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Domestic Maritime Transport Project Report and Recommendation of the President to the Board of Directors Project Number: 37265 March 2007 Proposed Loan Republic of the Maldives: Domestic Maritime Transport Project CURRENCY EQUIVALENTS (as of 01 March 2007) Currency Unit – rufiyaa (Rf) Rf1.00 = $0.078 $1.00 = Rf12.85 ABBREVIATIONS 6NDP – Sixth National Development Plan 7NDP – Seventh National Development Plan ADB – Asian Development Bank DMTP – Domestic Maritime Transport Project EA – executing agency EIRR – economic internal rate of return EMP – environmental management plan FIRR – financial internal rate of return GDP – gross domestic product GT – gross ton IA – implementing agency ICB – international competitive bidding IDC – interest during construction IEE – initial environmental examination JBIC – Japan Bank for International Cooperation KFAED – Kuwait Fund for Arab Economic Development MCH – Malé Commercial Harbor MCPI – Ministry of Construction and Public Infrastructure MEEW – Ministry of Environment, Energy and Water MHUD – Ministry of Housing and Urban Development MoFT – Ministry of Finance and Treasury MPA – Maldives Ports Authority MPND – Ministry of Planning and National Development MTC – Ministry of Transport and Communication MTCC – Maldives Transport and Contracting Company NPV – net present value O&M – operation and maintenance PIU – project implementation unit PMU – project management unit PPIAF – Public-Private Infrastructure Advisory Facility PPMS – project performance monitoring system PPP – public-private partnership PPTA – project preparatory technical assistance PSC – project steering committee PWS – Public Works Services QCBS – quality and cost-based selection TA – technical assistance UNDP – United Nations Development Programme VPA – Vulnerability and Poverty Assessment WACC – weighted average cost of capital NOTES (i) The fiscal year (FY) of the Government ends on 31 December. (ii) In this report, "$" refers to US dollars. Vice President L. Jin, Operations Group 1 Director General K. Senga, South Asia Department (SARD) Director K. Higuchi, Transport and Communications Division, SARD Team leader L. Weidner, Private Sector Development Specialist, SARD Team members A. Djusupbekova, Senior Counsel, Office of the General Counsel A. Mehta, Financial Management Specialist, Regional and Sustainable Development Department T. Nishimura, Transport Specialist, SARD L. M. Tai, Social Development Specialist, SARD D. Utami, Senior Environment Specialist, SARD H. Yamaguchi, Transport Specialist, SARD CONTENTS Page LOAN AND PROJECT SUMMARY i MAPS v I. THE PROPOSAL 1 II. RATIONALE: SECTOR PERFORMANCE, PROBLEMS, AND OPPORTUNITIES 1 A. Performance Indicators and Analysis 1 B. Analysis of Key Problems and Opportunities 4 III. THE PROPOSED PROJECT 8 A. Impact and Outcome 8 B. Outputs 8 C. Special Features 9 D. Project Investment Plan 10 E. Financing Plan 10 F. Implementation Arrangements 11 IV. PROJECT BENEFITS, IMPACTS, ASSUMPTIONS, AND RISKS 14 A. Benefits 14 B. Economic and Financial Analyses 14 C. Social impacts 15 D. Risks 16 V. ASSURANCES 17 A. Specific Assurances 17 VI. RECOMMENDATION 20 APPENDIXES 1. Design and Monitoring Framework 21 2. Domestic Maritime Transport Sector Analysis 25 3. Maritime Transport Sector Focus Areas 30 4. External Assistance to the Domestic Maritime Transport Sector 1981–2006 31 5. Detailed Cost Estimates by Expenditure Category and Financier 32 6. Implementation Arrangements 33 7. Implementation Schedule 34 8. Indicative Contract Packages and Procurement Plan 36 9. Infrastructure Investment Consulting Component Outline Terms of Reference 38 10. Institutional Development and Capacity Building Component Outline Terms of Reference 41 11. Summary Economic Analysis 46 12. Summary Financial Analysis 50 13. Summary Poverty Reduction and Social Strategy 55 SUPPLEMENTARY APPENDIXES (available on request) A. Status of Project Readiness B Current Organization Chart of Ministry of Transport and Communication C. Current Organization Chart of Ministry of Construction and Public Infrastructure D. Technical Drawings E. Detailed Economic Analysis F. Detailed Financial Analysis and Cost Tables G. Analysis—Proposed Harbor Usage Charges H. Summary Initial Environmental Examination LOAN AND PROJECT SUMMARY Borrower Republic of the Maldives Classification Targeting classification: General intervention Sector: Transport and communications Subsectors: Ports, waterways, and shipping Themes: Sustainable economic growth and capacity development Subtheme: Fostering physical infrastructure development Environment Category B. An initial environmental examination (IEE) was Assessment undertaken. The summary is in Supplementary Appendix H. Project Description The Domestic Maritime Transport Project (DMTP or the Project) comprises (i) an infrastructure investment component, and (ii) an institutional development and capacity building component. The infrastructure investment component consists of enhancements to the existing Malé North Harbor through (i) construction of a new 290 meter (m) long quay, projecting northward at right angles to Marine Drive alongside the boundary to Malé Commercial Harbor; (ii) ancillary civil works; (iii) provision of cargo handling equipment; (iv) construction of a temporary transit area for goods and passengers; and (v) consulting services for detailed design, preparation of tender documents, bid evaluation, construction supervision, and project management assistance. The institutional development and capacity building component aims at increasing the sustainability of the investment and enhancing ongoing sector initiatives by providing support to (i) current efforts to align the organizational structure of the Ministry of Transport and Communication (MTC) to its sector mandate, in particular focusing on policy, planning, and regulatory functions of international and domestic maritime transport infrastructure and transport services; (ii) capacity building within MTC in the areas of: (a) strategic planning and policy analysis, (b) establishment of harbor usage charges, (c) maritime safety regulations and vessel inspection and registration procedures, and (d) project performance and impact monitoring; and (iii) capacity building within the Ministry of Construction and Public Infrastructure (MCPI) to enable it to manage, operate, and maintain maritime transport infrastructure in Malé in a sustainable manner through (a) harbor management, and (b) financial management training. ii Rationale Malé North Harbor is the lifeline access point to the social and economic development opportunities available in the capital for 70% of the population who live in outer atolls, where the highest incidence of poverty occurs. By providing connectivity to the capital, Malé North Harbor serves a fundamental social need and is the most important interisland transport hub in the Maldives. Congestion in Malé North Harbor is chronic. The current situation, which constitutes a bottleneck for the poorest population segment’s entry to the capital, is a result of the combined effects of lack of capacity and lack of harbor management. Improvements to the existing facilities are the highest ranked sector infrastructure investment proposal in the Government’s Seventh National Development Plan 2006–2010 (7NDP). Construction of an additional quay area of 290 m will alleviate congestion for quay space and on the feeder road. The investment will increase the sustainability and operational efficiency of Malé North Harbor, together with the institutional development and capacity building component which includes support to (i) introduction of harbor usage charges, and (ii) harbor management initiatives. Impact and Outcome Through facilitating access to markets and social services, the Project will help ensure redistribution of benefits; and sustained, equitable, and regionally balanced economic growth within the Maldives. The impact will be attained by improvements to the country’s main inter-atoll transport hub, supported by institutional and capacity building initiatives in the domestic maritime transport sector. The expanded capacity of Malé North Harbor will improve connectivity, reduce transport cost, and facilitate interisland trade. It is expected that the enhanced capacity will increase Malé North Harbor’s contribution to gross domestic product (GDP) by 0.1% by 2015. The increase in interisland trade is expected to result in a 10% volume increase in key outputs of domestic agricultural produce sold in Malé North Harbor markets by 2014. Project Investment Plan The investment cost of the Project is estimated at $6.65 million, including taxes and duties of $0.43 million. Financing Plan Table 1: Financing Plan ($ million) Source Total % Asian Development Bank 5.33 80 Government 1.32 20 Total 6.65 100 Sources: Feasibility study and Asian Development Bank estimates. iii A loan of $5.33 million equivalent from the Asian Development Bank’s (ADB’s) Special Funds resources will be provided. The loan will have a 32-year term, including a grace period of 8 years, an interest rate of 1.0% during the grace period and 1.5% per annum thereafter, and such other terms and conditions set forth in the draft Loan Agreement. The Borrower will be the Republic of Maldives. Period of Utilization Until 31 December 2009 Estimated Project 30 June 2009 Completion Date Executing Agency Ministry of Finance and Treasury (MoFT) Implementation A project steering committee (PSC) will be established for the Arrangements Project, chaired by the Minister of MTC, with representatives at
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