handling equipment. Tel Aviv and Jaffa are inadequate, as exposed lighterage ports, for the growing traffic of their service area. They cannot be converted into deep-water ports of sufficient size for the followiing main reasons: i) Each port is surrounded by a built-up area which restricts landward expansion. ii) Geological conditions offshore are not favor- able for the economical construction of a deep-water port. - 5 - iii) There are no rail connectionsto Tel Aviv/Jaffa; road access is already difficultand any large Prowth of trade would create serious urban traffic problems. 23. The limited facilities at Eilat are auequate for -che present .3mall volume of traffic. E. Amount and Trvce of Traffic 24. Dry cargo traffic through Israel's ports has grown steadily over the past five years and now totals al-nost three million tons annually (see Tables 2 to 5), The Mediterranean ports handle about twice as large a volume of imports as of exports. Eilat has more export t'nanimport volume. 25. Traffic through the iYediterranean ports during the winter season (December to April) is almost twice as large as in any other season of the year. This is due to tle need to move all the itrus exoor';s in a few -onths; more ships call during this period, thus import 5 as well as exports increase substantially. 26. Haifa handles 85% of the country's seaborne trade and all the passenger traffic. Traffic has been increasing from 500,000 tons in 1933, when the port was opened, to over 2,400,000 tcns in 1959. The optimum. capaci- ty of the present port is estimated to be 2,100,000 tons of dry cargo per annum; the 1959 volume was reached only by uneconomic working. 27. Citrus is normally 40 - 50% of Haifa's export volume, but the pro- portion of cement, potash and phosphates has been increasing in recent years. Total exports have increased rapidly from 570,J"OO tons in 1955 to 930,C00 in 1959. Wheat and oilseeds are the largest of Hafals imports (50%) folLowed by sawn wood and logs, iron and steel, and some industrial raw materials. Imports now approximate1.5 million tons a year, 28. The auxiliary harbor at Kishon takes the overflow of trade from the main port. The Haifa port administration guarantees the Kishon concessionaire 100,000 tons of goods a year. Lighterage traffic to Kishon in 1959 rose to about 18,0CO tons of general cargo. 29. The present passenger traffic througnh Haifa is about 1CO,000 persons per year. The number fluctuates with the movement of immigrants, but tourist traffic has been growing steadily. 30. Traffic through Jaffa and Tel A4viv- is primarily inbound general cargo, but Jaffa also handles considerable city-s exports. The combired traffic of the two ports is 300,000 to 400,000 tons annually, which is beyond their optimum capacity, 31. Eilat's traffic is now about 130,0CO tons a year, predominantly export of cement, phosphates and potash. This is close to the full amount which could be handled efficiently with existing facilities. -6- F. Rate Struc.tures ard Tan.3.fs 32. The Ministry of Transport in consultationwith other interested ministries, fixes the port charges on ships and cargo. The same kinds of charges which are normally levied at ocean ports throughout -he world are also levied at the Israeli ports; (a) ships' dues for navigation,lights, anchorage, berthage, mooring, pilotage, etc.; (k) cargo-handlingcharges for stevedoring,porterage and li4ghterage;ard (c) various charges (on cargo) for the use of terminal facilities,mainly wharfage and storage dues. 33. MXuchthe same rate structure applies at all-the ports. It is de- signed partly to produce revenue for the port administrations, partly to pay cargo handlers the full cost of their services, and partly to encourage ex- ports. 34. Ships calling at the Israeli ports pay nominal dues compared with ships' dues in other countries. Import cargo pays materially higher han- dling charges, as a rule, than export cargo. Wharfage dues are assessed ad valorem at much higher rates for inports than eyports, as follows: Dry cargo imports: All ports except Tel Aviv 2%, c.i.f. Tel Aviv port 1%, c.i.f. Dry cargo exports: All ports 1/4.%,f.o.b. Crude oil imports 1/2%,c.i.f. 35. At Haifa, the porterage and lighterage charges as fixed by a pub- lic tariff are collectedby the port administration,vhich then pays the car- go-handlingfirms w,rhichdo the work, such fees, fixed by a contract scale, as would compensate them for their full costs. Stevedoring charges are collect- ed directly by the contractor,who pays to the %iinistryof Finance the differ- ence between the public tariff and the contract scale. 36. This system of chnargingfor cargo-handlingservices at one scale but paying the firms which do the work under another scale, is designed partly to produce revenue for the Haifa port administrationand partly to promote exports. The public tariff is materially higher than the contract scale for,most import commodities,but the cargo handler is ordinarily paid larger fees for working export goods than the amount which port administra- tion charges for the service. 37. The Jaffa, Tel Aviv and Eilat port admiristrationsperform cargo- handling work themselvesand collect the charges for their own account. G. Present Port Finances 38. GovernmaentPorts: Haifa and Jaffa ports were transferredto the Government debt-free when Israel became a state in 1948. All port works since 1948, including ccnstructionof Eilat, hava been firanced out of cap- ital provided by the Government. 39. ach port is eYxcTe&C to rain i's canital cost from revenue. Prior to 1953/59, the Haifa;,r, i.t.on pa d to the ;inistrj 0o i2ance, from revernue, the e AUivaClct 0'C t-- ;dQbt o-eOn all Ioaros incurred fo` the port plus an annuYal anoint re;cs3nting a r&-urn on the value of debt-free assets. 40. 1%w arranienets wor"e ^an i. %l95,/5; hereby the I4ini t-r oG Fi- rnance is paid (a) as i7terest 7,.an,>;-ally on tne value of all fi,-e assets at ori7inal cost less or vious : raents from iccat -evenue to amortize dCet -- curred for new const-uction, . . (b) as dcepnreci_7t on, an annual amrouln-tecual to service life depreciation or t,h re)laceaont value of the fixed assets. These payments are applied.q fjirst to the inte,r.-., and amortization of' I oaIns -ncurred for the port, arand-then to the gener:-a- p!.urposes of the Government Is current and capital bud gets. daddr these arrang3-ement,s the vidnistry wasapaicd about IT 3.4 million in 1958/596 II,rPil'l.:ns Pre-1948 plant at ori,Jinalcost 10 .0 1948/59 planntat origi.nalcos t 1. '.7 Storees Total 30.2tJ Less previous cap-ial 1reipaymments 9.3 Dasis for j- -- est chal-ge 20.9 Interest atO ? 1. 5 Depreciati on c1harg-es (Oil replacemntr value 1S Tot-al ' 41. The :Haia f'acilities are now,:bei r5nz rcevalued to det-ermine a ncw; basis for future interest a:;dde;,recia-v on charges. According to official eastimates, Hiaifa's reproductvio-2nI cost- new in 1959 was 831,5 millLon, equal to 5l59.7 million net of accrued ceoreciation, About I' 4 million of "ebtt, mainly the balance of the amount appl'fed to Hai_fa port wuor,ksout of a 1952 EBaimibank loan to tne Governm.ents is che only outstanding (inc irect) charge on the ea.ning power of these assets, 42. Apart from th..esm-all residue of silar (indirect ) charges arising from the 1952 Exi7br-.e'an:loan, t'e Jaffa invest.m.ent has beer, fully reinaid from port revenue. Eilat, a new n-ort, has incurred smpll start-up losses; no interest and depreciatiLon has yet been paid 4-othe IM.inistry. 43, The debt serv.rice w'hlich the 1MI.inist-ry of Finance nw rmakes gocd out of port administration reverue i s below,bown Haifa: 7Lri- (10•2/67) foa.r ec: ip:',i,enti anr stores p3.2 :iillion cacuivalent Cutstacic:iLng balance i_n1r 17960 $9.'J15rnllion Annual pa._yment of principal ', 265,000 Interest Ia'L Citrus i Larketi-n'- Boacd for construction of citrus wa.rehcuse i; 800,000 .A.mortizable ovcr a period of fouar years starting October 1960 Interest 5-1/2•7 Kishon Company JI: 440,0C0 for construction of a ware- house in ,{Kishon Harbor area Amortizable over a period of four years starting October 1960 interest 5-1/2,• Jaffa: labank (1952/63) $ 32L,179 equivalent Outstuanding balance April 1960 $ 133,677 Annual paymen.t of principal $ 33,419 Intearest 45 A1l the abor-e debt will have been repaid as of farch 31, 1965, except a residlue of us.QA0,o000ouu of an orig,inal jlSe`3.2rUllaon for the rort of Haifa from the proceeds of the Eximbank loan. 44. The ports' accounting system is shaped primarily to meet govern- mental budgetary requirements. The system is satisfactory for this p ruose and thne accounting work is well done. 45. Private Port: Ma_rine Trust Ltd., Tel Aviv, is a private conpany with II 3336,00 of paid-in capital. The ocvernment nowt owns 75;,of the sh'ares and the Eunicipality of Tel Av-_iv-ja-fLa another 5%A OTwership of the remaLnder is not knoun; the Government is buyi-ig all shares that come on the market. 46. Outstanding debt totals 11 300,000 ow-ed to banks plus IT 180,000 owied to the riovernment, -9- H. E arnings 47. Port earnLngs have been satisfactory. by and large 0 The income account of each port-for the nast few years -s suirmarized in Table 6. 48. The net revenu;e of the Haifa port administration from cargoc handling differentials has been dirmnishing for five years and its re- ceipts firom, the porterage and light,era;geof a nlmberof export gocds fall Short of its payments for the -vorIC to the handling firmis. AS a resulr of an inter-dinisterial study, the porterage anrd lizhterage charges at a1l oPortswere increased an avrerage IC', irnFebruary 1960; and action is noe, pencing to increase shipst dues C103va The h.igher handling charges shnou-ld increase the net revenue of the port adnini-it-rabions, but the Haifa ad- ministration would continue to pay out more than it collects for the handling of' various exports 0 The penCdinE increase in ships, dues would produce about Th 100,cco a year additional revenue for the present traf- fic volume at Haifa alone. 49. The Government appreciates the need for increasirg Sport rev- enue in order to be able to pay for port development without over-bu-rden- ing the public budget0 Toiwardthis end, it has recently increased cargo- handlimngcharges. as explained above, is planning to increase ship berthage dues as well, has giver, t-hought to introducing. -. Ashdod (; lien operati, ) and at Eilat (when enlarged) th_ system of cart -handling cmifferenti s which is now in use at Haifa, and has retainaed a consultant on port tarlif's whose recomm.endationsit is now considering. 50. The consultantfsmain recor.mmendationsare that (a) in lieu of cargo-handling differentiials, the handling firrms should be required to Day license fees plus suit-able chaes for their us_ of port-o-ned eouipmert and facilities; (b) present leases "or port-owred lands and structures should be renegotiated, as they expire, at higher rentals; (c) ship berth- age dues should be increased by the f-ullaaount which the Governmnentnowl has in mind; and (d) the ad valorem wharfage dues should be calculated for exports as well as importson the basis of eff t4ive forei n exchange rates. 51. The Government has indicated its reac iness to revise the struc- ture of port rates, within the near future, along the broad lines of ics consultant's reconimendations. This should inc-ease the net revenue of the port administrations as a whole at least 10 - 15jSfor the present traffic volume. 52. The accounts of the Government's por--s are audited by the Min- istry of Finance and the Stat e Controll' er. The auditors of M,1rarineTrusv Ltd., Tel Aviv, are Larti, IVilner and Rich, Inc., of Tel Aviv, a first class firm. - 10 - ='I. PORTL2`L0OGiT P?OG 1AN A. The Traffic Cutlook Gener-al 53. Exports and imports through the 1dtecitDrranean and Red Sea ports should ir.crease substantially during the next five to ten years. ThTe Governirnt has made detailed forecasts based on extensive studies of' the resources and needs of the natural service area of each port (see Niap 1), existing and potential sou-rces of production, nrnrketing prospects abroad, inland transportation distances, and the continuing development of an econ- omy that is making impressive gairs. 54. The export estinates are limited to cormmoditiesfor the produc- tion of which Israel enjoys a comparative advantage, such as clirtate and soil in the case of citrus, abundant raw- materials in the case of potash and phosphates, and technical know-how and skilled labor in the case of certain manufactures. The import estimates are related inter alia to ex- pected population growth, consumption trends and irport substitution. Export and Im=ort Esti.r,ates 55. The Government'sestimates of the growth of dry cargo traffic to 1963, 1965 and 1970 are summarized below: 1959 1963 1965 1970 000 I-9etricTons Actuals --- Estimates ------ Mediterranean 2,S44 3,070 3,675 4,,,4j50 Red Sea 131 550 975 1,5CO 2$975 3,620 4,650 5,95o Crude oil imports should also increase xiithout, however, occasioning any need to expand the existing facilities which are am.ple. 56. Of the expected traffic with Western countries through the Ned- iterranean ports in 1965, about 2.7 million tons would move via Haifa and 900,000 via Ashdod. Eilat, serving Africa, Asia and the Far East, would handle about one million tons yearly, An analysis by commoditiesand routing is shown in Table No. 7. 57. The traffic estimates to 1965 seem reasonable and those for 1970 possible of realizatiorn,provided no major event were to affect the development of Lsrael)strade. ?Ihe necessary production of citrus fruit to realize the 1965 traffic forecast is assured by the area now; planted with fruit bearing and maturiag trees. Fine qual!ty and the earlier ripening season of Jaffa oranges gives Israel's fruit a mnarketing advantage in 'ViTetern Europe, where almost the entire export crop is sold. Consum¢ptionthrcu-hout Europe should increase with higher living standa-ds. 58. Existing and notential world markets for potash and phosphate could absorb the forecast exports if production is increased. The Government has plans to exapnd production of potash frc,m the Dead Sea and phosphate from -the Negev. 59. The import traffic of Isreal's ports should develop proportionatiely with the growth of the economy. It consists of commodities essential to in- dustrial and agricultural production and for the subsistence of a growinc population. B. The Ten-Year Program 1960/70 60. As shc-n earlier, the present facilities at Haifa are overworwed. Tel kviv and Jaffa are functiona4ly inadequate, and Eilat is unequipped for any substantial increase in traffic. The Govern.nt has therefore prepared a ten-year development program, the total cost of which is estimated ac EJ 199.4 million (equivalent to US$110.8 million). This program is in two parts; first, definitely planned works to be carried out from 19601-965, and second, proposed works (at Lshdod and Eilat) fron 1966-1969 contingent on the actual growth of traffic. The planned works for 1960-1965 are mainly: Haifa: The constr-uctionof three to four additional berths, two transit sheds and a passenger terminal. Ashdod: The construction of a new por, with breakc-aters and an initial five berths plus storage facili- ties. Eilat: The constructionof three new berths and the provision of bulk loading equipment. 61. The works at Haifa would increase the port t s optimum working ca- pacity by approximately 650p000 tons a year. Ashdod, intended to replace Tel Aviv/Jaffa,should be able as of 1965 to handle at least 900,000 tons of dry cargo a year, of which one-third arould be citrus. Eilat., when, en- larged and equipped, would have a working capacity of a million tons a year, of which half would be in the form of potash ar. phosphate exports. - 12 - 62. The ports of Tel Aviv and Jaffa will continue in service until Ashdod comes into full operation in 1965. Tel Aviv port would then be closed while Jaffa would become a mere stand-by facility. No difficl ties are expected in dissolving Miarine Trust Ltd. Both Tel Aviv and Jaff a nay require the inves tment of small sums in the next few years for temporary structures and equipment which would later be transferred to Ashdod. TIhe amounts involved will not be charged to the port development program. 63. lThen the 1960/65 program is comoleted, each of the three main areas of Israel will be served by a well-equipped deep-water port (see Map 1). IV. TH PROJECT A. General 64. The project is the construction and equipment of Ashdod to its planned capacity as of 1965. Estimated construction costs excluding in- terest during construction would approximate IS 81 million, equivalent to Us$P45 million at the official rate. Of this, about US$11.5 million equivalentwould be foreign exchange for imported goods and services, and about US$30.7 million equivalentwould be for local currency for labor, materials, supplies, contractors,and engineering. Estimated ConstructionCosts Excluding Interest During Construction -US4$000 equivalent- Foreign Local Exchange Currency Total Construction of port works and related rail links 9,530 26,190 35,720 Purchase and installationof port operation equipment 2,050 4o0 2,l50 En- . ring design and super- vision 1,560 1,340 2,900 Sub-Total 13,1k) 27,930 41,070 Contingencies© 10% 1,310 2,790 4,100 -Total 14,450 30,720 45,170 I= 000 equivalent (26,010) (55,300) (81,310) - 13 - 65 The approximatephasing of the constri-ctionexpenaiture wozld be as follows: us5t 000 n coo Period equivalent equivalent September 1959 - March 1960 820C lgL80 1960/61 2,f200 3,960 1961/62 10.,l40 18,790 1962/63 11,870 21,365 1963/64 12,320 221l175 1964/65 6,000 10,8CO April - September 1965 15202 Total 15,170 81,310 66. The planned works woula take about five years to complete,thereby necessitating considerable expense for interest during construction. Being a new port, Ashdod will need initial working capi-'al as well as plant and equip- ment. The total cost of the project including interest during construction and working capitalwould approximateIS 98.4 million, equivalent to US4>O54.7 million. The foreign exchange costs, including US.Q305 million for interest during construction at a 5-3/4% on an assumed Bank loan of US$27.5 million, would total $18.0 million, or 33% of the total expenditure. Estimated Project Costs US$ million I; million Item equ.valent equivalent Port works, operating equipment and engineering 15.2 8103 Interest during construction 7.0 12.6 Sub-total 52.2 93,9 Initial working capital 2,5 4S 54,7 98.L Foreign exchdnge U8.0 32.4 Local currency 36.7 c6.o0 67. About 6% of the project costs, or some $3.3 million equivalent, would be expenditure for self-financing facilities - first, rail links to connect the port site with a construction quarry and second, lift trucks, tractors, and other mobile handlimng equipment. The rail links would become the property of the State Railway which would repay the Goverment construc- tion cost on terms designed to recover the full amount plus 6% interest over the useful life of the facilities. The handling equipment would be sold to cargo-handling firms on hire-purchase terms at 6% interest. - 14 - B. Planned New Pacilities 68. The historyof the project,natural conditions at the site, the essentials of the master plan, and particulars of the works and equipment are set forth in Appendix A which also gives an ana?ysis of the cost estimLates. The layoutof the new port and the phasingof constructionare illustraLedin Yap 2. 69. The main works to be comppleted and the main equipment to be in- stalled by early 1965 include(a) the full length (about 3.2 km) of all the breakwaters for the future port, (b) dredging within the porti area to proper depths for deep-sea ships; (c) wharves of a length to accomodate five s-uch ships at once, (d) track and roadway withinthe port area, and rail links out- side it to a constructionquarry, (e) severaltransit sheds for citrusfruit and generalcargo plus some paved open storageareas, (f) port utilitiesand auxiliarystructures, and (g) some harborcraft, cranes and mobileloading equipment. 70. About half the estimatedcost of Ashdodthrough early 1965 would be for the breakwaters.These have been designed for the much largerport facili- ties which might be neededas early as 1969/70if trade developsas eXpected by the Government. It is not,unreasonable to ex,pectrapid growthbecause the new port would not only serve the productive,grow,ing area now servedinade- quatelyby Tel Aviv/Jaffa,but would also be th3 nucleusof a plannedrew town with large industrialand residentialdistricts. 71. The cost estimaces which have been prepared I-ythe consultants for the project are realistic, They are based on current costs of materials, equipmentand services. They allowlG%o for contingencies over and above unit priceswhich also incorporatesome allowancefor contingencies. 72. Iabor costs in Israel are generally high because workers enjoy stard- ards of living comparable to those of Western Europe. However, wages are fixed at the present rates until January 1, 1961, and prices have been fairly steadysince 1 958. 73. Israelcan produceindigenously a la:gepart of thzeconstrucion materialsfor the project,and can supplyfrom its own engizeersand contrac- tors much of the neededservices. The 33% rat-.oof foreignexchange e;.pendi- ture to total projectcost is thereforelower than would normallybe found in Dank-financed port projects in under-developed countries. Financing of Pro.iect Costs 74. Of the project costs amounting to $54.7 million equivalent, the Government would finance 50% from the proposed Bank loan and the remaining 50% by reinvesting cash generated by the operation of Haifa port, by capital- izing interestduring constructicn, and by appropriationsfrom the development budget. 75. Port operationsat Haifa over the ne.t few years shouldyield a minimumof $15 millionequivalent which the Governmentintends to apply to the port developmentincluding Ashdod. - 15 - 76. Interesu during construction on the portion of the project costs to be financed from Government funds would aporo- .ate 'UShi3.5million equivalent. All such interest will be capitalized until Ashdod becomes fully operative in early 1905. 77. TEe Govern,ment is ready to appropriatefrom the developmentbdc,get whatever funds may be needed to complete the constructionof 1shdod to 'ts initial plarned capacity. Sufficient furds would therefore be available, to assure the completion of the project. 78. The proposed loan of $27.5 million exceeds the estimated fore.gn exchang.ecosts of $18.0 million. About $9.5 million of the proceeds would therefore be applied to the local currency costs of construction,equipment and engineeringestimated to total `30.7 million. EstimratedApplication of Loan Proceeds us;t OCO equivalent Foreign exchange component of payments to constructioncontractors 9'530 Purchase price and ocean freight of operational equipment 2,050 Foreign exchange component of engineering, design, tests and supervision 1,560 Sub-total 13,,14O Contingencies 1,310 Interest during constructionon requested loan 3,500 Foreign exchange costs 17,953 Local currency costs of construction equipment and engineering 9,550 Total 27,500 C. Constructionand Contract Procedures 791 The project has been carefullyrworked out and is technicallyuell conceived. Foreign experts have advised the Yvinistryof Transport on the design and layout of the new port, and qualified consulting engineers have been retained to prepare the detailed plans and specifications,andto advise on the award of contracts. 80. All the necessary land for the planned port as of early 1965 is already in the possession of the Government. The State Railways will start laying the track, within the next fe-wweeks, of a spur from the port to the main line and another spur from the main line to the constructionquarry; both service lines should be ready for traffic by early 1961. The plans and - 16 - spec½ _ationsof the breakwatersand dredgingare nearingcompletion. Ton- dezo for these works will be invited in the next few months, for th2 wharves by the end of the year, for the transit and citrus sheds early in 1(362, and for the paving, utilities and other structures and buildings late in 1962. 81. According to the consultant's constru stion schedule, which the Bank considers realistic, the new port should be ready to handle citrus fruit late in 1963, and would be fully operative early in 1965. The harbor craft, crares, lift trucks,tractors, and otherhandling equipment would be orderedin due time for this schedule. 82. The main contracts,those for the breakwater,wharves, and dredging, will be awardedto prequalifiedcontractors on the basis of internationalcom- petitive bidding. The tenders would be reviewedby a specialTender Board to be appointed by the Kinistry of Transport, which would be advised by the con- sulting engineers. All main items of operating equipment, such as the cranes, lift trucks and tractors, will also be procured by inviting internaticnal competitivebids. 83. Local contractorsselected through competitive bids will be used for constructionof the transitsheds, the port utilitiesand buildings,and other minorworks. 84. The Kinistryof Transportwill be responsiblefor carryingoUt the projectpending the establishmentof a Port Authoritywhich the Government plans to setiup as soon as practicable.The executionand progressof the work will be supervisedby the consultingengineers in cooperationwith the Ministry of Transport and Port Authority staff. 85. Satisfactory procedures have been used for planning and designing the new port, and the procedures which the Government has in mind for carrying out the project are satisfactory. The planned timing of construction is realistic. D. Econiic Jstification Necessity of Program 86. The expansion of the Mediterraneanand Red Sea portsto their plannedcapacity by 1965 is urgent. The IWediterraneanports are workingup to or beyondtheir optimumcapacity as measuredby the amountof trafficthey couldhandle without congestion or delay and at minimumexpense for cargo and ships. Eilat lacks the berths,loading equipment and storagefacilities for the largeamounts of potashand phosphatewhich would be movingto the port by 1965. 87. Accordingto officialtraffic forecasts which the Bank considers reasonable,the Israeliports would have to co e with 56% Lore dry carlo traf- fic by 1965/66 than at present. - 17 - Exnort TrInort 'PotfKl 000 cargo tons Forecast. lc,6-5/66, trafric 2,340 2,310 4,650 Estimate: 1959/60 traffic 1,130 1,845 2,975 Increase 1965/66 over 1959/60 1,210 465 675 Mtediterranean ports 640 275 c915 Eilat 570 190 760 Percent increase (total traffic) 107% 25% 56 88. M2ost of the increase (1.4 million tons out of a total of 1.7 .ni- lion) would be outbound citrus and mqanufactures, and inbound iron and steel, wood and pulp2 and wheat moving mainly throu-h >he Iediterraneanports, p'us outbound potash and phosphate movina mainly through Eilat. 89. Unit costs of cargo handling and ocean freight rates would increase considerablyif the futu,-e traffic had to be ha.adled with the present facili- ties. There could also be serious marketir, lossesfrom inability to sh'ip citrus fruit promptly. Eilatts present limitatLons could rstard the growth of potash and phosphate e-pcorts. 90. The port construction program up to 1965 is essentially a plan to provide additional capacity and more efficient Cacilities, so that the heavier traffic loads in sight can be handled economicallyand efficiently. Addition- al capacity may be needed soon there-after if traffic grows as expected by the Governmrent. Economic RetLUrn of Prcject 91. The minimum return to the Israel economy can be measured by relating the benefits for the 1965/66 traffic volume to the total project costs. - 18 - 93. The project costs total 1h 98.4 millioIn. The new facilitieswould have an average useful life of 40 years. The net benefits of I3 7.6 million a year would (a) amortize the total investment over 40 years and (b) return 7-1/2% on the investment. 94. The computed 7-1/2`Jreturn is an understatement. First, the pjanned facilities could handle at least 10% more traffi, than the forecast fo- 1965/66. The benefits attr-butableto the project would therefore increase materially with traffic growth. Second, the investment base includes the full cost of breakwatersof a size needed for a much larger port than the planned port of 1965. According to the depreciationschedules, aalf the breakwaterexpendi- tures might reasonably be treated as a ceferred cost of the planned port of 1969. 95. The project is economicallysound in terms of the need for the capac- ity to be provided, the potential traffic in sight, the cost of the facilities and their benefits to Israel. E. Expected Financial Results of Project 96. The new port as of 1965 should be able to generatefrom operations, over the useful life of the facilities, sufficient funds to meet debt service. On the basis of (a) 1965/c6 traffic volume as forecast by the Government; (b) a 10% allowance for traffic growth; (c) present tariffs (with minor ad- justments), wages and prices; and (d) productivity as improved (over Tel Aviv/ Jaffa) by the new facilities, the cash generation of Ashdod port per annum would be: Bn 000 Operating revenue 5,474 Hire-purchasereceipts (railway track and handling equipment) 619 Revenue 6,093 Working costs (before depreciation) 1,530 Cash generated by operation, 4,563 97. The cash generated, IS 4,563,000 a year, would (a) amortize the total investment of IS 98.4 million over 40 years, and (b) provide a return of almost 3-1/2% on the investment. 98. The debt service on a USp27.5 million Bank loan repayable in 20 years from 1965 at 5-3/4% interest would be IS 4,227,ooo per annum. This would absorb practically the entire amount of cash generated by operations attributable to the 1965 facilities. Only IB 340,000 a year would remain for renewals and repairs, for working capital to finance expansion of plant and equipmen'., and to reimburse the Government for its investment. 99. On the above shoTing, the financial return from the project would be low. Iowever, earnings would be larger than IS 4.6 million a year because the estimates do not give full effect to the Governmenttsdecision to make - 19 - effective the revision o0' Dort tariffs recomf,,ended by the Governmentœs consul- tant. Also, the investm:Dnt base on which the return is computed charges the project with the full cost of breaki-xaters fron t,he start of operat+ion.s. l00. The actual financial return shoUld thkrefore be higher than 3 1/2% but the resulting cover of debt sezrice would s.,ill be narrow. The Port Authority which the Government intends to estabLish would pool the net rev- enues of Ashdod with those cf Haifa and Eilat. "Isshown. below, these revenues would suffice to meet the debt service of the proposed loan by a wide margin. V. FUTUREPORT AUMHORITY A. Establishment of A-uthoritv 101. On the advice of consultants,the Government has decided to estab- lish, as soon as possible, a Port leuthoriyh wh-iJh WOUldtake over and oerate Haifa; Ashdod and Eilat pernmanently, and Tel viv and Jaffa as long as useful. Broadly, the Authoritywould be an autonomousp-iblic enterprise ema-poweredto formulate port development policy) to plan, finance and execute port works, and to manage anidoperate the ports. The enterprisewould be set up to be financiallyself-supporting, would be authorized to charge sufficientrates for this purpose, and would have wide powers to determineits tariffs and budgets. 102, The exact form, organization) duties and powers of the Autho-rity have not yet been decided. However, the Government has already appointed an inter-ministerialcommittee to draft a statute. It is expected that legislationwill be introduced in Knesset before the end of 1960, in which event the Authority could be establishedby early 1961. 103. The Bankagrees that a Port Authorit.r such as the consultantshave recomm.endedshould be established. Arrangementshave been made for consul- tation betweernthe Government and the Bank on thaecharter and regulations for the Port Authority, its powers,managemenc,resources and capital struc- ture, etc., and the terms under which the port properties Tould be trarsferred to it by the Government. The Bank's agreement on these matters will be required. A preliminarystatementof basic prirciples prepared by the Gov- ernment has already been discussedwith the Bank. 104. If a loan is made, the Governmentwould be the Borrower but suit- able arrangements would be made to transfer to the Authority the responsi- bility for completing the construction of Ashdod, and for meeting the debt service. B. Facilities and Properties 105. The Government will transfer to the Authority (a) all the present port facilities; (b) all port works in progress; and (c) the Government's interest in constructionand equipment contractsfor the port development program. - 20 - 106. The values at which these facilitiesand propertieswould be taken over have nlot yet been fixed. In principle, the take-over value of existing plant and equipm.ent would ber eplace.ment cost with allowance for accrued de- preciation, and the take-over value of the works in progress would be based on prior expenditure including capitalized interest during construction. C. Financial Aspects Development Progra.m to '965 107. It is the Governmentts intention that apart from the Banlcloan, the Authority should incur no debt or debt service charges for the port development program up to 1965, in any event, and possibly u. to 1969. A11 other corstruc- tion funds for the program would be provided by the Government itself by rein- vesting revenue generatedby port operationsand by approprictionsfrom the developmentbudget. 108. ALtthe start of operations,the new Authority would be indebted to the Government for an amount equivalent to the Bank loan plus the remaining balance of previous loans applied to port construction. The Authority would also be expected to compensate the Government for the take-ovrervalue of all facilities acquired from the Governmentand for the additionalinvestment cost of all facilities paid for by the Government. The period of repayment would depend on the useful life of the individual facilities; interest would be charged at rates equal to those paid by the Governmenton its internal borrowfings.However, the Government'sclaim to interest and amortization would be subordinate at all times to the debt service of the Bank loan, to any present Government debt assumed by the Authority, and to any future debt which the Authority might incur on its own credit. 109. The Government has assured the Bank that it will draw no cash for interest or amortization on its investment in the ports until Ashdod shall have been built to its planned 1965 capacity, and thaT, any cash withdrawals thereafter will be linited to amounts consistent with the Authority's burden of debt service, repair and renewal needs, and adequate working capital. 110. It was shown earlier that Ashdod as of 1965 should be able to pay the debt service of the Bank loan from revenue but that the cover would be very narrow. However, the Port Authority would then be operating, in additicn to Ashdod, (a) the port of Haifa as expanded, and (b) the port of Eilat as enla 0 4d and mechanizedfor bulk cargo. Haifa, Ashdod and 3ilat would form a coordinated port syste-m, and the thlree ports should therefore be treated as a single entity for the purpose of assessing the ability of the Port Authority to service the debt incurred for the A3hdod projec E. This ca] u- lation should take into account the total plant and equipment of the future port system, the total revenue and expense of all three ports, and the total financial charges of the Port Authority. 111. The tables below show the cover of debt service from the operations of the port system for two different years; 1965766, for which it is assumed that total traffic will be 4.5 millicn tons, somewhat short of the plamned capacity; and 1969/70, or earlier, when Haifa will be operating at capacity, and Ashdod and Eilat should have experienced a 10% traffic growth without additional investment. - 21 - Haif a-Ashdod-Eilat (or earlier) -- I000-Th -- Operatingrevenue 25,870 27,660 Hire-purchase receiDts (railway track and handling equipment) 850 550 Revenue 26b,720 2T,30 Workingexpenses (before depreciation) 12,700 12 700 Cash generatedby operationsand availablefor debt service 114,,020 15,830 Debt serviceof Barnkloan for Ashdod 42230 LZ2L Balancefor amortizirgGovernment investment,for expansion,renewal.s, workingcapital, etc. 9,790 .11,600 112, The balanceafter debt servicewould providethe Authoritywith ample funds;from the beginningit would be able to make some retu-rnto the Goverrnmenton its investmzntand withina shortwhile it shouldbe able to begin amortizingthis investmentat nullrate over LO years at 6% interest, and retainadequate working capital, m. 000 Estimatedinvestment cost of projectplus plannedworks at Haifa and Eilat l145,200 Subtract: equivalentof requestedBank loan 4s95co Governmentinvestment for port developmentprogram 95,700 Estimatedtake-over value of Haifa and Lilat 50J500 TotalGovernment investment 146,200 Required(1) to amortizeGovernmentts investment over 40 years,and (2) pay 6% interest 9,720 113. The cash flow positionis satisfactory,but thereis the question of the financialreturn. Calculationsshow thav the net operatingrevenue (afterdepreciation and beforeinterest charges) would yic1d a r.tur, of 6.6r on tho net fiod acactsat Mefrch 31, 1970. 22 _ Longer-Range Progr=- - ?eyon%d I°65 ll4 The second part of the ten-year pi;wram which covers proposed works from 1966-1969 is contingent on th e actual growth of traffic. Implenentation would cost about U; 540 2 million at, present pr_ces, including workcing capital and interest duiinz constractforn. Tne qlestion i3 whsther the Authority wJould have sufficient earning powier from the larger investw.ent as from 1969/70 if 'hese plans, which concern Ashdod and Eilat, were carried out. 115, The net fixed assets and permanent working capital of the Authority wiould approximate IT 210 million as of Narch 31, 1970 (see '2able 8) and the Governmerntts total investment is estim.ated at IS 185.5 million (see Table 9). 116. On the basis of conservativeincome and expense forecasts for oper- ations in the year 1969/70 at the traffic level forecast of 5,9 million tons (Table10), the retiznon net fixed assetswould be 5.6%; interestcharges would be earned 5.2 times; debt servicewould be covered 4.5 times; and the return on the Government'sinvestment would be 5e9%. 117. The Authority would therefore be financiallyviable, Since the Gov- ernment intends to adopt in substance the recommr.endationsmade by its con- sultant on port tariffs, the earning power and financial strength of the Port Authority would be greater than indicated above. Set Aside of ForeignExchange Revenue 118. If a Bank loan is made, the charges on ships and cargo paya'blein foreign exchange would be set aside for its debt service. The present volume of traffic through Israel's ports generates annual foreign exchange payments for ships' dues and stevedoringequal to the full debt service of the re- quested loan. VI, CONCLUSIONSAIMD RECOXIENDATIONS 119e The project is economically and technically sound, and the Port Authority which the Government intends to establish would be appropriate for the efficient developrment and management of Israel's ports. 120. The amount of the requested loans,USt27.5 million equivalent, is reasonable for the cost of the project, and the debt service could be met, by a wide margin, out of the operating revenue of the Authority. 121. The project is suitable for a Bank loan to the full amount of the request, but there should be restrictionson disbursementsuntil the Port Authority is actually established. 122. Considering the useful life of the facilities,and the expected earning power of the Port Authority, a 25 year loan, including a 5 year period of grac, Vrou2Abe arpproDrinto. TAiE 'iO. 1 IS,iL~ALPORT DE-LVZO?0..i',TPAO.ECT Manpower Ey-n-oloyedin Israel's lDorts- 195Q Haila Jaffa Tel Aviv Eilat Total Admninistration,storekeeping and accountancy staff 259 57 31 32 4L29 Cargo department 153 _ - - 153 Sea department 139 _ _ _ 13S Engineering department 211 - - - 211 Security and surveillance staff 145 20 23 15 203 Firemen 25 - - - 25 Stevedores, mechanical operators and porters 1,306 203 302 48 1,859 Lightermen 70 104 127 10 321 iaintenance staff 130 54 70 29 283 Passenger launch service 140 - _ - 140 Total permanent staff 2L573C 35 603 _134 37_5I Casual lacor up to 400 100 100 50 650 M`dximummanpower employed 2,978 538 703 184 4,403 TABTF N'CO.2 IS:3I,EL PLO7-FTDEV:EJLO?MJiT FRCJECT BO0270' FiAI-A Dry Ca-rgo Wai?2ico Port of Ifaifa, 7Q5-19,9 1/ (1,000 Tons) Comrmodity 195 1956 1.57 22f l Imoorts 1. Grain and oilseeds discharged in bualk 445 419 530 633 710 2. Bagged cargo 159 114 126 128 132 3. Iron and steel 104 119 109 101 116 4. Sawn wood 67 31 113 67 lo1 5. Wooden logs 52 41 44 50 57 6. Barrels and drums 45 54 49 43 55 7. Minerals in bulk 71 48 40 44 54 8. Boxboards for citrus fruit 28 16 22 27 33 9. Coal and coke 20 29 32 26 30 10. Seed cakes in bulk 10 18 10 14 2, 11. Cargo in paper bags 1)4 11 20 1] 13 12, Frozen cargo 22 23 14 29 6 13. Liquid chemicals and liquefied gases ;n bulk - - - - 4 14. Copra 9 9 13 6 - 15. Other commodities 137 163 144 138 160 Total Imports 1,183 1,145 1,266 1,320 1,496 Exports 1. Citrus fruit 270 311 327 304 368 2. Cement in paper bags 156 191 180 123 202 3. Phosphates, copper, cement and Kaolin in bulk 40 34 33 64 91 4. Potash in bulk by conveyor - - 72 65 90 5. Hard w,fheatin bulk - 25 5 16 6. Bagged fertilizers 14 25 15 23 12 7. Bagged groundnuts, potatoes, etc. 5 6 14 8 10 8. Liquid chemicals and edible oils in bulk - - - - 8 9. Scrap iron 19 17 22 - 4 10. Pyrites slag - 12 - - - 11. Sulphuric acid in bulk 24 3 - - - 12. Other cargo loaded (2) )42 58 67 86 129 Total Exports 570 662 755 673 930 Total Cargo Handled 1,753 1,807 2,021 1,998 2,420 1/ Oils and shinst supplies are not included in this table. (2) Lncl.: citrus fruit products, tomato and other preserves, bottled i-rLne, bananas, eggs, ply-vood, insulating boards, corrugated cardboard, tires, sheet glass, motor cars, etc. TABLE.'.0. 3 ISRJ1EL PORT DE3L0PTEINT PROJECT Dry Cargo raffic, Ports of Jaffa and Tel Aviv, 1956-1959, (1,000 Tons) 1956 1957 1958 1959 JAhFA Exports uthTiTs 58 72 73 Scrap metals - 6 5 1 General cargo 3 1 1 1 Total E)qorts b o7 Irorts ffr'ains 23 33 16 17 Sugar 14 11 - - Other Lood 5 1 8 2 Timber 18 5 7 8 Iron, steel and tin plate 38 30 22 28 Chemicals 16 16 10 15 Paper and cardboard - 2 7 7 Not specified 36 33 28 30 Total I.ports 1 5 130 -r07107 Jaffa-Total Exports & Inports 216 186 176 182 TEL AVIV ERports 1 1 2 3 Imports Grains 48 4.2 19 4 Sugar 12 8 22 20 Other food 5 6 6 6 Wood 12 -2 11 12 Steel, iron and tin 39 37 47 49 Fertilizers and chemicals 36 18 18 24 Paper 5 10 12 11 Not specified 36 36 9 49 Total Imports 19 19 0215 267 Tel Aviv-Total Exports & IWports 194 170 186 218 ThBLEII0. 1, ISRLEL PORT JLELOP:IZN? PR4WJECT Dry Cargo Traffic, Port of Eilat 1957-19959 (1,000 Tons) 1957 1958 1959 Exports Cement 17 '5 35 Potash - - 20 Phosphates - - 11 Others 3 25 Total Exports 20 28 91 Imports Grains and seeds 16 20 24 Ccffee 1 2 L4 Not specified 8 6 12 Total Imports 25 28 140 Combined Total Imports and Exports )5 6 131 TABIENO. 5 IS>IAEL PO.RTD:noLOPI0NT P1'.0j-CT Growth and Co=nosition of Dryr Cargo Traffic of Israel t s Ports 1955-1959 -.1,000 Tons) 1955 1956 1957 1958 1959 ExDorts Citrus fruit 329 367 38g 377 448 Potash 35 36 72 75 110 PhosDhates 25 32 30 60 96 Other rinerals - 2 3 4 -° Cement 150 1844 180 143 237 Industrialproducts 28 33 65 76 130 Agricultural products 15 17 28 25 49 Scrap and wastes 27 22 38 5 10 Unspecified 18 2L 1 15_ Li Total Exports 627 717 850 780 1),131 Imoorts Wheat 315 331 332 279 310 Oil seeds, fodder & chicken feed 264, 245 334 467 512 Other food items 149 126 126 153 142 Wood and pulp 215 206 226 215 245 Iron and steel 173 214 197 205 226 Raw materials, minerals & fertilizers 212 198 205 213 247 ivachine'y and paper 30 37 45 64 65 Unspecified 180 116 . S50 96 Total Imports 1.538 1.473 1,5 1654L1 LL TotialExports & Imports 2,165 2,190 2,395 2,421 2,974 The totals shown above are slightly different from the sum of individual port figures because the statisticsare in some instances based on the fiscal year, and in others on the calendar year. TABLBN4O. 6 T~~~~~ IS!7L PORT DERI5LOPFEITT EI0JBCT Inrz-o,eAccount of 7srael 1 s Pnrts, .5.1/55 954 56/57976 5-59 59/60 --I 000 ------(10 mos.) Haifa Revenuefrom cargo and passenger services 12.,367 13,011 13,976 14,032 14,447 14,398 Hevenuefrom ships'services 325 374 340 376 402 369 Other 1.L77 1,211 _1502 J)L8l 712 _1 5S 14,169 14,596 15,313 15,456 15,561 15,825 Expenses 7.8.62 7f5Q7 8;18l g3,& 10,317 .11.176 Net revenues 6,300 6,999 7,637 6,823 5,244 4,649 Interest 120 103 178 154 1,647 1,375 Repaymentof loans 30 477 466 .Refund on account of governmentts previous invest- ment, or depreci- ationallowance = 1,_00 2t045 2,,9L1 1.935 1,616 I.etincorne 4,233 5,061 4,937 3,262 1,662 1,658 Jaffa Re ---;_ 3,242 3,221 2,834 Expenses. 2796 _2925 Net incore 446 296 50 Nov56/TNiar 5 8 __ 5_ (11 mos.) Eilat Revenue 760 474 1,5CO Expenses 67L.. 549* 1.519* !;Ret income or (loss) 86 (75) (19) * No depreciation charged 1957 55/59 _,/60 (15 mos.) (11 imoS.) Tel Aviv Income 3,706 5,087 4,424 Expenses j676 5.,0 0 a259 Net income 30 47 165 TABLE7NIO. 7 ISRAEL PORT TEI,OP:'1i: tROJECT` Comparison of 1959 with 1965 and 1970 Port Traffic bZyCoymmodities and Routing Mediterranean _edR Sea Total 1959 1965 1970 1959 1965 1970 1959 1965 1970 ------000 Metric Tons ----- Citrus 448 700 900 - - - 448 700 9C0 Potash 90 200 250 20 350 600 110 550 850 Phosphates 85 50 150 11 1,0 250 96 200 400 Cement 202 250 250 35 -O 50 237 300 300 Iron ore, steel and coal 226 300 300 - - - 226 300 300 Grains and oilseeds 798 675 800 24 125 150 822 800 950 General cargo 995 jjf00 1.800 _4b 3,§0 450 L036 .800 2 2 0 Total Exports and Imports 2,844 3,675 4,450 131 9'75 1,500 2,975 4,650 5,950 .~.co~ .8 ~ ~ ~ ~ ~~~~T3 Fixed Assets and l,TorkirgCapital of Future Port Authority as of 1Iarch 31, 1965 and 1970 1965 1970 - l millions- Assets a/ a Pre 1960/61Plant 84.6 8L.6 1960/61-196h/65Fixed Assetsb/ 129.8 129.8 1965/66-1969/70c/ - 48.1 Ficed Assets at Cost 214.4 262.5 Permanent WiaJorkingCapital 6.6 9.2 Total 22'..0 271.7 Accrued Depreciation Pre 1960Plant 34,1 h44o6 NewPlant 11.6 34_1 56.2 Net Fixed Assets 180.3 206.3 PermanentWorking Capital 6.6 9t2 Total 221.0 271.7 a/ HaifaI' 81.5 millionreproductiion cost new as of i-arch1959 pricesplus budgetedinvestment of In 1.3 millionfor 1959/60 and Eilat It-1.8 million. b/ "TewTplant less railroadtrack andcargo handling equipment bought for the accountof others. c NNew plant less cargo handlingequipment bought for tlhe account of others. TABLI NO. 9 ISRAEL POcrT DIF;LTOPITP PROJECT Funded Debt of Future Port Authority as of M4arch 31, 1965 and 197J 1965 1970 - ZL;millions - Funded Debt Pre 1960/61 0.8 - 1960/61-1964/65 49.5 42.2 Sub Total 50.3 42.2 Government1 s In-vestment i4504 185e5 Total l95.7 227.7 Fixed Assets and VWorking Capital Net Fixed Assets and Permanent Working Capital 186.9 215.5 Value of New Plant (railroad track and cargo handling equipment) bought for the account of others 8.8 12.2 Total 195.7 227.7 Ratio of Debt to Net Fixed Assets and Permanent Working Capital 27% 20% TABLE i.T0. 10 ISRAEL PORT DEVTLrOPIE.TCPROJECT Estimated Income Account of Port Authority for 1969/70, Based on 5.9 milliontons (withno allowancefor traffic growth) and present tariffs with onl. ii,nor adjustrments. 1969 / 70 IL 000,000 1. Operating Revenue 31.7 2. Working Expenses 13 9 3. Balance 17.6 4. Depreciation 5e6 5. Net Operating Revenue 12.2 6. Hire-purchase Purchase Receipts (railway track and handling equipment) 103 7. Net Income before Fixed Charges 13 5 8, Interest on Funded Debt 2,6 90 Net Income 1009 Return on Net Fixed Assets and Permanent Working Capital 5.6% Times Interest Earned 5*2x Debt Service Covered 4.5x Yield on Governmenttsinvestment 5.9% Appendix A. ISRAEL PORT DE"rELOPi2NTPRjLO.ECT THE NEVWFORT OF ASHDOD General In 1952 the Central Planning Commission of the Ministry of the Interior recommendedthat any new Mediterraneanport should be located scme- where between Tel Aviv and the southern frontier. It has since been decided by the Government of Israel to construct - ne-wport at Ashdou at the site of that tow.n'sprojected industrialarea. The site is relatively barren with sand stretching from the seashore for several mi:es inland and is about 30 kmo south of Jaffa and some 120 km from Haifa (see Map No.1). The new toTl-nof Ashdod is planned ultimately to have a population of 160,000 with a first stage population of 50,000 by 1970. The water supply for the new town would come from ample, deep wells in the area. Adequa&e road and rail connections to the rest of Israel are to be provided as required and can be built without any physical difficulties. North of the new port site is Ashdod electrical benerating staticn, which was completed early in 1959, and is the third largest power station in the country. The cooling water basin of the station is formed behind a small breakwater offshore and, in the ultimate stage of development of the port, care will have to be taken to ensure that the proximity of the port structures to the cooling basin does not interferewith the operations of either. This is being investigatedby the LaboratoireCentrale dfHydrauliquede France at present. The presence of the power station will ensure a plentiful electricity supply for the new port. Natural Conditions Starting in 1957, extensivegeological and oceanographicstudies were carried out by the French LaboratoireCentrale dlHydrauliquede France and are being continued b- the iMinistryof Transport'sCoast Study Group in the area. The usual sand dune formation that is characteristicof Israel's long smooth coast line fades out in the Ashdod area and for about 2-1/2 miles, the coastal area is fairly flat for a width of half a mile, so forming a more favorable terrain for port and industrialdevelopment. The sand continues inland for some three miles thus lowering the value of the area for agricul- tural purposes. The port site consists of sand with stratified layers of sand-shell conglomerates. Offshore, the indicationsare of unstable conditions over a gradually sloping beach out to tlleeight meters contour but thereafter the sea-bed is flatter and conditions are stable. Like the rest of the coast of Israel the site is subject to a slight littoral drift of sand, but the conditions at Ashdod are better than can be found at any other suitable loca- tion along the Mediterraneancoast. The imperviousunderground strata that contain the subterranean water of the area have outcroppingsrising toward the sea so that, should piles or deep foundationspenetrate these water-holdinglayers, leakages or contaminationsare likelyto result with sericus effects on the future Apuendix A. Page 2. water supply of the region. This factor hias b9een taken into account in the siting on the ne-woporte The coast, hav-ng no natuLral protection on land or off-shore, is exposed to severe wave action fromi waves up to 8 m. in height. There are no strong ocean currents along the coast. Visibility is good at all seasons and winds seldom exceed 30 knots, with gusts up to 60 knots veloc- ity. The tidal range is sm.all varying only one meter betreen average high and low water. Tne Master Plan Frederick R1.Harris, Inc. of New York, were retained as consult- ing engineers and have prepared an approved master plan. The plan envis- ages an off-shore port comprising a basin protected by means of brealk.-aters, *sithfinger piers projecting into the sheltered wqater area (see 14ap ,IMo.2 ). To suit the cargo forecasts, the development is planned to take place in the following three phases: Phase I. - l960-65 - Construct main and lee breaktaaters with 2 citrus berths and 3 general cargo berths. Capacity 900,000 tons/year. (Shown in solid black line on liap MTo.2). Phase II.- 1966-70 - Further develop tihe port behind the break- waters by completing the first finger pier and construct three others for general and bulk cargo handling - total 16 berths. Capacity 2,500,000 tons/year (shotm in solid red line on Rlap .Jo.2). Phase III.- After 1970 - Extend the main and remove the lee break- water to the north and develop thie enclosed area with additional general cargo berths, Total 30 berths. Capacity over 4 million tons/year. (ShoTn in broken red line on IMap 2)2Jo. Generally spealcing, it is initially chseaper to build a harbor in- shore by diaging and dredging rather than to build off-shore and protect the enclosed water area by e-xensive breakwaters.Hows-ever this solution Twas not practical at Ashdod for the following reasons: (a) As mentioned above, the sinking of deep foundations in-shiore wTould interfere with the undergr und water suipply of the area; (b) A dredged channel leading to mn in-shore harbor wouald have to be cut across the flow of thae litzoral drift and wTould be sub- ject to heavy siltation and require expensive maintenance dredg- ing; and Appencix A. Page 3. (c) Storms usually come from the western quarter and the normal entrance to an in-shore harbor under such storm conditions would present very considerable navigational difficulties. lhe present plan for a new port at Ash&c I is well-conceived and has demonstrable advantages o.rer any alternative schli;.e. The balance between the quantities of "cut" and -fi11 is well maintained and none of the foundations will interfere with the underground water sources. The breakwaters should, with negligible maintenance, provide a safe, shel- tered water area not only for the immediate development but, without alter- ation, for all developments up to 1970. The harbor entrance should be nav- igable in all but extreme storm conditions and, subject to the results of hydraulic studies now in progress, it is considered very hopeful that the final breakwater shapes and locations will provide a port practically free from siltation. The Project The project, submitted for Bank-financLng,is the Phase I. develop- ment of the master plan. It entails the construction of the main and lee breakwaters, wharves, transit and citrus sheds, open storage areas, road and rail facilities and dredging. Model Tests Extensive hydraulic model tests are at present being conducted in two laboratories in France and some tests have been completed. The tests are to determine the best location for the breakwaters,their ability to withstand the worst storm conditionsand at all times afford maximum shelter to the port basin. The final results of all tests will be incorporatedin the detailed designs, but the preliminary findings are that the present plans and designswill require little if any modification. Details of the costs of the Phase I. project are given at the end of this Appendix and the various items are: A. The Breakwaters The main breakwaterwill be about 2,300 meters and curve offshore as shown on Map No. 2, to a depth of 15.5 meters. The lee breakwaterwill have a length of about 900 m. and will jut out of a depth of 11 m., the two roundheads forming an entrance to the port 220 m. wide and with a depth of 12 m, Both breakwaters will be constructed on the rubble-mound system with rock sizes ranging up to 10 tons each, armored with tetrapods ", up to 40 tons each on the sea-side slope. The main breakwater will be topped with a concrete wave deflector. Some 2-1/4 million tons of rock will be required for the breakwaters alone. B. Dredging and Wharves About 700,000 cu. m. of sand will have to be dredged to form the 12 m. deep entrance, the 11.7 m. deep turning circle, and provide 10 mn. ->/ A tetrapod is a French, patented type of concrete block used in sea- defence work. Annendi.x A. Page 4. depths alongside the berths. Dredged material ,,Tll be puiTed ashore and used for reclamation or bacl-filling work. The 9Lo0in. of wharves will be of concrete pile and cozicrete deck construction, complete wvith moorin.- a-ds and service ducts. The spacious citrus berths will contribute greatly to the smooth and speedy delivery to shipside of tho crated fruit during the four monthst season. C. Buildings and Structures 2\.o transit sheds of 8,000 and 10,000 sq. m. area wdill be con- structed on the citrus, wharf adjacent to the lee brealkwater. The general design and type of construction has not yet been finally determined nor has the mechanical citrus handling equiprment. Other structures will include paved areas for open storage of goods, administrative buildings maintenance and equipment shops, a road overpass across the port railways, a lighthouse and breakwater beaconls, a restaurant and the necessary fences, gatehouses and wyeighbridges, and two general car6o sheds. 1). Railways 'The railT-ray layout in the port and tlhe rail comnections to the State railfTay system were reconimmended by an expert of the French national railways. Each new berth wiill have a railway siding. A small holding- yard ii11lbe laid out inside the port area and a larger marsh&iing yard constructed some 3 km. along the track from the port. The connection wfith the main Ashqelon-Lydda line is about 6 km. long and the junction will be south of Yibna. Lydda is a very busy center and to avoid the added conges- tion of all rail traffic between Ashdod and the south passing through Lydda, it is proposed to build a 22 km. diversion comnecting Yibna with the line from Beersheba. This is not included in the port project. The nearest suitable quarry is situated 15 km. north of the port. It i rroposed to import all quarry materials 'oyrail and a 7 km. rail con- nection is to be laid to the quarry from the main line north of Lydda for this purpose. Approximately one million tons of material will be handled annually for the three years of construction, th.3reafter the rail connec- tion will be used for carrying ballasting material and supplying the Tel Aviv area. B. Utilities The cost of the electricalpower, telephone and fire alarm sys- tems are included under tihis heading, as vwell as the usual fresh-water bunkering, drainage, sewYageand hydrant services. F. General Construction Eouipment In additioin to the specialized equipment needed fo- the construc- tion of the breakw-yaters and for the dredging, some items of equip-ment wh'i-ch would require mostly to be purchased abroad,comprise this item. Included are 6 trucxs from 1-1/2 to 30 tons capacity, a service launch, a fuel supply barge, and a 50 ton lighter. ApDer.d-~A. G. Contractor's 7-enscs and Su-pervisi-on This connonent of the cost was based on contractors? overheads of 10, on labor, materials ard equipment, and on contractorst pro-fits of 5% on labor and materil s, Super-ision by quali:, ed staff over a five year period has been allowed 0 H. Plannin-g and Tests This headinrg covers the contract entered into with F. R. IHarris, Inc., consulting engiineers, New York, for the investigations, planninQ- and design of the iwork. The tests are those at present being carried o-ltby the two French hydraullic laboratories, Laboratoire Central d' Hydraulique de France and Sogreah. I. Operational Equipment In order to operate the new port with 1:Yo citrus berths plus tin three general cargo berths, the following land ard floating equiprent is required: Floating Equipment 1 - 80 hpn. service launch 1 - 125 hp. pilot launch 1 - 80 1-1p .- ,.ooring lauinch 1 - 800 hp. tug-cum-fire boat 1 -1500 hp. tug 1 - 50 tori lighter Land Equipment for Citrus Cargo 3 - 1-1/2 ton fork lift trucks 6 -2 It if 2 -3 2 - 5, It t 10 -60 " tractors 80 - 2 t trailers 20 -- 1000 -- pallets 2 -50 weighing maachines Land Equipment for General Cargo 6 - 5 ton portal cranes 10 - 1-1/2 It fork lift trucks 20 - 2 Ii tl It it 4j 3 iit 1t It 2 -5 t itlt 15 -60 " tractors 200 - 2 " trailers 30 - 5 "i 2500 pallets 2 - - portable conveyors 2 - 6 Il track cranes Anzr,rdix4. Page 6. J. Contingencies These cost est-nat-es are based on conservative unit prices -:I'-ich erbody a contingency al-lowanice and in add:ition an overall corntingency o-f lT% has been applied. The following tab2L lists the main headings of tim project and their estinated costs. Cost Stmrrary for Phase I. DBeplor, mnt -,960/65 Item Descri-tion Total A Brealkwaters 36,L,86 B DredgCing and wharves 9g,50 C Bmildings and structures L.,770 D RailwLays 2,218 . Utili tie s 1,368 F General construction equipment 150 G Contractors 1 expenses and supervision 7,5214 H Planning and tests 5,220 I Operational equipment 1, ,10 J ContLigencies 7,380 Tot al 81 ,306 In US.- 000 15,170 Map I PORTSOF ISRAEL X 7 R- WK .- de COAStf.igd LIB* GENERASEVCAREA F> J L k{W ~~~~~~~UAE - GUST 1960 IBRD-6841112