Document of

Public Disclosure Authorized The World Bank

Report No: ICR000052

IMPLEMENTATION COMPLETION AND RESULTS REPORT (IBRD-70140) Public Disclosure Authorized ON A

LOAN IN THE AMOUNT OF

US$35.36 MILLION

TO

LITHUANIA

FOR A Public Disclosure Authorized

KLAIPEDA PORT PROJECT

June 24, 2009

Public Disclosure Authorized Sustainable Development Department South Central Europe and Baltics Country Unit Europe and Central Asia Region

CURRENCY EQUIVALENTS

(Exchange Rate Effective May 4, 2009)

Currency Unit = Litas 1.00 = US$ 0.386 US$ 1.00 = 2.599

FISCAL YEAR January 1 – December 31

ABBREVIATIONS AND ACRONYMS

CAS Country Assistance Strategy KSSA Klaipeda State Seaport Authority CDF Confined Disposal Facility LISCO Lithuanian Shipping Company CEEC Central and Eastern European Countries LR Lithuanian Railways CIS Commonwealth of Independent States LRA Lithuanian Road Administration CMEA Council for Mutual Economic Assistance MOE Ministry of Energy EBRD European Bank for Reconstruction & Dev. MOT Ministry of Transport EIB European Investment Bank MT Million Tons EIRR Economic Internal Rate of Return NPV Net Present Value FMS Financial Management System OED Operations Evaluation Department FSU Former Soviet Union PHRD Policy and Human Resource Development GDP Gross Domestic Product PIU Project Implementation Unit GPN General Procurement Notice SA Special Account IAS International Accounting Standards SAL Structural Adjustment Loan ICB International Competitive Bidding SOE Statement of Expenditure ICR Implementation Completion Report SPN Special Procurement Notice IMO International Maritime Organization TEU Twenty Foot Equivalent Units KLASCO Klaipeda Stevedoring Company

Vice President: Shigeo Katsu Country Director: Theodore Ahlers (Acting) Sector Manager: Henry G. R. Kerali Project Team Leader: Henry G. R. Kerali ICR Team Leader: Ross Pavis LITHUANIA KLAIPEDA PORT PROJECT

CONTENTS

Data Sheet A. Basic Information B. Key Dates C. Ratings Summary D. Sector and Theme Codes E. Bank Staff F. Results Framework Analysis G. Ratings of Project Performance in ISRs H. Restructuring I. Disbursement Graph

1. Project Context, Development Objectives and Design ...... 1 2. Key Factors Affecting Implementation and Outcomes...... 5 3. Assessment of Outcomes ...... 7 4. Assessment of Risk to Development Outcome...... 12 5. Assessment of Bank and Borrower Performance...... 13 6. Lessons Learned ...... 14 7. Comments on Issues Raised by Borrower/Implementing Agencies/Partners...... 14 Annex 1. Project Costs and Financing ...... 15 Annex 2. Outputs by Component...... 16 Annex 4. Bank Lending and Implementation Support/Supervision Processes...... 20 Annex 5. Beneficiary Survey Results ...... 22 Annex 6. Stakeholder Workshop Report and Results...... 23 Annex 7. Summary of Borrower’s ICR and/or Comments on Draft ICR ...... 24 Annex 8. Comments of Cofinanciers and Other Partners/Stakeholders ...... 27 Annex 9. List of Supporting Documents ...... 28 MAP A. Basic Information Country: Lithuania Project Name: Klaipeda Port Project Project ID: P035776 L/C/TF Number(s): IBRD-70140,TF-21584 ICR Date: 06/24/2009 ICR Type: Core ICR MINISTRY OF Lending Instrument: SIL Borrower: TRANSPORT Original Total USD 35.4M Disbursed Amount: USD 35.4M Commitment: Environmental Category: A Implementing Agencies: Klaipeda State Seaport Authority Cofinanciers and Other External Partners:

B. Key Dates Revised / Actual Process Date Process Original Date Date(s) Concept Review: 07/23/1997 Effectiveness: 10/24/2000 Appraisal: 11/30/1999 Restructuring(s): Approval: 05/11/2000 Mid-term Review: 07/19/2002 Closing: 09/30/2004 12/31/2008

C. Ratings Summary C.1 Performance Rating by ICR Outcomes: Moderately Satisfactory Risk to Development Outcome: Moderate Bank Performance: Satisfactory Borrower Performance: Moderately Satisfactory

C.2 Detailed Ratings of Bank and Borrower Performance (by ICR) Bank Ratings Borrower Ratings Quality at Entry: Satisfactory Government: Moderately Satisfactory Implementing Quality of Supervision: Satisfactory Satisfactory Agency/Agencies: Overall Bank Overall Borrower Satisfactory Moderately Satisfactory Performance: Performance:

C.3 Quality at Entry and Implementation Performance Indicators Implementation QAG Assessments Indicators Rating Performance (if any) Potential Problem Project Quality at Entry No None at any time (Yes/No): (QEA):

i Problem Project at any Quality of No None time (Yes/No): Supervision (QSA): DO rating before Moderately

Closing/Inactive status: Satisfactory

D. Sector and Theme Codes Original Actual Sector Code (as % of total Bank financing) Ports, waterways and shipping 100 100

Theme Code (as % of total Bank financing) Infrastructure services for private sector development 50 50 Pollution management and environmental health 25 25 Water resource management 25 25

E. Bank Staff Positions At ICR At Approval Vice President: Shigeo Katsu Johannes F. Linn Country Director: Theodore O. Ahlers Basil G. Kavalsky Sector Manager: Motoo Konishi Eva Molnar Project Team Leader: Henry G. R. Kerali Pedro N. Taborga ICR Team Leader: Ross S. Pavis ICR Primary Author: Michel Luc Donner Ross S. Pavis

F. Results Framework Analysis

Project Development Objectives (from Project Appraisal Document) The main objective of the project is to strengthen the long-term competitiveness of the Port of Klaipeda in the Baltic Region. The project's second objective is to improve environmental conditions by preventing spills, improving waste reception facilities, and providing necessary disposal facilities and continuous monitoring of environmental conditions at the port.

Revised Project Development Objectives (as approved by original approving authority)

ii (a) PDO Indicator(s)

Original Target Formally Actual Value Values (from Revised Achieved at Indicator Baseline Value approval Target Completion or documents) Values Target Years Indicator 1 : Volume of oil products Value quantitative or (#000 tons): 459 2,000 9,360 Qualitative) Date achieved 06/15/1999 12/31/2002 12/31/2007 Comments Target for 2002 was 2 million tons; actual2.7 million. Since then, volume more (incl. % than tripled to 9.4 million implying average growth of 23% per year. achievement)

(b) Intermediate Outcome Indicator(s)

Original Target Actual Value Formally Values (from Achieved at Indicator Baseline Value Revised approval Completion or Target Values documents) Target Years Indicator 1 : Volume of dry fertilizers Value (quantitative (#000 tons): 1,759 4,085 7,213 or Qualitative) Date achieved 06/15/1999 12/31/2002 12/31/2007 Comments Target for 2002 was 4.1 million tons; actual was 2.35 million (60% short). (incl. % However, since then the volume has nearly tripled to 7.2 million, implying achievement) average growth of 21%.

G. Ratings of Project Performance in ISRs

Actual Date ISR No. DO IP Disbursements Archived (USD millions) 1 06/29/2000 Satisfactory Satisfactory 0.00 2 12/28/2000 Satisfactory Highly Satisfactory 0.35 3 06/22/2001 Satisfactory Highly Satisfactory 3.85 4 11/05/2001 Satisfactory Satisfactory 10.26 5 03/21/2002 Satisfactory Satisfactory 15.46 6 08/14/2002 Satisfactory Satisfactory 16.63 7 05/06/2003 Satisfactory Satisfactory 20.98 8 10/07/2003 Satisfactory Satisfactory 23.12 9 06/04/2004 Satisfactory Satisfactory 24.17 10 10/28/2004 Satisfactory Satisfactory 26.83 11 05/04/2005 Satisfactory Satisfactory 27.53 12 10/26/2005 Satisfactory Satisfactory 29.70

iii 13 03/31/2006 Satisfactory Satisfactory 29.70 14 11/21/2006 Satisfactory Satisfactory 29.70 15 05/18/2007 Moderately Satisfactory Moderately Satisfactory 29.70 16 05/22/2008 Moderately Satisfactory Moderately Satisfactory 29.96 17 12/04/2008 Moderately Satisfactory Moderately Satisfactory 35.31

H. Restructuring (if any) Not Applicable

I. Disbursement Profile

iv 1. Project Context, Development Objectives and Design

1.1 Context at Appraisal With an area of 65,200 square kilometers, Lithuania is the largest and southernmost of the Baltic countries. It lies on the eastern shore of the Baltic Sea and borders with Latvia in the north, Belarus in the east, and Poland and Russia’s Kaliningrad region in the south. Since the time of Lithuania’s independence in March 1990, when an unfavorable economic environment with declining output and deteriorating terms of trade imposed significant hardships on the population, market-oriented reforms remained consistently in place, which resulted in macroeconomic stabilization and transition towards a market economy. Lithuania adopted policies such as monetary and budgetary discipline, currency reform, decreasing energy subsidies, privatization, social assistance reform and restructuring of the financial sector. Gross Domestic Product per capita had grown from US$1,138 in 1994 to an estimated US$2,832 per capita in 1998. While longer-term fundamentals remained sound, Lithuania’s short-term prospects were fundamentally altered by the Russian financial crisis in 1998. GDP growth fell to 4.7 percent for 1998 and growth was estimated at zero percent for 1999. Fiscal outcomes deteriorated, with the consolidated fiscal deficit rebounding to 5.9 percent of GDP for 1998, and around 8 percent for 1999.

In 1997, the country’s exports and imports were equally shared by the European Union, the Former Soviet Union (FSU) and Central and Eastern European Countries (CEEC). Main trading partners were in order of importance Russia, Germany, United Kingdom and Ukraine. Main exports consisted of foodstuffs and agricultural products, textiles, chemicals and fuels. Main imports consisted of machinery, oil and manufactured goods. The 1998 crisis in Russia exposed Lithuania’s dependence on its external environment, given its small size, limited natural resource base and high trade intensity. External trade increased from USD1.3 billion in 1992 and peaked at USD10 billion in 1998, with Russia being the main trading partner, although trade with the EU had become greater. It was becoming increasingly clear that diversification of trade and production, and continued integration with the EU would remain important.

Transport Sector and the Port of Klaipeda. Due to its geographic location, in 2000 freight transit played a key role in the economy of the country. Freight shipments between Russia, the CIS, and the West were the core of the transit industry in Lithuania. The Port of Klaipeda, the country’s only major seaport, was the hub for this industry.

The Port of Klaipeda is located along the east bank of the river connecting the Kursiu Lagoon with the Baltic Sea. All three Baltic countries, in addition to Russia, are natural competitors for East-West cargo shipment; however the Port of Klaipeda, at the time of project preparation, had several advantages. The Port of Klaipeda is year round ice free, while Riga, Tallinn and St Petersburg ports need icebreakers to guarantee access during winter. Compared to other Baltic ports, the Port of Klaipeda had the best hinterland road with a four-lane European standard expressway to Vilnius and rail connection to the East and Moscow. Even though most Baltic ports were operating below capacity, the Port of Klaipeda had demonstrated its competitiveness by having a 16 percent increase in traffic in 1996 followed by an 8 percent increase in 1997. A survey of logistic costs in the region indicated that logistic costs in Lithuania were the lowest in

1 the region. Finally, transport through Klaipeda also offered a faster route to Russia from the West than land transport through Poland, since it avoided the rail transshipment before entering into Poland and bottlenecks at border crossings. Despite these advantages, however, the port needed to improve its deteriorating infrastructure to remain competitive in the future.

1.2 Original Project Development Objectives (PDO) and Key Indicators (as approved) The main objective of the project is to strengthen the long-term competitiveness of the Port of Klaipeda in the Baltic Region. The project’s second objective is to improve environmental conditions by preventing spills, improving waste reception facilities, and providing necessary disposal facilities and continuous monitoring of environmental conditions at the port.

The indicators were agreed to in the Minutes of Negotiation and tracked three main areas: competitiveness, institutional strengthening, and environment.1

Competitiveness: (i) volume of oil products; (ii) volume of dry fertilizers; (iii) generated/diverted traffic; (iv) voyage cost savings; (v) cash flow from operations; (vi) return on net assets; and (vii) debt service coverage. Institutional Strengthening: (i) financial return on investments; (ii) percentage of new capacity investments with economic/financial evaluation; (iii) land lease rate; and (iv) number of employees. Environment: (i) safely disposed dredging material; (ii) number of vessel accidents: (iii) number of days of port closure due to wave disturbances; and (iv)wind speed linking to navigation suspensions.

1.3 Revised PDO (as approved by original approving authority) and Key Indicators, and reasons/justification NA

1.4 Main Beneficiaries By increasing the overall competiveness of Klaipeda Port and improving its safety and the environment,2 the project broadly benefitted the population of the port city through the creation of jobs and increasing income. More specifically, beneficiaries included: (i) shippers, who had enhanced safety, a reduction in transport costs, and a reduction in the time the port was closed due to inclement weather conditions; (ii) importers and exporters; (iii) maritime operators; and (iv) the municipality, through increased economic revenues linked to greater transit traffic.

1.5 Original Components (as approved)

Rehabilitation of the Existing Breakwaters (US$5.4 million). The existing channel entrance to the port is protected by two breakwaters. The northern breakwater was about 190 m long, and the southern breakwater about 880 m long. The breakwaters were built in the 19th century, and in spite

1The full set of indicators is reviewed in Annex 3.

2 Though a containment facility was not built, other project activities such as improved safety and reduction of oil spills contributed to overall improvements.

2 of regular maintenance, required major rehabilitation. Detailed field investigations were carried out to determine the exact nature and specifications of the rehabilitation required. North and South Breakwater Extension (US$16.4 million). The breakwaters were configured such that the Oil Terminal (Naftos Terminalas) and the former State Commercial Port operator (KLASCO) were exposed to the north-western and western waves, with insignificant reduction in wave action inside the port. This resulted in considerable loss in berth utilization from down-time in cargo-handling operations. In bad weather conditions, excessive penetration of waves into the port from the north-west and the west complicated ship maneuvers in and out of the port and due to these disturbances the port was losing, on average, over 40 days per year of operations. An extension by 240 m of the northern breakwater and by 275 m of the southern breakwater addressed this problem. In addition, the extension also reduced the distance between the two breakwater heads, thus limiting the wave energy entering the port, and effectively reducing wave disturbances in the port. Dredging of the Channel Entrance (US$19.0 million). Reconfiguring the channel entrance allowed bigger ships to use the port and improve safety during in/out maneuvers. The existing channel entrance had limited capacity; even under normal weather conditions, the maximum size of ships that could be admitted to the oil terminal could not exceed 28,000 DWT. The channel passed very close to the oil terminal, which required specific ship maneuvers to avoid hitting the oil berths. To improve this situation, the channel was widened to 120 m and deepened to 14 m, allowing ships of up to 60,000 DWT to enter the port. The extensions of both northern and southern breakwaters provided additional protection of the channel. Dredging and disposal of dredged material methods followed the provisions of the London Dumping Convention and international agreements for protection of the Baltic Sea (Helsinki, 1992, and Gdansk, 1993). Improvements in Mooring/Fenders Systems (US$2.0 million). Ships at berth were exposed to longitudinal motions induced by specific wave spectra. This phenomenon occasionally caused mooring lines to break, endangering both ships and berths, and forcing ships to leave the berths without delay, resulting in loss of time in cargo-handling operations. To resolve this situation, specifically designed mooring/fenders were to be installed, mainly consisting of pneumatic fenders, combined with steel mooring lines with nylon tails. This system of mooring/fenders was to be installed at Naftos Terminalas’ and KLASCO’s berths. Wave/Current Monitoring System (US$1.0 million). Wave/current recorders were to be installed at the entrance of the port to assist pilots. Online data would provide necessary information to pilots to make rational decisions during maneuvers and to extend the navigation period under adverse weather conditions without exposing the ships to unwarranted risks. Safety of in-and-out maneuvers was to be increased significantly as those tools became available to the pilots. Port/Ship Discharge Service Equipment (US$1.8 million). The dumping of ship wastes in the Klaipeda port or in its environmentally sensitive approaches was not systematically monitored. Any such pollution would be critical for the fish that hatched in the Kursiu Lagoon and migrations to and from the Baltic. Preventive and mitigation measures were needed to control the situation. These measures would consist of establishing a permanent pollution monitoring unit at KSSA which would be equipped with booms, boats, skimmers, and a waste reception facility. Environmental Mitigation Measures (US$6.1 million). Mitigation measures would limit environmental impacts of the proposed project as well as those derived from the development program of the Port. Under this component a site for depositing contaminated dredged materials

3 was to be selected and a confined disposal facility (CDF) built for contaminated dredged material from the future deepening of the Port. Contract/Lease Management (US$0.2 million). Studies to estimate the appropriate level of land lease rates to avoid cross subsidies between harbor dues and land leases. The new land lease rates would enable an efficient use of land available around Klaipeda Port. The study also was to review leasing contracts management including bidding procedures and to seek improvements towards a more transparent, fair and economically efficient management. Training of the Port Pilots (US$0.5 million). Changes in channel entrance would affect in-and-out maneuvers which required training of port pilots to perform under the new navigation conditions on a simulation model. Pilots would acquire the necessary training for a safer and more skillful navigation of ships, especially under adverse weather conditions, thus reducing ship waiting time. Privatization/Contracting out of Port Services and Port Management Strengthening. (US$1.0 million). Various port services provided by KSSA such as piloting, infrastructure maintenance, or environment protection would benefit from being privatized or contracted out. This technical services contract would include: (i) the preparation of a port privatization seminar and determination of port services that could be privatized or contracted out, (ii) the preparation of tender documents inviting bids for privatization; (iii) assistance to evaluate the bids and negotiate the contracts; and (iv) services to improve the international competitiveness of the port of Klaipeda. It would help KSSA to further dissociate itself from port services and assume a landlord status while retaining regulatory and control functions over the private sector operators. The study would also cover steps necessary for the potential privatization of KSSA at a later stage. Project Supervision, Environmental Mitigation and Procurement Assistance (US$1.9 million). Implementation of the environmental mitigation program, supervision of construction and civil works under the project, and review of regulations and penalties related to fisheries protection at marine construction sites.

1.6 Revised Components The component for Port/Ship Discharge Service Equipment (US$1.8 million) was dropped from the project as the Government received grants from other donors for projects which encompassed activities to be funded under this component: Danish funding supported a port waste management plan which included monitoring and the collection of ship waste; Lithuania, Finland and Denmark financed a program for equipment for Klaipeda to manage oil spills. This had little effect on the Bank‘s project financing as the majority for this component was to be non-Bank financed (NBF). The US$300,000 that was to be funded by the Bank was reallocated to dredging activities.

1.7 Other significant changes The project was extended twice, largely in order to facilitate the building of the confined disposal facility for dredged materials. Negotiations among a wide range of political stakeholders took place over several years. Conditional assurances that the construction would take place were given at different intervals, but were ultimately unsuccessful during the life of the project.

4 2. Key Factors Affecting Implementation and Outcomes

2.1 Project Preparation, Design and Quality at Entry The Bank has had long experience in port projects and the project preparation team utilized this in the project’s design. In particular, lessons compiled by OED stressed that precipitate preparation often leads to project failure; that good geo-technical and hydrological analysis is essential; that a thorough knowledge of port operations must be complemented by strong borrower commitment; and that strong technical assistance on procurement issues and supervision of civil works problems are essential to ensure the success of project implementation.

Preparation started early by testing various construction alternatives and was completed with a thorough engineering study of the selected solution, including ship navigation simulations by port pilots under the modified port entrance conditions. Significant expert assistance was provided by port and shipping specialists in the course of preparation. Implementation and supervision functions were established, and consultants assisted and trained the project implementation unit (PIU) staff to handle procurement issues and necessary financial management and accounting systems. A special focus on environmental protection aspects of the project was central to the project preparation effort.

For analysis purposes, the project can be split in 2 areas:

• Rehabilitation and improvement of navigability, navigational safety and protection of port installations and operations from recurring heavy weather conditions. Here, the impact on competitiveness of restoring the decaying navigation support infrastructure, and further improving it, was clearly identified; and

• Specific environmental preventive and mitigation measures. The idea that improving maritime access and port installations safety would contribute decisively to the environmental protection of the area was adequately captured by the team at the onset of the project.

The dual nature of the overall objective of the project was translated into a well balanced combination of mutually reinforcing components that provided a variety of specific solutions to the issues at hand.

2.2 Implementation Key factors during implementation

Confined disposal facility (CDF). At the time of the closing of the loan on December 31, 2008, all components had been successfully completed, except the CDF. The initial date of completion had been set at September 30, 2004. As noted above, however, there were two two-year extensions: the first to September 30th 2006; the second to December 31st 2008. In both cases, the extensions were related to delays incurred by the construction of the CDF which was hampered

5 by such issues as changing site selections, related property rights, approvals needed from several government agencies, and decisions on appropriate technical methods to be implemented.

The material removed under the project during the dredging and reconfiguration of the entrance channel, and the additional dredging carried out in the center of the port, were closely monitored for safety by external specialized firms (BCEOM, then BLG). Almost all of the dredged material was clean and was used in the surrounding areas for beach replenishment. A small amount of the material contained low level contaminants which, according to international standards and regulations, was within the range approved for disposal in one of the designated deep open-water disposal sites in the Klaipeda coastal zone,

A final consensus among the Lithuanian authorities as to where, when and how the CDF will be built and financed has not yet been reached; however, KSSA has committed in writing to the Bank that it will construct the CDF with its own resources, and has submitted an implementation timetable foreseeing the completion of the CDF by end 2010. The process is at the feasibility/EIA level. The facility will conform to EU environmental regulations. KSSA has also given assurances to the Bank that no dredging of contaminated soil will take place until the CDF is operational.

It is worth noting that this component suffered several difficulties and drawbacks of the same nature as a similar project component in the Sczeczin-Swinoujcie port project in Poland during the same period of time. The lessons to be learned from these situations will be addressed in section 6.

The breakwater rehabilitation and extension, dredging and wreck-removal components were satisfactorily completed, in spite of various delays and extensions due to periods of extreme weather conditions, unexpected condition of the soil in some places (including the need to dispose of an unexploded bomb), and fire on board the floating crane initially assigned to carry out the wreck-removal. Considering the magnitude of the tasks involved, these types of incidents are not uncommon and can, in some respects, be expected to occur. In each case, KSSA’s assessment of the circumstances, causes, and solutions were endorsed by the concerned engineer/technical supervisors, and the Bank team carefully followed up.

The wave/current monitoring system, procured in 2005, included a warranty through the end of 2006 (extended six months). During the summer of 2008, two monitoring stations were removed from the water to accommodate channel dredging and, subsequently, stopped functioning. KSSA is in discussions with the vendor on whether or not to repair the system or replace the equipment with a newer technology, which changes frequently.

The training of the port pilots was conducted successfully and was considered very satisfactory by KSSA. Training will be continued after completion of the Bank-funded cycle using KSSA’s own resources, with the same vendor, including the yearly updating of the port access simulation model.

6 2.3 Monitoring and Evaluation (M&E) Design, Implementation and Utilization An appropriate set of indicators for this type of port project were identified during the design phase and were well utilized to measure progress on all major project activities. Sufficient measures were put in place to ensure regular and accurate collection of data, which was carried out by KSSA through its Project Implementation Unit. Updated indicators were incorporated into all project reports as required. Collected data – especially with regard to volume of oil products and fertilizers and environmental indicators, such as safely disposed dredging materials – was regularly used to guide decision making on related project activities.

2.4 Safeguard and Fiduciary Compliance KSSA retained a German consulting company to supervise the entrance channel dredging and shipwreck removal works, and the short-term environmental monitoring, which also included sub-contracting to local institutes to monitor fish migration, sediment sampling, and slope stability.

During preparation, erosion of beaches and sand dunes was a concern. Measures were designed and put in place to continually compensate for ongoing erosion by disposing of clean dredging masses on the affected beaches. After completion of the breakwaters and initial dredging works, UAB "Geoprojektas" prepared a final report which concluded that there had been no significant negative impacts due to the works in the port.

All fiduciary procedures were carried out according to agreements and guidelines. Financial reports were received on a regular basis and audits were carried out as required. Safeguards compliance, financial management and procurement were consistently rated satisfactory.

Issues relating to the CDF are described above.

2.5 Post-completion Operation/Next Phase Considering the increased competition to be expected for hinterland cargoes in the Baltic Sea, if there was appropriate interest, it would be beneficial to continue to support KSSA and the Lithuanian Government3 in exploring the requirements, needs and ways and means to develop intermodalism between the port and its inland customers (e.g., Belarus and Russian clients). The good business atmosphere that surrounds the Klaipeda port has already allowed the emergence of a reasonably prosperous Klaipeda Free Economic Zone.

3. Assessment of Outcomes

3.1 Relevance of Objectives At the time of the project’s preparation a survey in the region indicated that logistic costs in Lithuania were the lowest in the region. Transport through Klaipeda offered a faster route to Russia from the West than land transport through Poland. Compared to other Baltic ports, the Port of Klaipeda had the best hinterland road with a four-lane European standard expressway to

3 A system of transport that provides the seamless movement of cargo by using two or more different modes of transport like ships, trains, river-barges, trucks or planes, in a single journey.

7 Vilnius and rail connection to the East and Moscow. Despite this favorable competitive position, however, the port had an urgent need to improve its deteriorated infrastructure if it was to remain competitive in the future. The components of the project were well designed to address this issue – not only ensuring continued competitiveness, but also addressing the increasingly important issues of safety and environmental protection. The components were designed as an intricate set of varied but complementary and mutually reinforcing elements that ended up contributing to more than one objective. For example, the rehabilitation, redesign and improvement of the port access directly contributed to both safety and competitiveness, and by preventing navigational incidents (conducive to oil spills), also to environmental protection.

It can be said that the design of the project amply and astutely covered the objectives and only the inconclusive construction of the CDF prevented a fully successful completion. The table below gives a component-by-component breakdown of how each component fit into this complimentary project design.

Project components’ contribution to objectives Environmental Competitiveness Safety protection Rehabilitation of Bigger ships, protect oil Safer Reduce collision & spillage breakwaters berth from weather navigation risk Bigger ships, protect oil Safer Reduce collision & spillage Extension of breakwaters berth from weather navigation risk Deeper ships, more cargo Safer Reduce collision & spillage Dredging of channel intake per ship navigation risk Equal treatment of Safer Additional dredging operators (competition) navigation Wave/current monitoring Safer Reduce collision & spillage & laser-docking navigation risk Fast detection & intervention Pollution monitoring unit capacity Environmental mitigation Aborted cdf construction Contract/lease Port authority capacity management building Capacity to handle bigger Safer Reduce collision & spillage Pilots training ships navigation risk Port management Port reform seminar and strengthening technical assistance

8 3.2 Achievement of Project Development Objectives

Objective 1: Strengthen the long term competitiveness of the Port of Klaipeda in the Baltic Region.

Fully achieved (and exceeded)

The project’s activities have resulted in the Port being able to:

• Receive and serve bigger ships, thus increasing traffic and volume; • Provide safer conditions, through improved assistance to navigation and deepening of the approaches and facilities; • Curtail the loss of precious productive vessel operation hours during bad weather conditions; • Promote competition between private operators by providing equivalent water-depth conditions to competitors; and • Convince the second biggest global container line (Wiss-based Mediterranean Shipping Co - MSC) to invest in a container terminal in Klaipeda (Klaipedos Smelte - quays 83- 100) – thereby also fostering competition and anchoring a large-volume provider to the port.

The following indicators tracked competitiveness, institutional strengthening and environment. Additional comments on these will be found in Annex 3. (Original targets only projected to 2002.)

9

Indicator Baseline 2002 2008 Actual Target Competitiveness Impact Volume of Oil Products (‘000 tons) 855 2000 9,360 Volume of dry Fertilizers (‘000 tons) 1,687 4085 7,220 Generated/ Diverted Traffic (000 tons) 0 0.5 m tons 5.3 m tons Voyage cost savings for using “Panamax” class 0 $2 m $30 m vessels (US$ million) Cash Flow from Operations (US$ million) $15.5 m $19 m $24 m Return on net assets 8.5% 9.3% 6.0%4 Debt service coverage 13.8 6.4 7.815 Institutional Strengthening Financial return on investments NA >libor + 4% >libor + 4%6 for capacity expansion Percentage of new capacity investments with N/A 100% 100% economic/financial evaluation Land lease rate (US$/year/sq.m) 0.82 0.8 1.86 Number of employees 286 270 299 Environmental Indicators Safely disposed dredging material (m3) 0.38 m 0.5 m 1.2 m Number of vessel accidents 00 27 Number of days of port closure 25 20 0 (due to wave disturbance) Wind speed linking to navigation suspension 20 20 208 (m/s) (from West)

The improved competitiveness of the port of Klaipeda, supported by the Bank financed project, has largely contributed to Klaipeda’s readiness to participate in, and prosper from, the global growth which occurred during the period of project implementation. Klaipeda’s ranking in the world-wide league of container ports provides convincing data that the port grew at an even faster rate than its peers during this period, going from a ranking of 243rd to 145th in 5 years.9 (See chart.)

4 Indicator is calculated dividing net profit by all assets.

5 Since 2002 has been in the range of 5.6 to 11.6

6 This changes from year to year but must maintain above the minimum of +4.

7 Both accidents occurred due to Ship-Master’s error.

8 Shipping in the port is prohibited when wind speed is over 20 m/s. With new breakwaters, vessels can stay alongside the berths in the port with Harbor Master's permission when Westerly wind is over 20 m/s. The indicators were reviewed in 2002 and the 2002 target for this indicator was revised from 30 (which was in the PAD) to 20.

9 Similar data prior to 2004 is not available.

10

Klaipeda among world-wide container ports

300

250

200

150 ranking

100

50

0 2004 2005 2006 2007 2008

(Source : Containerisation International)

Objective 2: Improve environmental conditions by preventing spills, improving waste reception facilities, and providing necessary disposal facilities and continuous monitoring of environmental conditions at the port

Partially Achieved

• Preventing spills: achieved by improving navigational safety, redesigning and extending the breakwaters, broadening and deepening the entrance channel, training the pilots, protecting the oil terminal from the swell and setting up a permanent well-equipped anti- pollution monitoring unit. • Improving waste monitoring and reception facilities: achieved (indirectly). Contracts were signed with other donors that encompassed activities to be funded under this component: Danish funding supported a port waste management plan which included monitoring and the collection of ship waste; Lithuania, Finland and Denmark financed a program for equipment for Klaipeda to manage oil spills. • Providing necessary disposal facilities: not achieved. The confinement facility was not built, though the Bank has received written assurances that it will be built in 2009-2010. • Monitoring of continuous environmental conditions at the port: achieved by setting up a permanent pollution monitoring unit at KSSA.

3.3 Efficiency The ex post economic return, taking into account actual construction costs and actual traffic through 2008, is 38 percent, down only slightly from the appraisal estimate of 41 percent. The difference is not significant. The risk of an unsatisfactory return from here on is minimal; even if

11 benefits turned out half the ‘best estimate’ starting from 2009 until the end of the 25-year evaluation period, the ERR would still be 33 percent.

3.4 Justification of Overall Outcome Rating

Rating: Moderately Satisfactory The project was highly relevant and its efficiency satisfactory. Though most aspects of the project’s objectives were achieved, the CDF was not built which, given the importance of environmental concerns, must bring down the overall outcome rating.

3.5 Overarching Themes, Other Outcomes and Impacts

(a) Poverty Impacts, Gender Aspects, and Social Development NA

(b) Institutional Change/Strengthening KSSA has well integrated the landlord port concept, demonstrated by its ability to attract one of the biggest global container lines to invest in its terminal facilities in Klaipeda. Also indicative of its competitive approach is its sound policy of ensuring the provision of similar water depth to competing private port operators (tenants).

(c) Other Unintended Outcomes and Impacts (positive or negative) NA

3.6 Summary of Findings of Beneficiary Survey and/or Stakeholder Workshops NA

4. Assessment of Risk to Development Outcome

Rating: Moderate

Not including the risks inherent in the global economic crisis, the main risk to the development outcome resides in the competitive environment and the substantiality of the political will displayed by the Russian Federation to expand, favor, and protect its own port installations. Klaipeda, however, still has the unique advantage of being the northernmost port in the Baltic Sea with all-year-round ice-free access.

The KSSA has displayed a growing maturity in assuming its role as a landlord port, as can be illustrated by the examples below:

• By adjusting the dredging to ensure equal water-depth to competing “tenants” (private port operators). • By succeeding to attract a major container operator to invest in a container terminal in the port.

12 Given these indications, it can be reasonably expected that the required maintenance and other budget supports necessary to the upgraded port installations will continue, enabling the Port Authority to maintain the benefits accrued from the project.

5. Assessment of Bank and Borrower Performance (relating to design, implementation and outcome issues)

5.1 Bank Performance (a) Bank Performance in Ensuring Quality at Entry

Rating: Satisfactory The design was appropriate and highly relevant to the country conditions. The Bank team incorporated lessons learned in port projects and was diligent in its technical preparation, carrying out testing of various construction alternatives and completing thorough engineering studies. They worked closely throughout the preparation with government counterparts and in particular, put in place a good monitoring and evaluation system.

(b) Quality of Supervision

Rating: Satisfactory The team supervised the project closely, carrying out more than the minimum number of required missions, writing comprehensive aide memoires and flagging outstanding issues that required attention by management. The team made sure to enlist the support of technical experts whenever required – in a project with more than its share of technical issues. Though the CDF was not built during the project, the team demonstrated great flexibility doing everything it could to work with counterparts in developing new approaches, new locations, meeting with stakeholders and finally, extending the project.

(c) Justification of Rating for Overall Bank Performance

Rating: Satisfactory Quality of entry, design and supervision were all satisfactory, and the team demonstrated technical competence, flexibility, and a focus on development impact throughout the life of the project.

5.2 Borrower Performance

(a) Government Performance

Rating: Moderately Satisfactory All aspects of the project went smoothly with the exception of the building of the CDF. The Bank repeatedly raised the issue of the persistent delays with KSSA, as well as with the Ministry of Transportation in Vilnius. The Bank team also provided senior environmental consultants during the course of project implementation, and supported KSSA in financing specialized consultants under the Loan to help resolve the outstanding issues. Despite these efforts, however, the Government was not able to bring together the multiple stakeholders who had vested interests in the outcome of this activity, and they were not able to speed up the slow

13 approval processes involving land ownership. Its inability to accomplish these tasks was the primary cause for the CDF not being built.

(b) Implementing Agency or Agencies Performance

Rating: Satisfactory The implementing agency collaborated closely with the Bank team throughout and was diligent in all aspects of its project supervision, including procurement, financial management, carrying out its fiduciary obligations, maintaining the monitoring and evaluation system, and ensuring adequate supervision of the technical works. They deserve particular recognition for their handling of the difficult circumstances involved with the shipwreck removals in the vicinity of the breakwaters.

(c) Justification of Rating for Overall Borrower Performance

Rating: Moderately Satisfactory Given the Government’s responsibility for the CDF’s incompletion (the outcome which is responsible for the overall MS rating of the project), their moderately satisfactory rating must hold sway for overall Borrower performance.

6. Lessons Learned

If the Bank is going to finance the construction of containment facilities for contaminated materials produced by dredging, it needs to ensure a deep knowledge of the country’s laws and regulations vis a vis the Bank’s own rules and guidelines. If at all possible, a binding agreement on the facility’s location, as well as treatment technology, should be pursued prior to loan signing.

The strategic linking of the components identified and designed in support of the first development objective (and part of the second) were well conceived in their complementarities; each component enhanced the other such that the outcome was greater than the sum of its parts. The design should be viewed as a model for similar operations.

The meticulous preparation work that was carried out at the onset of the project and the strong technical, i.e., geo-technical and hydrological support by specialists and engineering firms is a remarkable feature in this project, and like the design, should be replicated where appropriate.

7. Comments on Issues Raised by Borrower/Implementing Agencies/Partners (a) Borrower/implementing agencies Comments from the Borrower (Annex 7) are consistent with the assessment represented in this report.

(b) Cofinanciers

(c) Other partners and stakeholders NA

14 Annex 1. Project Costs and Financing

(a) Project Cost by Component (in USD Million equivalent) Actual/Latest Appraisal Estimate Percentage of Components Estimate (USD (USD millions) Appraisal millions) CIVIL WORKS 46.90 48.73 103.90 GOODS 4.80 1.07 22.29 CONSULTANT SERVICES 4.50 1.60 35.56 PIU OPERATING COSTS .30 .70 233.33 (including auditors)

Total Project Cost 56.50 52.10 92.21

Project Preparation Fund 0.00 0.00 0.00 Front-end fee IBRD .40 .35 87.50 Total Financing Required 56.90 52.45 92.18

(b) Financing Appraisal Actual/Latest Type of Percentage of Source of Funds Estimate Estimate Cofinancing Appraisal (USD millions)(USD millions) International Bank for Reconstruction 35.36 35.36 100 and Development Bilateral Agencies 21.54 17.09 79.34

15

Annex 2. Outputs by Component

Rehabilitation of the Existing Breakwaters

• Old South breakwater rehabilitation - 1480 m • Old North breakwater rehabilitation - 150 m

North and South Breakwater Extension

• New South breakwater length - 278 m • New North breakwater length - 205 m • Volume of the rock used for the breakwaters - 365820 m3

Dredging of the Channel Entrance

• Volume of dredging - 3,8 MIL m3, port entrance channel was dredged by 2 - 3 m to allow PANAMAX type vessels to call the port

Shipwreck near port entrance removed - volume 6273 t.

Training of the Port Pilots • Twenty pilots trained for safer and more skillful navigation of ships, especially under adverse weather conditions Wave and Current systems equipment

• Wave current station • Three equipment units and one meteorological station • Laser docking system is installed at 2 oil berths

16 Annex 3. Economic and Financial Analysis

1. Achievement of the project objectives was measured by 15 indicators, grouped under three headings:

(a) Competitiveness Impact (b) Institutional Strengthening (c) Environmental Indicators

2. Almost all show that the targets were achieved or exceeded. The comparison is complicated by the fact that the appraisal traffic targets were for only three early years –2000, 2001 and 2002, the year when it was expected that the main works would be complete. Instead, the actual outcome saw the main works not completed until 2004, causing a lag in the growth of traffic. Some targets for 2002 or earlier were not met within that period, partly because the works were not yet finished. However, the trends since then have been very positive, so that the 2002 targets were reached a year or two later. Thus, a summary assessment would be: “targets exceeded but with delay”.

Indicator by Indicator

Volume of Oil Products: Target for 2002: 2 million tons, actual 2.7 million: exceeded by a third. Since then the volume has more than tripled to 9.4 million tons, implying an average growth of 23% per year --good.

Volume of Dry Fertilizers: Target for 2002: 4.1 million tons, actual 2.35 million: fell short, only 60% of target. However, since then the volume has nearly tripled to 7.2 million tons, implying an average growth of 21% per year --good.

Generated/Diverted Traffic: Target for 2002: 0.5 million tons, actual 0.7 million: exceeded by a third. Since then the volume has grown by a factor of eight, to 5.3 million tons, implying an average growth of 41% per year –very good.

Voyage Cost Savings from making port accessible to Panamax-size vessels: Target for 2002 $2 million, actual $2 million: target met. By 2008 this value had reached $30 million per year --satisfactory.

Cash Flow from Operations: Target for 2002: $19 million, actual $24 million: exceeded. Since then it has been as high as $31 million and as low as $11 million, but most recently, in 2007-08, it was at $24-26 million --adequate.

Return on Net Assets: Target for 2002: 9.3%, actual 7.3%: fell short. Since then it has been in the range 2.5% to 7.7% and most recently (2008) 6%. Somewhat low.

Debt Service Coverage: Target for 2002: 6.4; actual 9.1: exceeded. Since then it has been in range 5.6 to 11.6, most recently 7.8, which is more than adequate.

17 Financial Return on Investments for Capacity Expansion: Target and actual: >LIBOR+4% every year.

Percentage of New Capacity Investments with Economic/Financial Evaluation: Target: 100%, actual 100% every year since 2002: met.

Land Lease Rate per year: Target for 2002: $0.80 per sq.m., actual: $0.95: exceeded. Since then it has grown steadily year by year to $1.86. Very satisfactory.

Safely Disposed Dredging Material: Target for 2002 0.5 million tons, actual 1.2 million tons: exceeded. Thereafter it ranged between 0.5 million and 1.5 million tons.

Number of Vessel Accidents: Target throughout: 0, actual 0 throughout (met), except 2 in 2008. Both of these accidents were unrelated to port conditions and were attributed to the Ship-Master’s error.

Number of Days of Port Closure (due to wave disturbance): Initial value 25 days, target for 2002: 20, actual 3 (exceeded –i.e. favorable). From 2003 through 2008: actual 0 --very satisfactory.

Project Costs: Appraisal Estimates and Actuals

3. As shown in Annex 1, the civil works, which accounted for 82% of total financing required, experienced only a small over-run –of less than $2 million or just under 4%. In contrast, substantially less was spent on goods and consultant services than expected, leading to a net under-run of $4.4 million (8%).

Traffic: Appraisal Estimates and Actuals

4. The following table compares the traffic forecasts for 2002 with actuals for that year and the six years since then. It also shows the rate of growth over this period.

18 Main Traffic Categories, Estimates And Actuals

2002 2003 2004 2005 2006 2007 2008 Oil Products Target (000 tons) 2,000 Actual 2,667 3,540 4,500 5,800 6,772 7,139 9,360 Actual/target (ratio) 1.33 Growth from previous yr 33% 27% 29% 17% 5% 31% 23% Avg Dry Fertilizers Target (000 tons) 4,085 Actual 2,350 2,600 2,724 4,640 5,399 7,213 7,220 Actual/target (ratio) 0.58 Growth from previous yr 11% 5% 70% 16% 34% 0% 21% Avg Generated/Diverted Traffic Target (000 tons) 500 Actual 676 1,450 100 1,540 1,820 3,750 5,346 Actual/target (ratio) 1.35 Growth from previous yr 115% -93% 1,440% 18% 106% 43% 41% Avg

4. The economic analysis done at appraisal foresaw rapid growth in traffic during the first five years after completion. Because of the delayed completion of the works, the actual traffic fell short of the forecasts. The ex post data supplied by KSSA show that the major bulk cargoes, oil and fertilizer (making up three-fifths of total tonnage handled) in 2005 fell short of the forecast by 45% but by 2008 the gap had closed to 20%. We project that by 2028, the end of the 25-year evaluation period, this gap will have been further narrowed to 10% --i.e. the updated forecast will be 90% of the appraisal forecast.

5. The actual construction cost (works and equipment) was about 4% less than the appraisal estimate. As for the unit values of savings in shipping costs and the avoidance of accidents, international trends suggest that they increased somewhat in real terms during the first five years after completion, that is, until 2008, though the global financial crisis of 2009 will have set them back again. We lack detailed updated values and therefore retain the appraisal values as a central estimate.

6. On this basis the ex post economic return is now 38%, down from 41% at appraisal. The difference is barely significant, given continuing uncertainties about traffic and shipping costs. But the result is far in excess of the cost of capital and very robust. Even if the annual benefits from 2009 until the end of the period were to be half of the ‘central estimate’ forecast, the final ER would still be 33%.

19 Annex 4. Bank Lending and Implementation Support/Supervision Processes

(a) Task Team members Responsibility/ Names Title Unit Specialty Lending Pedro Taborga Sr. Transport Economist ECSSD Team Leader Robert Kietlinski Operations Officer ESCIE Operations Patrick Fourgeaud Senior Port Operation Specialist TUDTR Technical Specialist Nicholay Christyakov Sr. Finance Officer ECSPS Financial Mgt Karina Mostipan Senior Procurement Specialist ECSPS Procurement Iwona Warzecha Sr. Financial Management Specialist ECSPS Financial Mgt Supervision/ICR Michel Audige Lead Transport Specialist ECSSD Transport Specialist Anders O. Halldin Consultant ECSIE Consultant Richard Martin Humphreys Sr. Transport. Econ. ECSSD Transport Specialist Henry Kerali Lead Transport Specialist ECSSD Transport Specialist Cesar Augusto Queiroz Lead Highway Engineer ECSSD Team Leader Karina Mostipan Senior Procurement Specialist ECSPS Procurement Iwona Warzecha Sr. Financial Management Specialist ECSPS Financial Mgt Graham Smith Consultant ConsultantEconomist Ross Pavis Operations Officer ECSSD ICR Team Leader Michel Luc Donner Sr. Port Specialist ETWTR ICR Author Marie Laygo Sr. Program Assistant ECSSD Project Support

20 (b) Staff Time and Cost Staff Time and Cost (Bank Budget Only) Stage of Project Cycle USD Thousands (including No. of staff weeks travel and consultant costs) Lending FY95 91.40 FY96 92.84 FY97 35.11 FY98 0.00 FY99 83.82 FY00 49 260.88 FY01 1.22 FY02 0.94 FY03 0.00 FY04 0.00 FY05 0.00 FY06 0.00 FY07 0.00 Total: 49 633.18 Supervision/ICR FY95 0.00 FY96 0.00 FY97 0.00 FY98 10.86 FY99 0.00 FY00 19.35 FY01 20 88.19 FY02 15 68.31 FY03 14 69.20 FY04 11 58.56 FY05 10 83.02 FY06 9 73.08 FY07 2 30.19 Total: 81 500.76

21

Annex 5. Beneficiary Survey Results NA

22

Annex 6. Stakeholder Workshop Report and Results NA

23 Annex 7. Summary of Borrower’s ICR and/or Comments on Draft ICR

The Loan IBRD 70140-LT for Klaipeda Port Project (LT-PE-35776) was signed between the World Bank (WB) and Klaipeda State Seaport Authority (KSSA) on August 03, 2000. The first Loan Closing Date was extended until September 30, 2006. The second Loan Closing Date was extended until December 31, 2008.

It is necessary to stress that the Klaipeda Port Entrance Rehabilitation project, comprising complex port construction works, procurement of goods and technical assistance components, was the largest (in terms of scale and expenditure) which SE KSSA had undertaken from borrowed funds.

A basic component of the project – new breakwaters – has absolutely changed the configuration of the port entrance. Due to this rehabilitation, bigger vessels now are allowed to stay at berths nos. 1, 2 and especially no.7 during stormy weather. The seventh berth, in particular, had been especially dangerous; high waves had been able to reach the berth with very damaging results. Prior to the reconstruction, when storms were anticipated, some vessels had to stay out of the port until the weather had calmed; other vessels already in the port and which had not completed their activities had to either leave the port having not finished their loading/unloading operations or remain in the port berthed and risk breaking their mooring lines. Reduction of the high wave effect was documented by scientists at the Sea Researches Centre. Even those who originally had doubts regarding the necessity of the port entrance reconstruction have been convinced that the port has become much safer.

Another works component – port entrance channel dredging (up to – 15 m depth between breakwater heads) allowed Klaipeda Port to let PANAMAX types of vessels to call on the port and load safely. Under the project, project port pilots were trained to operate the ships when passing through the new port gates which had changed the navigational situation. A wave /current measurement system was installed (in 2003) which due to the rapid changes in computer technologies will now need modernization.

The Project envisaged and took into account technical supervision, the environmental impact, and project monitoring; good quality services were delivered by experienced international companies. The participation of World Bank specialists engaged in project implementation is worth noting; in all cases SE KSSA received qualified advice on technical, administrative, procurement and financial issues. Particular attention from the Bank was necessary during the two loan extensions and when the issue of redistribution of loan funds arose.

It is stressed that having implemented the Klaipeda Port Project financed from the World Bank loan, it is became possible to invest a lot of funds into essential port infrastructure, and thus strengthen the competitiveness of all the Klaipeda Port companies in the Baltic Region. At the same time, environmental conditions were improved as general standards were raised to meet the standards expected under the project.

All the Project components were successfully performed in the due time except for the Confined Disposal Facility, as there were a number of serious obstacles preventing this facility from being

24 built. After the Feasibility Study and Environmental Impact Assessment of the Confined Disposal Facility were completed, a Detailed Territory Plan of the Port Territory Southwards from the Senoji Smiltele Street was developed covering the prospective CDF location at the old harbor for boats in the Smeltes Peninsula. During the Detailed Plan approval procedure, the Klaipeda Municipality posed a number of unreasonable requirements to the Port Authority, for example, carrying out an urban assessment of an area that is outside the city. Due to having to carry out such requirements, the approval procedures took longer than expected. In order to compensate the old harbor for the small leisure boats that had belonged to the Municipality, SE KSSA took responsibility for designing and building a new harbor at the address Kairi g. 17, and these preparation activities services are still underway.

In accordance with the Confined Disposal Facility Feasibility Study prepared by ECOREM in 2002, the total estimated quantity of sediments to be cleaned was 444 ths. m3. It was taken into account that an additional 20 ths.m3 of the contaminated sediments might accumulate annually. Thus, during a 5 and 10 year period the quantities calculated were 544 ths.m3 and 644 ths.m3 respectively. The whole project, together with channel dredging the old boat harbor structure could cost up to 45 Mil. LTL, not taking into account CDF operation costs. According to the Coastal Research and Planning Institute under Klaipeda University, at present the quantity of contaminated sediments in the port could reach just 200 ths.m3. Taking into account the costs mentioned above, investment that should have been made, would have made 225 LTL, without dredging and treatment in the facility, while the cost of maintenance dredging today is 20 – 23 LTL per 1m3.

In the case of CDF project implementation, a huge amount of money would have been spent at the cost of other projects, and in principle would have been useful only to a single company, namely, JSC “Vakaru laivu gamykla”. Moreover, 9 ha of the territory that is close to big port terminals would be occupied by the CDF. In the southern part of the port, intermodal cargo volumes grow very fast, consequently this area would be better allocated for direct port needs, i.e. for port development. For all these reasons, the majority of the port’s operators have a negative opinion concerning the CDF construction at the Smeltes peninsula.

Having assessed the situation as described above, alternative solutions of the problem were looked for. In 2008 ECOREM presented CDF Design Proposals at the SC “Toksika” (under the Ministry of Economy) territory. This company has a license to collect, keep, treat and use dangerous wastes. Contaminated sediments would be treated without creating any threat to the sensitive environment of the Kuronian lagoon and Baltic Sea coast.

Practice has shown that the project of the CDF is very complicated, first, due to an unclear legal basis, second, due to unsolved land property and responsibility issues, necessitating that decisions be taken at the Government level. Building a CDF might be worth having a separate project to fully concentrate on its preparation and implementation with all the attention required both from the Borrower (Government) and from the World Bank sides.

As the problem of contaminated sediments is important not only to the port, but also to Klaipeda City and to the Region, it was decided to present the information concerning the CDF to the Strategic Planning Committee under the Government of the Republic of Lithuania in order to

25 name the implementing responsible entities and to envisage financing. At present, the quantities of the sediments are being clarified. Hopefully, when the Strategic Planning Committee concludes its study, a more effective solution to the problem of contaminated sediments and treatment will be found.

26 Annex 8. Comments of Cofinanciers and Other Partners/Stakeholders NA

27 Annex 9. List of Supporting Documents

1. Staff Appraisal Report Project Appraisal Document, 2000 2. Klaipeda Port Entrance Rehabilitation Project Environmental Impact Assessment, 1999 3. Loan Agreement 4. Aide Memoires 5. Country Assistance Strategy for Lithuania (Report No 19135-LT, April 19, 1999) 6. Implementation Status & Results Reports 7. Annual Audit Reports and other project financial statements 8. Quarterly Project Management Reports 9. Project Information Document and Integrated Safeguard Datasheet 10. Inception report May 1998 on Design of Klaipeda Port Entrance by Frederic Harris 11. Plan for Privatizing Port Operations in Lithuania 12. Environmental Monitoring Reports of Breakwaters 13. Inception Report for Klaipeda Port Entrance Channel Dredging and Sunken Wreck Removal Works

28

IBRD 33437

N 54

N 56 N 55 ° ° ° S 27 ° E U R 40 Miles 60 Kilometers A LITHUANIA L E B BELARUS

s 40 l i

p

y v

p a o 20 u T To g o t

u T To n

s a y l L Lyntupy i D Daugavpils

p

v

a 20 o

ToT g Ignalina Ignalina

u

a

Daugavpils D n Snieckus Snieckus a

k g

i 26 ° E r y o n T To o n Zarasai Zarasai l e This map was produced by the Map Design Unit of The World Bank. The boundaries, colors, denominations and any other information shown on this map do not imply, the part of The World Bank Group, any judgment on the legal status of territory, or endorsement or acceptance of such boundaries. t a y 0 0 o m s

T To y i b S Smorgan o o n o m ToT T To

26 ° E k K Kobylnik h

s Akniste A Svencionys Svencionys

O Oshmyany Utena Utena Svencioneliai Svencioneliai Rokiskis Rokiskis

o

v

o

ilnia Pabrade Pabrade n o

Kalnas T To o V Naujoji Naujoji Vilnia Svedasai Svedasai r (292 m)

o

V Voronovo

Juozapines/ Pandelys Pandelys Moletai UTENOS UTENOS Moletai Suvainiskis Suvainiskis s Jasiuni y Jasiuni k r

e

Eisiskes n Salcininkai Salcininkai

vintos u Kupiskis Kupiskis

M M o d VILNIUS T To a 25 ° E Sirvintos Sir s R Radun ri 25 ° E e VILNIAUS VILNIAUS N Ukmerge Ukmerge i Subacius Subacius k

Birzai Birzai

rakai h i

Anyksciai i Anyksciai

j j T Trakai s

ys i

o

o o l t

t i

T To n

n s

e

e a v v

S S arena V Vasilishki Kavarskas Kavarskas V Varena Rudiskes Rudiskes e l A

e

ANEVEZIO o b o I r u Likenai Likenai

To Kaisiador T Kaisiadorys abalninkas a PANEVEZIO P v Pasvalys Pasvalys Ziezmarai Ziezmarai Vabalninkas Barbele B V e

L Daugai Daugai V Jonava Jonava T Merzine Merzine

a Jieznas Jieznas k

s AUS

o

A

u

s s

i i s

T To s

z z

a a

e e

v

a v n n e e

N N u

Joniskelis u Joniskelis a m B Bauska m

e L e LATVIA N N n Panevezys Panevezys Alytus Alytus Kedainiai Kedainiai YT d Druskininkai Druskininkai o

T To o

r Kaunas Kaunas 24 ° E H Hrodna 24 ° E

ALYTAUS AL Gudziunai Gudziunai

e KAUNO KAUNO Seduva Seduva

a v Linkuva Linkuva s v a Prienai u Prienai a n

o S g d T To o l T To o e r Garliava J Jelgava Garliava

H Hrodna Lazdijai Lazdijai Radviliskis Radviliskis Sestokai Sestokai Pakruojis a Pakruojis s u w o Joniskis Joniskis t M s s o u T To a a g s n u y u ub A Augustow ytuvenai D m Tytuvenai T e Raseiniai Raseiniai N Siauliai Siauliai i Sakiai Sakiai k SIAULIAI SIAULIAI l

a

o 23 ° E Kelme Kelme T To w

u Marijampole Marijampole Kalvarija Kalvarija

S Suwalki 23 ° E MARIJAMPOLES MARIJAMPOLES

e

c ilkaviskis o u T To D Akmene Akmene V Vilkaviskis A Auce a Uzventis t Uzventis Kursenai n Kursenai Naujoji Naujoji N Akmene Akmene e

V

k

s

Kudirkos a

e a i

i v

A c

c c

y

y o o

v

u v

T To Naumiestis r r h

L i

A Auce i k

V V o a AURAGES T To y

n

TAURAGES T r O Jurbarkas Jurbarkas

i e l

h ieksniai a P POLAND

C Chernyakhovsk o Vieksniai V Skaudviles Skaudviles N o

T To m

a

P Pamoali O Seda Seda elsiai I Mazeikiai Telsiai Mazeikiai T aurage

° Silale Silale 54 N Taurage T T 22 ° E Rietavas Rietavas TELSIAI A Pagegia Pagegia

k

s

v R

o

e h l

k E

u

o a k o T To y T To e i n Plunge Plunge D r r

P Priekule e Skuodas Skuodas h E

C Chernyakhovsk Silute Silute

F

a a

j j

i i

n n i i

M M N Darbenai Darbenai Kretinga Kretinga KLAIPEDOS KLAIPEDOS A

a

v I

a o c T To S u

Rucava R Priekule Priekule S 21 ° E U Sventoji R RUSSIAN FEDERATION Klaipeda Palanga

Gargzdai Zaliv

To

Kurshskiy

Rybachiy SELECTED CITIES AND TOWNS COUNTY (APSKRITIS) CAPITALS CAPITAL NATIONAL RIVERS MAIN ROADS RAILROADS COUNTY (APSKRITIS) BOUNDARIES BOUNDARIES INTERNATIONAL LITHUANIA

Sea

Baltic

56°N 55°N

DECEMBER 2004