DOCUMENTOF INTERNATIONALBANK FOR RECONSTRUCTIONAND DEVELOPMENT INTERNATIONALDEVELOPMENT ASSOCIATION NotFor Putblic Use FILECopY Public Disclosure Authorized
ReportNo. 93a-AF
Public Disclosure Authorized APPRAISAL OF
AN AVIATION PROJECT
AFGHANISTAN Public Disclosure Authorized
April 5, 1973
TransportationDivision
Public Disclosure Authorized Projects Department Europe, Middle East, and North Africa Regional Office
This report was preparedfor official use only by the BankGroup. It may not be published,quoted or cited withoutBank Group authorization. The Bank Groupdoes not accept responsibilityfor the accuracy or completeness of the report. CURRENCYEQUrVALENTS
CurrencyUnit - Afghani(Af) US$0.0125 Af 1 US$1.OO- Af 80 US$12,500 Af 1 million
SYSTEMOF WEIGHTSAND MEASURES : METRIC
Metric System British/US System
1 kilometer (km) a 0.62 mile (mi) 1 meter (m) 2 3.28 feet (ft) 1 metricton (m ton) = 2,204.60pounds (lb)
ACRONYMSAND ABBREVIATIONS
AAA - AfghanAir Authority ANS - Air NavigationServices ATO - AfghanTourist Organization FTC - FlightInformation Center ICAO - InternationalCivil Aviation Organization STOL - ShortTake-off and landing uS - UnitedStates USSR - Union SovietSocialist Republics HF - High Frequency VHF - Very High Frequency
ROYALGOVERNMENT OF AFGHANISTAN FISCALYFAR
March22 - March21 APPRAISAL OF AN AVIATION PROJECT
AFGHANISTAN
CONTENTS
Page No.
SUM1ARY ...... i
I. INTRODUCTION ...... 1
II. THE TRMNSPORT SECTOR ...... 1
III. CIVIL AVIATION ...... 2
A. Background ...... 2 B. Flight Information and Air Traffic Control Services 3 C. Administration ...... 4 D. International Airports ...... 5 E. Domestic Airports ...... 6
IV. THE PROJECT ...... 7
A. Description ...... 7 B. Cost Estimates ...... 9 C. Execution ...... 11 D. Financing ...... 11 E. Disbursements ...... 13
V. ECONOMIC EVALUATION ...... 13
A. Introduction ...... 13 B. Traffic Forecasts ...... 14 C. Costs ...... 15 D. Benefits .15 E. Economic Return ...... 16
VI. FINANCIAL EVALUATION ...... 16
A. Existing Situation ...... 16 B. User Charges and Financial Objectives ...... 16 C. Future Earnings and Financial Position ...... 17
VII. RECOMMENDATIONS ...... 19
This report was prepared by Messrs. W.B.R. Zetterstrom (Aviation Engineer), B.B.M. Bostrom (Economist), D.C. Elliott (Section Chief), and D.D. Singh (Economist) all of the Association. -2-
CONTENTS (Continued)
ANNEXES
1. Equipment to be Purchased for Kabul Flight InformationCenter 2. EstimatedSchedule of Disbursements 3. Economic Evaluation 4. FinancialAssumptions TABLES
1. Estimated and Projected Operating Results of Air Navigation Services, FY70-80 2. Air Navigation Services - ComparativeBalance Sheets 3. Estimated and Projected Cash Flow of Air Navigation Services, FY70-80
MAPS
Transport Facilities in Aghanistan- IBRD 3367 AfghanistanAirways System - IBRD 3368R APPRAISAL OF AN AVIATION PROJECT
AFGHANISTAN
SUMMARY
i. This report appraises an aviation project in Afghanistan, for which an IDA Credit of US$2.5 million equivalentis proposed. Afghanistan is a land-locked and extremely mountainous country, which has no railtways and only a very small amount of river traffic. Although the road transport system is far from adequate, it provides the principalmode of internal and internationaltransport. However, the difficult mountainous terrain, the low proportior.of the total road network which is paved, the effects of the inclementweather on unpaved roads, and the scattered pattern of the country's predominantlyrural population combine to produce conditions in which air transport plays an increasinglyimportant complementaryrole in the country's domestic transport system. Internationalair services provide an essential link between this remote country and the developedworld, and are the only realistic means by which its considerableattractions could be made available to the growing internationaltourist market.
ii. This would be the second transportationproject in Afghanistan to be financed by the Bank Group. The project consists of three parts: A. investmentsin flight informationfacilities for civil aviation (US$1.5 million), B. organizationalchanges and technicalassistance to improve the civil air navigation services in Afghanistan (IJS$700,000), and C. studies and engineeringwork for additional airport capacity to serve the Kabul area (US$900,000). The foreign exchange component of this US$3.1 million project is estimated to be 80% or US$2.5 million equivalent,and would be financed by this IDA Credit.
iii. The project would establish, no later than the end of 1973, Air Navigation Services (ANS), a separate entity with its own charter, to have general responsibilityfor the provision of civil air navigation,air traffic control and air communicationservices in Afghanistan. ANS would be run on a commercialbasis and would be responsible to the Afghan Air Authority (AAA).
iv. The Credit would be made to the Afghan Government,which would make it available,with the US$600,000 equivalent local costs, to the AAA for the purposes of the project. AAA would be responsible for the project, but would transfer responsibilityfor parts A. and B. of the project to ANS when it is established. The funds attributable to parts A. and B. of the project would be treated as a loan, repayable by AN'Sto the Government over 12 years (includinga two-year grace period) at an interest rate of 7 1/4% per annum. Repaymentswould begin in 1976. Funds for part C would be provided as a grant by the Government to AAA.
v. The construction,and procurement and installationof equipment involved in part A. of the project are likely to be carried out under a single contract, which will be awarded under internationalcompetitive - ii - bidding. The design, engineering and supervisionof this work will be under- taken by consultants. Since improvements in flight information services are a matter of considerableurgency, the Government is currently in the process of appointing consultants for this work. Retroactive financing for these consultants services,which is expected to involve less than US$50,000, has been requested by the Government and is included in the Credit. vi. Part C of the project would also be undertaken by consultants. It consists of (a) preliminary engineeringand economic studies of new airport facilities for Kabul, and (b) final engineering for these facilities. The final engineeringwould only be financed by this Credit if, after (a) above is completed, the Government and the Association agree that the final engineer- ing is justified at that stage. vii. The improvementsin the flight information and air traffic control services resulting from the project will justify increases in the charges paid for them by foreign and domestic airlines. As the present rates will not be sufficient to cover the cost of operations, it is recommendedthat they be raised to levels which would make the provision of these services financiallyself-sufficient. The revenues from increased charge to foreign airlines are direct incrementalbenefits to the Afghan economy arising from the project, and these benefits alone give the project an economic return of 12%.
viii. It is recommended that a Credit for US$2.5 million be made to the Royal Kingdom of Afghanistan on the usual terms. APPRAISAL OF AN AVIATION PROJECT
AFGHANISTAN
I. INTRODUCTION
1.01 In 1969, the Royal Government of Afghanistan asked the Association to review its proposed expansion program for Kabul airport. An identifica- tion mission, wqhichvisited the country in November 1969, recognized the economic priority of further developing civil aviation in Afghanistan as well as the neeed for improvementsin civil aviation facilities. In particular, improvementsin air navigation services were seen to be urgently required. Consequently,a US$3.1 million project has been prepared with the two objec- tives of improving the Flight Information and Air Traffic Control services in Afghanistan,and of assessing the airport capacity needs for the Kabul area. The proposed IDA Credit would finance the 30% foreign exchange component of this project, which amounts to US$2.5 million.
1.02 This report is based on the findings of an October/November1970 appraisal mission composed of Messrs. W.B.R. Zetterstrom (Aviation Engineer) and B.B.M. Bostrom (Economist)of the Association and Mr. B. Rollins (FinancialAnalyst), a consultant,as well as on the findings of updating missions by Mr. Zetterstromin July 1972 and bv Mr. D.C. Elliott (Section Chief) in November 1972.
II. THE TRANSPORT SECTOR
2.01 Afghanistan is a land-lockedand mountainous country. Nearly a half of its area of 635,000 km2 is more than 1,800 m above sea level, with several peaks exceeding 7,000 m. The 725 km Hindu Kush mountain range cuts a broad swathe across the country, separating the fertile northern agricul- tural plain and the arid deserts which make up most of the south. The country's population, estimated to be about 14.6 million and growing at about 2% per annum, is predominantlyrural and widely dispersed. It has been estimated that only 1.1 million of the total population live in urban areas with over 20,000 inhabitants,and that some 435,000 of these urban dwellers live in the capital city of Kabul.
2.02 Map IBRD 3367 shows transport facilities in Afghanistan. Road transport is the principal means of internationaland domestic movement, with air transport playing an increasinglyimportant complementaryrole. No railways exist because the mountainous terrain makes constructionextremely difficult and expensive and because the volume of bulk products for long distance hauls is very small.
2.03 The need to link the principal river basin agriculturalareas, in which all the major population centers are located, has led to development of a roughly circular road system. Primary roads run around the Hindu Kush - 2 -
range, parallel to the borders of the country, and spurs extend to neighbor- a ing countries. About 3,200 km of primary roads exist, of which about 2,500 km have paved all-weather surfaces. In addition, there are some 14,000 km of other roads and motorable tracks, of which about 10,000 km have gravel and improved earth surfaces. Heavy rain often washes away road sections and erodes surfaces,making movement difficult. There is about one motor vehicle to every 500 persons in the country and two-thirds of the vehicle fleet consists of trucks or buses. Animals, mainly camels, carry much traffic, particularlyon routes not yet served by roads. The size of the road system is inadequate for the country's needs, but the most immediate requirementis for improved maintenance of existing roads rather than expan- sion of the system.
2.04 The only significantwater transport is on the Amu Darya River, which runs along the border with the Union of Soviet Socialist Republics (USSR). The river carries about 150,000 m tons annually including some internationaltraffic with the USSR. A pipeline carries gas to the USSR.
2.05 The civil aviation system is described in Chapter III.
III. CIVIL AVIATION
A. Background
3.01 Afghanistan's civil air transport system has largely been developed over the last 15 years with American and Russian aid. It now contains 20 airports and airstrips of which Kabul, with more than 2/3 of all inter- national and domestic passenger movements, is by far the most important. Six other airports each handle more than 2,000 passengers a year, of which one, Kandahar, is also an internationalairport. Ariana Afghan Airlines, which is jointly owned by the Government and Pan American Airlines, and six foreign airlines connect Afghanistanwith 11 cities in 8 foreign countries. A second Afghan airline, Bakhtar, was set up in 1968 to provide feeder services to remote areas. In 1971, it took over all of Ariana's domestic routes.
3.02 Air transporthas an obvious role to play in a land-lockedmountai- nous country such as Afghanistanin which the population is widely scattered over a large area. Moreover, because of Afghanistan'sremoteness from the major tourist generating countries of the developedworld, aviation is the only realisticmeans by which the country's considerableattractions could be made accessible to the growing and lucrative internationalmass tourist market.
3.03 The vital importance of air transport to the economic and social developmentof the country was not explicitly recognized until the early 1950's. In 1952, the InternationalCivil Aviation Organization(ICAO) -3 - establisheda Technical AssistanceMission in Kabul, and it formulatedthe country's initial requirementsin an Air Transport Project, which was launched in 1955 and took over 10 years to complete. This project called for the constructionof two internationalairports (Kabul and Kandahar) and four domestic all-weatherairports (Herat,Kunduz, Mazar-i-Sharifand Jalalabad) to serve the main cities in the country. In addition, it includ- ed the establishmentof a system of air routes, the acquisition of communica- tion and navigationalequipment required to operate such a system, as well as the reorganizationof the national airline and of the administrationof civil aviation. Most of the initial requirementsidentified by this project were met by 1968, with the help of bilateral aid, principallyfrom the United States (US). Between 1956 and 1968, the US contributedover US$22 million to Afghanistan for aviation projects, including the constructionof Kandahar InternationalAirport and four domestic airports, and for technical assistance. The USSR built Kabul airport at a cost of about US$6.5 million and provided technicalassistance and training in the USSR.
3.04 Afghanistan is located on an important junction in the airways system for intercontinentaltravel. The existing and proposed air routes over Afghan territoryare illustratedin Map IBRD 3368R. The most important of these is the east-west route, along the Tehran-New Delhi axis, which is i-ollowedby a stream of flights from Europe and the Middle East to South and Southeast Asia. In 1970, some 4,800 foreign civil aircraft flew over Afghanistan without landing in the country and paid charges for the use of Afghan airspace.
B. Flight Information and Air Traffic Control Services
3.05 Officially, all the airspace over Afghanistan is under the control of the Royal Afghan Air Force (RAAF), but a network of air corridors has been established into an airways system for civilian use, which is admin- istered by civilian authorities. The safe and efficient operation of an airways system requires sophisticatedradio equipment and skilled manpower to provide informationand to control continuouslythe movement of aircraft along the establishedroutes to their destinationairports in the country, or, in the case of overflying aircraft, to the airspace of neighboring countries. For this purpose, a Flight Information center (FIC) was establish- ed at Kandahar as part of the 1955 Air Transport Project.
3.06 liowever,the communicationsequipment in the existing FIC is now largely obsolete and unserviceable. Consequently,the center is unable to secure positive and continuouscontrol of aircraft in Afghan airspace in accordance with InstrumentFlight Rule (IFR) separation standards. The pilots of overflying aircraft are hence obliged to ensure their own separa- tion from other operating aircraft; to do this, they have to rely on visual sightings and on the limited and often unreliable information service provided by the existing FIC. The provision of a continuouspositive IFR separation service is an urgent necessity and is strongly urged by ICAO. - 4 -
Moreover, the existing FIC is unable, because of its inadequateequipment, X to communicate satisfactorilywith FIC's adjacent countries and to provide and receive appropriate advance notices for the transference of control of aircraft. These are serious deficienciesin Afghanistan's aviation infra- structure, which need to be rectified expeditiously,if safe movement of civilian aircraft in Afghanistan's air corridors is to continue.
3.07 Since almost all of the equipment at the FIC needs to be replaced, and since it is necessary to continue using it to provide limited services until the new equipment is operational,re-equiping it will provide an apt opportunityto relocate the center, with little additional cost, at Kabul where the Afghan Air Authority has its headquarters. This would improve supervisionand enable better manpower utilizationby providing a larger concentrationof the relevant techniciansat one location.
C. Administration
3.08 The administrationof the civil airways system and the provision of the air navigation services it requires are the responsibilityof a non- ministerial autonomous government organization,the Afghan Air Authority (AAA) which was set up under the 1955 Air Transport Project (para. 3.03). The AAA is responsible for Afghanistan's civil airports, for the regulation of its airline industry and for the provision of meteorologicalservices. It has also been responsible for the direct management and operation of the Government--owneddomestic airline, Bakhtar, since its establishment in 1968. Although Ariana Airlines is organized as a distinct entity with its own accounts, sub-management,pay scales, etc., it is very closely connected with the AAM, with which it shares a common President and headquarter offices. The President of the AAA, as head of the Afghan Tourist Organization (ATO) also deals with all matters relating to tourism in Afghanistan. The ATO receives no funds from the state budget but is entirely supported by the earnings of its commercial arm, Afghantours,which operates tours, rents vehicles and manages hotels. Afghantours and Bakhtar airlines each have their own operationalpersonnel, but share some administrativeservices with civil aviation administrationfunctions within the AMA.
3.09 The growth in the functions centered on the AAA, the wide interests of its President, and the need for clearer definition and increased delega- tion of responsibilitiesin the existing organizationstructure are giving rise to serious and pressing problems for the air navigation and traffic control aspects of administeringcivil aviation in Afghanistan. These pro- blems are aggravated by inadequate procedures of operating and maintaining air traffic control communicationsfacilities; methods of procurement and warehousing in particular need substantial improvement. Moreover, as the AAA does not operate a modern cost accounting system, management lacks the control data to efficientlyoperate and maintain its air navigation facil- ities. Further, the existing system of remuneration,with low civil service pay scales and progressionbased exclusivelyon longevity,makes it difficult -5- to attract and retain the highly skilled techniciansrequired in air naviga- tion services. An important part of this proposed project is designed to overcome the above problems by organizationaland administrativechanges, and by technicalassistance (paras. 4.06 and 4.09).
3.10 A potentiallydangerous situation arises when it is necessary for non-civilianaircraft to use civilian airspace. Assurances have been obtained from the Government that it will take all the necessary steps to enable civil aviation to enjoy the safe use of its designated airspace, and that adequate notice will be provided to the civilian air authorities each time civilian airspace is to be used by non-civilianaircraft.
D. InternationalAirports
3.11 Internationalaviation in Afghanistan is very much centered on Kabul airport, which was opened in 1962. By 1964 it was handling 30,000 internationalpassengers; this rose to 55,500 by 1969. A sample survey conducted in 1969 showed that 22% of internationalpassengers at Kabul were Afghans, 44% were foreigners resident in Afghanistan and that 34% were foreign visitors. By 1972, the number of internationalpassengers handled at Kabul rose to 87,000. The volume of internationaltraffic at Kandahar is much lower: the passengers it handled, consisting mainly of Haj pilgrims and of passengers joining outbound Ariana flights to Europe, rose from 3,900 in 1964 to 8,300 in 1969.
3.12 The existing airport at Kabul is located about 6 km to the north of the city center. The surface of its 2,800 m x 45 m runway is uneven due to irregular settlement of the square concrete slabs used in its construc- tion. A combination of the airport's elevation (1,800 m above sea level), high temperaturesin the summer months, and the inadequate length of the runway results in restrictionson the loads of the heavier aircraft now using Kabul, such as the Boeing 727. The runway, moreover, is not strong enough to accommodate the larger aircraft (e.g. the Boeing 707 and DC8 types) which have been in use by internationalairlines during the past decade on their long haul routes. It has been estimated that over 90X of the civil aircraft currently flying across Afghanistan are unable to use Kabul airport with normal commercial loads.
3.13 Thereas it is feasible tolengthen, strengthen and improve the existing runway to accommodate the largest civil aircraft now flying, a serious problem, difficult to overcome, is created by a mountain range some 8.5 km away on the western approach to the airport. These mountains pre- clude both instrument approaches from the west and take-offs toward the west by larger aircraft. However, with the existing alignment of the runway, easterly operations have to be across the prevailing winds for a large pro- portion of the time. Given the present low frequency of operations with heavy aircraft like the Boeing 727, this is not yet a serious problem, but as traffic and aircraft movements grow, an increasing number of take-offs by heavy aircraft to the east would experience tailwindswhich would constitute - 6 - a serious safety hazard. It is however, not possible to re-align the runway with the prevailing winds on the present site because of surroundingmountains. Moreover, the existing airport is not capable of accepting aircraft at night or at times when low cloud and reduced visibility conditions occur; opera- tions under these conditions would require sophisticatedelectronic landing aids which the AAA and several internationalairlines do not consider safe in the mountainous conditions around Kabul airport.
3.14 At present all internationalscheduled flights in Afghanistan originate or terminate at Kabul. This airport, despite its favorable geographic location, is totally unused as a route stop on the major inter- national networks. The inadequate facilitiesat Kabul airport have undoubtedly contributed to this situation. Improvementsin the airport facilities to serve the Kabul area are clearly necessary to meet the needs of the long-term development of internationalair travel to Afghanistan. These needs are unlikely to be met satisfactorilyat the existing site because of its operationaldisadvantages.
3.15 An alternative would be to construct a new airport with a well aligned runway and clear approaches to it. It has been established that the closest available site which meets these requirementsis some 47 km south of Kabul in the Logar valley, and the Government intends to build a new internationalairport at this site. There is little doubt that the Logar site is considerablybetter than the existing airport from a technical viewpoint of aircraft operations;however, what remains to be established is whether, from an economic and financialviewpoint, the disadvantagesof the present airport would warrant the immediate constructionof a new airpor,. for the levels of traffic expected by the late seventies. Under the proJect, a study will be made to ascertain if and when a move to Logar would be justified and, if such a move is justifiable in the near future, to develop well-conceivedand soundly planned investment proposals for it (paras. 4.10 and 4.11).
E. Domestic Airports
3.16 Besides Kabul and Kandahar, there are about 18 airports and air- strins in the domestic air system, which between them serve all of the more importantand a few of the smaller centers of populationin Afghanistan. In 1972, Kabul, which is the focus of the domestic air network, handled some 26,500 passengers on 2,200 domestic flights. Bakhtar Airlines now provides jet services connecting the more important towns in Afghanistan with its fleet of Russian YAK 40 aircraft.
3.17 The majority of the country'spopulation, however, still lives in inacessibleareas which, though they are often relatively short distances apart, are in many cases isolated bv the difficult surface terrain. The Governmenthopes to reduce the isolation of these communitiesby providing, through Bakhtar Airlines, short haul feeder services using short take-off and - 7 - landing aircraft (STOL). In 1969, ICAO established a new Technical Assistance Mission, financed by a UNDP grant, to assist Bakhtar in its feeder service program. The Government envisages STOL services eventually serving a very substantialnumber of air strips in remote parts of the country. Bakhtar is already serving several such strips using its existing fleet of STOL aircraft (De Havilland twin engine Otters).
IV. THE PROJECT
A. Description
4.01 The project consists of:
(i) the design, constructionand equipment of a Flight Information Center at Kabul, to serve internationaland domestic civil aviation in Afghanistan;
(ii) organizationalchanges and technical assistance to ensure the provision of adequate air navigation services; and
(iii) preliminary engineering,economic studies and final engineering of new airport facilities to serve the Kabul area.
(i) The Flight Information Center
4.02 The principal categories of equipment to be purchased are high frequency and very high frequency transmitter and receiver systems for air/ground communications, direct speech/radioteletypewriter circuits for communication with neighboring FIC's, equipment for an aeronautical fixed telecommunicationslocal network, and voice recording equipment. Spare parts of short life components, sufficient for two years, will also be provided. An Air Traffic Control (ATC) Simulator (for basic and refresher training of about 100 controllersover the next few years) will also be purchased. This equipment (see Annex 1 for full details) which is the minimum required for providing adequate air navigation services in Afghanistan, will be capable of serving forseeable traffic requirements.
4.03 The new equipment will be installed in a two-storey addition above a wing of the existing terminal building at Kabul airport which would provide direct physical access both to the Kabul control tower and to the AAA unit providing meteorologicalservices. The existing structure is sufficientlystrong to carry the additional loads involved. Two hundred square meters of space will be made available on the second floor of the existing terminal building for use as an ATC Training Center, which will contain the ATC simulator (para. 4.02). The FIC would not need to be moved if and when a new airport is built at Logar, as it could continue to function satisfactorilyfrom its site at Kabul. - 8 -
4.04 The existing transmitterbuilding will be enlarged to accommodate the new transmittingequipment. Ample space exists for the additional external transmittingantennae. The existing receiver site at Kabul airport is located on the main airport access road close to the antennae of Radio Afghanistan, leading to interferencein radio signals. To overcome this problem, a new receiver site will be constructed for the FIC antennae. Several suitable sites exist on Government-ownedland, and the final location of the FIC receiving antennae will be determined after testing the equipment under operating conditions to ensure that the interferenceis stopped.
4.05 The services of consultants,acceptable to the Government and the Association,will be provided under the project to develop detailed designs and final engineering of the FIC, and to supervise the constructionof the buildings and the procurementand installationof equipment.
(ii) Re-organizationand Technical Assistance
4.06 The most effective way of dealing with the administrativedifficul- ties confrontingcivil air navigation in Afghanistanwould be to establish a separate entity with general responsibilityfor the provision of civil air navigation,air traffic control and air communicationsservices in Afghanistan. Under this project, the Government has agreed to establish such a separate entity, with its own charter, to be called Air Navigation Services (ANS) and responsible to the AAA, as early as possible but not later than December 31, 1973. ANS, which would operate and maintain the FIC, would be run on a commercial basis and would be organized to provide clear lines of command and communicationbetween its headquarters staff and its field staff at various operational locations. The Government has agreed that ANS, which will levy and collect user charges for air navigation services, shall retain its operating revenues to meet its expendituresand that it shall pay its employees such salaries as shall be necessary to attract and retain adequately qualified and experiencedpersonnel.
4.07 Since with the present procurement and warehousing procedures, it is not possible to provide expeditiouslysupplies to operationalpoints in the field, a small procurementsection in the ANS will be established to purchase and distribute maintenance supplies for air traffic control and communicationequipment. This section will become operational at the same time as the ANS.
4.08 Technical assistance is required to enable ANS to be organized into an efficient unit and improve the quality of air navigation services in Afghanistan as soon as possible. The project will provide:
a) the services of consultants to establish modern commercial and management accounting system,sfor ANS. These consultantswill also provide one man for one year to advise ANS in implementing and maintaining these accoutting systems; -9-
b) the services of three advisers, to the Chiefs of ANS, Air Traffic Control, and Maintenance,respectively, for an initial period of three years, to be extended to a maximum of five years by mutual agreement between the Government and the Association;and
c) the services of a training adviser for one year to establish a training program for controllersand to train instructors in using the ATC simulator.
4.09 Assurances have been obtained from the Government that: (i) a modern commercial and management accounting system will be installed in ANS no later than March 22, 1974; (ii) certified accounts and financial statements of ANS for each fiscal year, audited by independentauditors acceptable to the Association,will be provided to the Associationwithin 4 months after the end of each fiscal year, with an auditors report; and (iii) the advisers referred to in (b) and (c) of para. 4.08 above will be appointed as soon as possible, but no later than December 31, 1973.
(iii) Preliminary Engineering,Economic Studies and Final Engineering
4.10 The project includes provisions for preliminary engineeringand economic studies by consultantsto accertain if and when moving the airport from Kabul to Logar would be justifiable. Preliminary engineeringwill plan and provide reliable cost estimates for the new airport whereas the economic studies will: (a) provide phased plans for developing the new airport; (b) estimate the net economic advantages to Afghanistan of moving from Kabul to Logar; and (c) assess the optimum timing for such a move.
4.11 The project also makes provisions for the final engineeringand architecturaldesign work by consultantsof the first phase of developing Logar airport. However, such work will only be financed by this Credit if it is mutually agreed by the Governmentand the Association that it is necessary to commence the final engineering immediatelyafter the completion of the studies referred to in para. 4.10 above, in order to cemplete the constructionof the new airport at the optimum time recommendedby those studies.
B. Cost Estimates
4.12 The total project cost, including contingency allowances,is US$3.1 million. The foreign exchange component is US$2.5 million or 80%. A breakdown of the project costs is given on page 10. 10 -
Foreign Costs _ Exchange Local Foreign Total Local Foreign Total Component ----- Af thousand------US$ thousand----
Proiect Element
A. Flight Information Center: (i) Equipment Purchases 640 65,680 66,320 8 821 829 Installation 880 5,040 5,920 11 63 74 Building Works 7,440 7,520 14,960 93 94 187
Subtotal 8,960 78,240 87,200 112 978 1,090 90
(ii) Design and Final Engineering of the Flight Infor- mation Center System 2,880 6,720 9,600 36 84 120
Total - FIC 11,840 84,960 96,800 148 1,062 1,210 88
B. Technical Assistance27,60 0 29,200 56,800 345 365 710 51
C. Studies: Economic and Preliminary Engineering 6,400 25,600 32,000 80 320 400 Final Engine- ering 2,000 38,000 40,000 25 475 500
Subtotal 8,400 63,600 72,000 105 795 900 88
D. Contingency Allowance/1 1,200 22,000 23,200 15 275 290
Total Project Cost (Rounded) 49,000 200,000 249,000 600 2,500 3,100 80
/1 20% physical contingency on FIC equipment purchases and installation and 10% price contingency on subtotal A(i). - 11 -
4.13 These costs were estimatedby the appraisalmission in 1970 and were updated by the Association in 1972. The costs of the building works are based on costs of similar work recently done in Afghanistan. These estimates are considered to be reasonable by the Government and the Associa- tion, who have discussed and agreed on them.
4.14 Because the estimates of the costs of purchasing and installing the FIC equipment are based on preliminary engineering,a contingencyallow- ance of 20% of the cost of these items has been included to provide for physical variations that may be produced as a result of the final engineering of the FIC system. An additional 10% contingencyhas been included on the FIC equipment, installationand building costs, to allow for possible price increasesbetween the time the estimateswere made and the time contracts are expected to be signed, a period of approximatelyone year.
C. Execution
4.15 The AAA will be responsible for carrying out the project. However, when ANS is established (by December 31, 1973, at the latest), it will assume responsibilityfor the first two parts of the project, (sections (i) and (ii) of para. 4.01), while the AAA will continue to be responsible for the third part (Section (iii) of para 4.01). The design and final engineeringof the FIC system is expected to be substantiallycompleted by the end of 1973; the building work, and the procurement and installationof equipment are expected to commence in the second quarter of 1974 and to be completed by the third quarter of 1975. The preliminary engineering and economic studies for new airport facilities are expected to start in the last quarter of 1973 and to take 15 months to complete; the final engineering for these facilities, if undertaken,will require an additional year for completion. Consultants will assist in all three parts of the project. Assurances have been obtained from the Government that it will employ qualified and experienced consultantson terms and conditions suitable to the Association.
4.16 A contract for the supply and installationof the specializedFIC equipment and for the building work will be awarded after international competitivebidding in accordance with the Bank Group Guidelines for Pro- curement. Because the elements are relatively small, they will be awarded in a single contract,which a foreign firm is expected to win as there are no local contractorscapable of undertakingeven a part of the highly special- ized work involved. The special Air Traffic Control Simulator estimated to cost about US$20,000 will be obtained from a Canadian manufacturerwhich is the only firm that produces this unit according to ICAO specifications. Acquisition of materials and land for the project are not problems. All materials, except some for building, wwillbe imported. The Government already owns the minimal amount of land required.
D. Financing
4.17 The table on page 12 shows the funds required under the project and their sources. - 12 -
Distribution of Funds Elements Requiring Funds AAA ANS Total --- Af million--- Af million US$ million %
Equipiaent 0 126 126 1.5 47 Organization of the ANS 0 57 57 .7 21 Economic and Preliminary Engineering Studies 72 0 72 .9 27
Working Capital 0 13 13 .2 5
Total 72 196 268 3.3 100
Sources of Funds
Internal Generation 0 120 120 1.5 45 Less Debt Service 0 97 97 1.2 36 Payment to Government 0 5 5 0 2
Subtotal 0 18 18 0.2 7
Plus IDA Credit 64 136 200 2.5 75 Government Loan 0 42 42 .6 15 Government Grant 8 0 8 .0 3
Total 72 196 268 3.3 100
4.18 The Credit, to be made to the Government, will finance the foreign exchange cost of the project (US$2.5 million); the Government will finance the local cost (US$600,000). The Government will pass on the total (US$3.1 million) to the AAA. Since US$900,000 relates to the airports studies, this will be provided as a grant to the AAA, and since US$2.2 million relates to the cost of setting up and equipping the ANS, this will be a loan bearing 7 114% interest annually. In view of the comparatively short life of the air navigation equipment and the projected, ANS revenue, repayment by the ANS to the Government is proposed in 20 equal, semi-annual installments starting on the date of commissioning the new FIC (January 1976). The Government and the Association have agreed on the above arrangements.
4.19 Since FIC equipment purchases will start before the ANS is establish- ed, the related expenses will initially be carried on the AAA account books. The assets will be transferred to the ANS, together with the corresponding debt as soon as the ANS is established. The ANS will become responsible to the AAA for servicing the debt and will assume the AAA's obligations under the Project Agreement in this respect. The Government and the Association have also agreed on the above arrangements. - 13 -
4.20 Because the existing FIC is in poor condition and its improvement is urgent, the Governmentwishes to employ consultantsas early as possible for design and final engineering. The Governmenthas asked for retroactive financing for these services. It is estimated that the amount involved would be in the order of US$50,000 and would cover payments between January 1, 1973 and signature of the Credit. The Associationhas agreed to this request.
E. Disbursements
4.21 Disbursementsfrom the Credit Account will be made to meet the actual foreign exchange costs of all project elements. Disbursementsfor final engineeringof new airport capacity would be made only if the economic studies referred to in para. 4.10 justify proceeding to this stage. Based on the foregoing, and on the schedule for project execution (para. 4.15), an Estimated Schedule of Disbursementshas been prepared (Annex 2). The Government and the Bank should discuss and agree on this schedule during negotiations. Surplus funds remaining in the Credit Account after the project has been completedwill be cancelled.
V. ECONOMIC EVALUATION
A. Introduction
5.01 This economic evaluation seeks to establish whether it is justifi- able for Afghanistan to provide itself with a new, re-equippedFIC and to improve its flight informationand air traffic control services. At present, these services are unreliable and deficient because the existing FIC has obsolete, unserviceableequipment and is inefficientlyoperated. If these conditions persist, many foreign airlines flying over Afghanistan would find the risks of collisions in Afghan airspace great enough to induce them to seek alternative routes. Moreover, if the project is not implementedin the near future, flight informationservices would deteriorate further and some of the foreign airlines now serving Kabul may consider withdrawing their flights. Improved flight information services are therefore essential to maintain and expand internationalflights to and over Afghanistan.
B. Traffic Forecasts
5.02 The largest number of aircraft requiring flight information services are the foreign aircraft which fly over but do not land in Afghanistan. During the 1960's there was a steady growth in the number of such flights and in the late sixties the rate of growth was rapid; between 1967 and 1970, flights over Afghanistan rose by 50'%to reach a total of 4,800. With the closure of the air border between India and Pakistan since December 1971, following the Indo-Pakistanwar, overflights fell to about 4,300 in 1971 and substantiallyto 900 flights in 1972. The number of overflights is expected to rise to levels on the long-term trend as soon as the border is re-opened and internationalairlines can resume flights along their shortest route patterns. The number of overflights is predicted to exceed 6,000 by 1975 and rise to about 7,500 by 1980. - 14 -
5.03 The FIC, in addition to serving overflights,will also serve flights to and from points in Afghanistan. Since additional airport capacity for the Kabul area, capable of serving larger aircraft, is unlikely to be in operation for some years to come, it has conservativelybeen assumed in forecasting internationalflights to and from Afghanistan that these flights would arise only from countries currently serving Afghanistan and would be made only by aircraft types that Kabul is now able to accept. On this basis, it is predicted that internationalmovements at Kabul, which were just over 2,000 a year in 1970, would rise to about 3,300 by 1980 and to 4,700 by 1987. If any increases in the capability or capacity of Kabul airport take place, this forecast is likely to be an underestimate.
5.04 Given the evolving nature of the domestic air network in Afghanistan and the limited informationon the determinantsof demand for local services, reliable aggregate forecasts of domestic air movements are difficult to produce. It is expected that, with the development of tourist facilities currently planned, an increasing number of domestic air trips will be made by foreign visitors. Given the recent introductionof jet services on the major domestic routes, the present policy of introducingair services to isolated areas and the low level of present domestic traffic, substantial growth in this traffic could be expected over the next decade. However, it has conservativelybeen assumed in this analysis that domestic aircraft movements will only increase at roughly the same rate as international traffic.
5.05 Forecasts of overflightsover the country, and the international and domestic aircraft movements at Kabul (landingsand take-offs)all of which will be served by the FIC are given below:
FORECAST OF FLIGHTS TO BE SERVED BY AFGHAN FIC
Overflights Kabul Flight Movements (landingsand take-offs) Domestic International
1973 5,200 2,340 2,020 1974 5,720 2,510 2,170 1975 6,290 2,690 2,320 1976 6,420 2,850 2,490 1977 6,550 2,990 2,690 1978 6,780 3,110 2,890 1979 6,810 3,250 3,110 1980 7,490 3,410 3,370
1981 7,870 3,580 3,540 A 1982 8,260 3,760 3,710 1983 8,670 3,950 3,900 1984 9,100 4,140 4,090 1985 9,560 4,350 4,210 1986 10,040 4,568 4,510 1987 10,540 4,800 4,700 - 15 -
C. Costs
5e06 The costs that have been taken into account in this analysis are the total costs of physical improvementsto the flight informationsystem (design, equipment purchases and installation,and buildings), the increased operating costs such as the higher expected maintenance costs and increased manpower costs arising from higher salaries (para. 4.06 and para. 6.05), and a proportionof the technicalassistance attributableto services for overflyingaircraft and for internationalaircraft serving Afghanistan.
D. Benefits
5.07 The improvementsin the quality of flight information services that the project will provide will give rise to increasedrevenues from the charges paid by airlines for these services. The additional revenues from the flight informationcharges paid by foreign airlines, which would be lost if the project was not implemented,constitute direct incrementalbenefits to the Afghan economy arising from the project. These direct benefits are the only ones that have been credited to the project in this analysis of the project's economic viability.
5.08 The direct benefits will arise through increased revenues from additionaloverflights and increasedcharges for flight informationservices. If the project were not undertaken,airlines wishing to fly over Afghanistan would be likely to choose alternativeroutes. Although it is probable that the number of civil aircraft flying over Afghanistanwould decline if the project were not undertaken, this analysis conservativelyassumes that over- flights would continue to increase as forecast until 1975 and maintain a constant annual level thereafter. If the project is undertaken,however, the number of overflightswould continue to increase after 1975 as forecast (para. 5.05). Revenue from the additionaloverflights (about 1,300 flights by 1980) gives rise to the first stream of project benefits.
5.09 The improved flight informationservices will justify increased charges to internationalairlines for these services. Increases have been proposed and agreed with the Government (para. 6.03). The level of charges was establishedafter considering the cost of improved services and its value to users, levels of charges for similar services in neighboring countries, and recommendationson such chargesmade by ICAO. Those increased charges which will be levied when the new FIC is completed, give rise to the second and third streams of project benefits. The second is the additionalrevenue from the US$35 increase (US$25 to US$60) in the charge for overflights;the third is the additionalrevenue from the US$15 increase (US$25 to US$40) in FIC charges to internationalairlines serving Afghanistan. These increases are not expected to deter traffic levels in view of the better service offered. For overflyingaircraft, alternativeroutes to flying over Afghanistan are likely to cost airlines substantiallymore than the increased overflight charges and, if there are no offsetting revenues to be gained from changing route patterns, the best alternativeroute for a typical aircraft may cost airlines as much as ten times the increasedoverflight charge in terms of additional flying costs. The value of the improvementsin safety and in reliability of operations for international airlines serving Afghanistan is likely to be greater to them than the $15 increase in the FIG charge to them. - 16 -
5.10 Despite the conservative assumptions used in this analysis, the three benefit streams described above would collectively provide Afghanistan with incremrental annual foreign exchange earnings of about US$250,000 in 1976 rising to US$450,000 by 1985. The estimated cost and benefit streams are presented in Anrex 3.
5.11 The value to the Afghan economy of the benefits that Afghanistan's own internationaland domestic airlines will receive from improved flight informationservices is difficult to estimate. It has not been possible to estimate directly either the operating cost savings or the greater safety that the Afghan airlines will enjoy as a result of this project, and the increased charges that Ariana and Bakhtar pay for the improved flight informa- tion services may not be a reliable measure of the economic worth of these improvementsto the country. Because of these measurementdifficulties, the economic analysis does not include any estimates of the benefits of the project to Afghanistan'sown airlines and consequently,the economic worth of the project has been underestimated.
E. Economic Return
5.12 The economic rate of return of the project is 12%, based on the costs and benefits described above. The sensitivityof this rate to possible variations in costs and benefits was tested with the following results. A 15% increase in the costs of the physical improvementsto the flight information system and a delay in all benefits by one year would reduce the economic return to 9%. Increases or decreases of 25% in the value of the benefit streams would increase the economic return to 17% or decrease it to 7% respectively.
VI. FINANCIAL EVALUATION
A. Existing Situation
6.01 Little financial informationis available about existing FIC operations and tower operationsat various airports for Afghan FY70-72. Because the existing equipmenthas been used for over 10 years and is now ineffective,the written-downopening value of fixed assets has been conser- vatively estimated. Informationabout present salary scales has been made available and estimated profit and loss accounts and balance sheets for Afghan FY70-72 have been reconstructed. They should be regarded, however, as indicativeof orders of magnitude.
B. User Charges and Financial Objectives
6.02 The new ANS (para. 4.06) will be responsible for establishingand collectinguser charges, such as FIC charges from overflyingaircraft and internationalairlines serving Afghanistan as well as air traffic control tariffs. Also the ANS will be responsiblefor the moneys collected and for - 17 - paying its financial commitments. The commercialand management accounting system to be establ'shedwill reflect, on an accrual basis, all transactions affecting its revenues and operating and capital expenses. These transac- tions will be subject to budgetary controls, involving monthly closure of accounts and preparation of reports showing operating results comparedwith the budget, and periodic, at least quarterly,presentation of financial statements. Financial statementsprepared for each fiscal year and relevant accounting records will be audited bv auditors acceptable to the Bank (para. 4.09).
6.03 Existing user charges are not adecuate to allow the ANS to cover its cash operating requirement,repay the investmentcost for new facilities and organizationaLdevelopment under the project, and finance routine new equipment and future expansion. Therefore, these charges will have to be increased as follows:
User gha /Flight_ Tyne of Plight Existing Prosed
Overflight US$25 USS60 as from March 22, 1976 (Afghan FY77)
International 0 US$25 as from September 22, 1973 and US$40 as from March 22, 1976 (Afghan FY77)
Domestic 0 US$10 as from MIarch 22. t97D (AWch,. F"Y77)
The new user charges are comparable to those of neighboring e The amount and timing of the increaseswere agreed during appra'.,al,and during negotiations,assurances were also obtained that they will be i;mplemented.
C. Future Earnings and Financial Position
6.04 Table 1 shows estimated and projected operating results of the ANS for Afghan FY70-80. Because of the uncertaintiesassociated with aviation development,a forecast now of operating revenues and traffic ,volumesbeyond Afghan FY80 would be impractical. Also internationaltraffic revenues have declined as traffic has declined due to the closure in Deceember1971 of the border between India and Pakistan (para. 5.02). The projections assume, however, that normal trafficwill be resumed by 1974. The forecast of operat- ing revenues was calculated, therefore,based on normal traffic growth and the proposed new user charges. - 18 -
6.05 Operating expenses are estimated and projected on a broad basis, taking into account applicable general expenditureheadings and making adequate allowances for cost increases. Salary costs include incremental charges, in the form of 20% annual increases for Afghan FY74-78 to cover the increased cost of attracting and retaining qualified personnel (para. 4.06). Annual costs of recurrent and preventive maintenance programs for equipment and buildings are estimated at 3% and 2%, respectively,of the investment under these items. Assurances have been obtained that the ANS will continuouslymaintain its equipment and related assets in good working order and that an annual certificatewill be submitted to the Association from an independentengineer certifying the state of the equipment. Deferred charges covering organizationaldevelopment costs are written off over the period in which they are incurred. Other financial assumptions are given in Annex 4.
6.06 Because of the heavy initial organizationalcosts incurred during the early years, the &NS will ircur annual deficits up to 1979, but will become increasinglyprofitable thereafter, This is normal in a new organiza- tion of this type and does not affect ANS9 abilit\'to futly meet its obliga- tions. Should the services of the advisers be required for only 3 years instead of 5 (para. 4.08(b)), then ANS will become Profitable earlier.
6.07 Table 2 shows comparativebalance sheets and Table 3 the estimated and projected cash flow of ANS up to Afghan FY80. The ANS should be able to meet its obligations to repay the Government loan and at the same time maintain a reasonable level of cash. u.08 This situation depends, however, cn the continuationof overflights which provide most of the operating revenue. Should overflightsbe inter- rupted beyond 1974, due to closure of the Indian-Pakistanborder or for other reasons, then the financial position of ANS would quickly deteriorate. Assur- ances bave thereforebeen obtained during negotiations,that the Government will at all times ensure the financialviability of ANS by providing it with funds, as may be necessary, for it to operate efficiently and maintain its equipment in sound condition.
5e09 It is also possible if traffic increases faster than foreseen, that ANS will accumulate cash balances greater than those projected and which would not be needed to meet its obligationsor replace equipment. It has thereforebeen agreed during negotiationsthat any surplus shown in the accounts should, after deduction has been made for amortizationof debt and a reasonable reserve, be transferred to the Afghan treasury.
6.YO Due to the comparativelyshort life of the equipment, a Financial Return calculationon net fixed assets would be meaningless,and the imposi- tion of a financial operating ratio would only cut back efficiency of the FIC if overflightswere curtailed. imposition of any particular,measurable financial covenants, other than those mentioned in paras. 6.08 and 6.09, is not proposed. - 19 -
VII. RECOMMENDATIONS
7.01 During negotiations, agreementwas reached and assurances obtained from the Government on the following principal points:
(I) the Government will take all necessary steps to enable civil aviation to enjoy the safe use of civilian ait- space and will provide adequate notice to the civilian air authorities each time civilian airspace is to be used by non-civilianaircraft (para 3.10);
(ii) the establishmentof the ANS and a procurement section within it, appropriatesalaries for its employees, and the installationof modern accounting systems (para 4.06, 4.07 and 4.09);
(iii) the levels of user charge increases and the dates by which they would be levied (para 6.03);
(iv) that ANS will maintain its equipment in good working order and will submit a certificateannually to the Association (para 6.05);
(v) that ANS will transfer to the Afghan treasury any surplus funds arising from operations (para 6.09).
7.02 In view of the foregoing, the project is suitable for an IDA credit of US$2.5 million to the Royal Government of Afghanistan on the usual terms and conditions.
4
APFHANI;TAN
APPRAISAL OF
AN AVIATION PROJET
BGuie nt to bs Pcrhased for Kabu.l Flight Inforation Center
of £q4LIECent mant-ity
Traa: rt . o. 9L I kr., 2-_'~ M7, O'hara'l:Led I 1,w 2-7; :xZ, synthejFsi7ed &'atOonatic turing 2
ReceieWrs 2-30 DMIZ charnelized 6 2-30 s,thlegized arc eo tuning 3
Abntsnae Dog c2ct4 4 E~rc
RFnr r ztor 6 Teie%rpurft ±t2r sden angd receiving 9 Spare 3-c'W 2-year supply
Viery hip nv jPr) Air/Gr omd Coimmunicati ons System
TransmItters. mr, I$o watt 4 ReceIversa VfI 4 Antennarip -tranessitting and recei-vting 4 Spare .rta-t 2-year supply
Tranxmitters, 1 km 2-30 pE, channelized, one with renmo.^ contro1 3 ReceI-vers 2-30 hRZ, channelized, rearote conbrol 4 2-30 IvFZ9 synthesized automatic tuning, with remote control 1 Anternnae, HF.>,cni-directional 6 Selective calling eqpipment (SILCAGL) 1 Generator 4 8 KVA 1 Spare Parts 2-year supply
Aeronautical Fixed Telecoiunanications Local Network Traneivers, EF SSB, 130 watts 9 Antonma 8 Spare Parts 2-year supply
Training Equipmnt Skykeaesh Air Traffic Control Simulator, manufactured to ICAO specification and design 1 Reoorcoi ca 1uipme0t Aeronautical 10 track tape voice recordiers 6 ANJNEX2
AFGHANISTAN
APPRAISAL OF
AN AVIATION PROJECT
Estimated Schedule of Disbursements
IDA Fiscal Year Cumulative Disbursement Quarter at end of Quarter US$ thousand
1973/74
September 30, 1973 57 December 31, 1973 100 March 31, 1974 202 June 30, 1974 425
1974/75 September30, 1974 617 December31, 1974 883 March 31, 1975 1187 June 30, 1975 1596
1975/76 September30, 1975 1956 December31, 1975 2092 March 31, 1976 2238 June 30, 1976 2250
1976/77 September30, 1976 2350 December30, 1976 2370 March 31, 1977 2390 June 30, 1977 2400
1977/78 September30, 1977 2425 December30, 1977 2450 March 30, 1978 2500 ANNEX3
AFGHANISTAN
APPRAISALOF
AliAVIATION PROJWECT
EconomicEvaulation (Lus$ thousanus)
COSTS1' BENMEFITS Additional revenue Revenue from Additional revenue from charge increase increased No. from overflights to foreign airlines Year of overflights" charge increase serving Kabul
1973 116 0 0 0 1974 477 0 0 0 1975 884 0 0 0 1976 184 3 224 19 1977 63 7 230 20 1978 29 10 234 22 1979 50 13 238 23 1980 50 30 262 25 i981 50 39 274 26 1982 50 49 288 28 1983 50 59 302 29 1984 50 70 318 30 1985 50 81 333 32 1986 50 93 350 34 1987 50 106 368 35
1/ The cost streamincludes the FIC investment,the eJ-taU< increased operating costs and a part of the technical assistance attributable to servicesprovided to foreignairlines. For the purposesof this analysisit has been assumedthat the 3 advisersreferred to in para. 4.08(b)would be retainedfor five years,although it is recognized that their services could be terminated after three years by mutualagreement between the GovernmentanA the Association. b 2/ Differencebetween the numberof overflightsforecast with the project anu the number of overflightsin 1975, multiplied by the existingoverflight charge of US$250
ANNEX a Page
AFGHANISTAN
APPRAISAL OF
AN AVIAT]DN PIDJECT
Finalcial AssumEtions
1. The new Flight Information Center, to be financed umder thie proiects
will be commissioned as of January 1, 1976,
2. Existing electronic equipment will be taken over at written down value,
as shown on the attached statement.
3. i&EistingFIC equipment has been treated as having zero value.
4. Annual depreciationrates are:
Building - 5%
34uipment- 10%
5. Annual maintenance expenses have been calculated as:
Building - 2%
FEquipment- 3%
6. A new pay scale will be introducedeffective Afghan F-7 1?,74, and is
assumed to cost the Afghan Navigation Services an incre.nrtalraTe of 20% of salary costs through 1978 and 5% thereafter. 7. Other personnel costs are assumed to be equal to 8.3% of salary costs.
8. Accounts receivable: 1½ 9. Accounts payable: 1 month outstanding cash operating expenses, excluding salaries at year end. 10. Organizationaldevleopment costs are written off as incurred. ANNEX4 Page 2 STATEMENTOF VALUEOF EECTRDNIC EQUIPMENT AS AT MARCH 21, 1970 Su5iary Aix-port Cost Reserve Book Value ------,f. ------ Kabul 282,100 256,890 25,210 Kandahar 443,4oo 409,520 38,880 Farah 35,000 31,500 3,500 Gardiz 4,400 3,9bu 400 Ghazni 51,200 49,080 2,120 Herat 55,500 49,950 5,5)o Jabulsaraj 20,200 18,180 2,020 Jalalabad 18,600 15,970 2,630 Kunduz 52,100 47,610 5,290 Maimana 55,100 52,820 2,280 Mazar-e-Sharif 46,00 41,260 5,440 Others 13,500 4,100 10,400 Total 1,078,600 980,840 103,760 Total (Rounded) 100,000 AFCHANISTAN APPRAISAL OF AN AVIATION PROJECT Estimated and Projected Cash Flow of Air Navigation Services, FY70-80 Expressed in Thousands of Afghanis (Afs) Exchange Rate: US$1.00 = Afs 80.00 Afs 1.00 = US$0.125 Estimated Proiected For Fiscal Year Ending 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1900 March 21 SOURCES OF FUNDS Operating Income before Interest 3,040 4,503 2,869 198 ( 265) (2,710) 13,782 4,394 2.709 3,716 13,241 Add: Depreciation 800 800 800 800 800 800 3,670 12,040 12,160 12,280 11,600 Amortization 8,000 10,000 10,000 10,000 10,000 9,000 - Total Internally Generated Funds 3,840 5,303 3,669 998 8,535 8,090 27,452 26,434 24,869 24,996 24,841 Government loan - local costs 5,400 11,700 8,600 6,700 4,140 4,100 Government loan - foreign currencies 8,600 52,700 50,100 16,000 4,460 4,500 14,000 64,400 58,700 22,700 8,600 8,600 TOTAL SOURCES 22,535 72.490 86,152 49,134 _ 3.469 33.596 24,841 APPLICATION OF FUNDS Capital Expenditure - Project - FIC 6,000 50,000 50,000 14,000 Project - Organizational Development 8,000 14,400 8,7 00 8,700 8,600 8,600 Total Project 14,000 64,400 58,700 22,700 8,600 8,600 Replacement of equipment 1.200 1,200 1,200 1.200 1,200 Total Capital Expenditures 14.000 64.400 59,900 23.900 9.800 9.800 1.200 Repayment of Government loan - - 6,179 13,038 14,000 15,034 16,143 Repayment of Interest 520 3,625 11,230 12,152 11,190 10,157 9,047 Tofal Debt Service 520 3,625 17r,409 25,190 25,190 25,191 25,190 Net Return to Government before the Creation of Autonomous Unit 3,840 5,303 3,669 998 5,000 Increase in Working Capital (exc4ding exasil 2,450 270 2,570 1015159190 195 195 90 TOTAL APPLICATION 3,840 5,303 3,669 998 21,970 68,295 79,879 49,280 35,185 35,186 26,480 CASH POSITION Annual 565 4,195 6,273 (146) (1,716) (1,590) (1,639) cuaulative 4,760 11,033 10,887 9,171 7,581 5,942 Source: Association Staff. March 1973 AFGHANISTAN APPRAISAL OF AN AVIATION PROJECT Air Navigto evcs-CsaaieBlneSet Expressed in Thousands of Atghanis (Ais) Exchange Rate: US$1.CO - Afs 80.00 Af9l.O0 - JS$0.125 R eco n s t r u c t e d F o r e c a s t As at Yaroh 21, 1970 1971 1972 1973 1974 1975 1976 776 197 ASSETS Currsnt Assets Cash 565 4,760 11,033 10,887 9,171 7,581 5,942 Accounts receivable 2,100 2,300 4,600 4,800 5,000 5,200 5,300 Inventory - stores 400 500 1.000 1.00,00 1,000 1.000 1 Sub-total 3,o65 7,560 16,633 16,687 15,171 13,781 12,2 2 Fixed Assets Buildings 20,000 20,000 20,000 20,000 20,000 Equiprnt 8,000 8,000 8,000 8,000 8,000 8,000 109,200 110,400 111,600 104,800 106,000 Construction in Progress 6,ooo 56,ooo (14,000) _ _ Sub-total 8,000 8,000 8,000 8,000 14,000 64,000 115,200 130,h00 131,600 124,800 126,000 Less: Acucsulated Depreciation Buildings 250 1,250 2,250 3,250 4,250 Equipment 800 _1,60 3,200 4,000 4,800 8,220 19,2603 30_420O 33,700 _ 443o00 Sub-total 800 1,600 2,400 3,200 4,OOO 4,800 8,470 20,510 32,670 36,950 48,55) Net Fixed Assets 7,200 6,4000 5,600 4,800 10,000 59,200 .106,730 109,890 98,930 87,850 77,450 Beferred Charges Orgamnational Levelopment - 4,400 3,100 1,800 400- Sub-total - - 4,400 3,100 1,800 400 TOTALASSETS 7,200 6,400 5,600 4,800 13,065 71,160 126,463 128,377? 114,501 101,631 89,692 =v======X====...... =.==.._...... ==.__==.==O==m=^Uu====WwaX__ LIABILITIES AND EQUITI Current Liabilities Current portion - long-term debt 6,179 1),038 14,000 15,034 16,143 17,335 Accounts payable and accruals 50 80 310 320 325 330 340 Sub-total 50 6,259 13,348 14,320 15,359 16,473 17,675 Long-Term Debt Government loan for the project 14,000 72,221 117,883 126,583 120,149 112,6o6 95,271 Equity ard Surpluw Opening Balance 8,00O 7,200 6,400 5,600 4,800 (985) (7,320) (4,768) (12,526) (21,007) (27,448) Earned surplus (deficit) 3,040 4,503 2,869 198 (785) (6,335) 2,552 (7,758) (8,481) (6,441) 4,194 8 Less: Payment to Governmtent (3, 40) (5,303) (3,669) (998) (5,000) Closing Balance 7,200 6,400 5,600 4,80) (985) (7,320) (4,768) (12,526) (21,007) (27,448) (23,2514) TOTAL LIABILITIESAND EQUITY 7,200 6,400 5,600 4,800 13,065 71,160 126,463 128,377 114,501 101,631 89,692 Sourae; Association Staff hrch 1973 AFGHANISTAN APPRAISALOF AN AVIATIONPROJECT Estimated and Projected Operating Results of Air Navigation Services, FY 70-80 Expressed in Thousands of Afghanis Exchange Rate: US$1.00 - Afs 80.00 Afsl.OO - US$0.125 For Fiscal Year Ending E s t i m a t e d P r o j 8 c t e d March 21, 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1900 OPERATINGREVENUES Domestic ATC charges 2,150 2,305 2,390 2,485 2,600 Overflight charges 5,280 10,400 11,440 30,201 30,806 31,420 32,049 32,692 International Flight FIC charges 4,o46 4,334 7,420 7,968 8,595 9,238 9,949 Charges for Class B messages 432 441 450 _459 468 477 487 497 Total 7,944 9,600 8,181 5,712 14,887 16,224 40,230 41,547 42,882 44,259 45,738 OPERATINGEXPENSES Salaries 3,120 3,275 3,450 3,611 5,112 6,690 8,362 10,453 13,066 114,373 15,810 Other personnel costs 259 272 286 300 408 555 694 868 1,084 1,193 1,312 Utilities 95 100 105 110 116 150 158 166 174 183 192 Maintenance - equipment 240 240 240 240 240 240 2,616 2,652 2,688 2,484 2,520 - building 424 424 424 424 424 Other costs 390 410 431 453 476 499 524 550 577 606 639 Depreciation 800 800 800 800 Boo 800 3,670 12,040 12,6o0 12,280 11,600 Amortization of Organizational Costs - - - - 8,000 10,000 10,000 10,000 10,000 9,000 - Total 14,94 5,097 5,312 5,514 15,152 18,934 26,448 37,153 40,173 40,543 32,497 Operating Income 3,040 4,503 2,869 198 265 (2,710) 13,782 4,394 2,709 3,716 13,241 IN71SREST 520 3,625 11,230 12,152 11,190 10,157 9,0147 Net Income (Deficit) 3,o40 4,503 2,869 198 (785) (6,335) 2,552 (7,758) (8,481) (6,441) 4,194 Source: AssociationStaff March 1973 TRANSPORTFACILITIES IN AFGHANISTAN MGE 5 r,'<~~~~~~~~~~~~~~~~~~~~~~~~~~F- -,Xl ~~~~I 00~~~~~~~~~~~ 91 X P 1 I 9 _ 9 _~ _~ ~ ~ ~~4< , '-\ -s SFn ~~~~~~~~~~~~~<\/ 0\4/ r D 2~~~~~~~~~~~~~~~~~~ ~~~~~~~~~~~~N, / S,R\ -'f. j IVQu---- ,-- ", 1Q U S. 5~~~~~S R. U. S S. R. TASHtKENTFIR j 7-- ,9------, ! ', 4 \'~~~~~~~~~~~~~~---- KUdUi,, j \, ,, pv - - - -! X _ f X - - X 0 'i''- J~~~~~~~~~~ ~ ~~~~~~~~~~~~~ALALABAD ! \ \ i ' -- 11 <~~~~ti iSrr ; \ - ; ~~~~~~~~sss0 -00X~~~~~ ~~ ,. '> \ I | - Ns ) LAHOREFRFlF'} AAFG (a-A ALAHRET F t FARh _ _ .-- ~~ _~ ' . C/ ! / i" W, \ D; r FXo CK} AIRWAYS SYSTEM S _ rj X X 0 /) ,, f (/J , , / , \ 10 j ^~~~~~~~~~~~~~~~~~~~~~ProposedReporhng Pomr El Rrg X / -/ a ; / Extst"~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ongReporthngPoin>t - - /'- sEishr RadioFocility -t \ .--- (EDr j 5r, / \; , -- Exishug Airway7,;~~~~~~~~~~~~~~~~~~~~~~~~~~~~Exstng ifay 75 / ~~~~~~~~~~ - 10; 4 t ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~KARACHIFIR TNe' >> x>*X-, - I fCf } r v v W5~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ so 10 1°~50 RsA...... 2