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Document of The World Bank FOR OFFICIAL USE ONLY Public Disclosure Authorized Report No: 56032-PK PROJECT APPRAISAL DOCUMENT ON A Public Disclosure Authorized PROPOSED LOAN IN THE AMOUNT OF US$115.8 MILLION TO THE ISLAMIC REPUBLIC OF PAKISTAN FOR A Public Disclosure Authorized KARACHI PORT IMPROVEMENT PROJECT August 13, 2010 Sustainable Development Unit Pakistan Country Management Unit South Asia Region This document is being made publicly available prior to Board consideration. This does not imply a Public Disclosure Authorized presumed outcome. This document may be updated following Board consideration and the updated document will be made publicly available in accordance with the Bank’s Policy on Access to Information. CURRENCY EQUIVALENTS (Exchange Rate Effective June 30, 2010) Currency Unit = Rupees Rs 85.52 = US$1 US$1.48 SDR FISCAL YEAR January 1 – December 31 ABBREVIATIONS AND ACRONYMS ADB Asian Development Bank MoPS Ministry of Ports and Shipping CAO Chief Accounts Officer MPCD Marine Pollution Control Department CAS Country Assistance Strategy CFAA Country Financial Accountability MTDF Medium Term Development Assessment Framework CAPEX Capital Expenditure MOF Ministry of Finance DSCR Debt to Service Coverage Ratio NCB National Competitive Bidding DPL Development Policy Loans NHA National Highway Authority GAAP Governance Accountability Action Plan NMB Napier Mole Boat GDP Gross Domestic Product NPV Net Present Value GOP Government of Pakistan NTCIP National Trade Corridor Improvement Project EBITDA Earnings before interest, Taxes, PAD Project Appraisal Document Depreciation and Amortization EIA Environmental Impact Assessment PD Project Director EMS Environmental Management System PDO Project Development Objective EOP Mid-term and End of Project PICT Pakistan International Container Terminal EPA Environmental Protection Agency PIFFA Pakistan Freight-Forwarders Association FMS Financial Management Specialist PPIAF Public Private Infrastructure Advisory Facility IBRD International Bank for Reconstruction and PMU Project Management Unit Development ICB International Competitive Bidding PNSC Pakistan National Shipping Company ICR Implementation Completion Report POM Project Operational Manual IEG Independent Evaluation Group PQA Port Qasim Authority IFC International Finance Corporation PRGF Poverty Reduction Growth Facility IFRS International Financial Recording PR Pakistan Railways Standards ILO International Labor Organization PRSP Poverty Reduction Strategy Paper IRR Internal Rate of Return PPP Public Private Partnerships Vice President: Isabel M. Guerrero Country Director: Rachid Benmessaoud Sector Director: John Henry Stein Sector Manager: Michel Audigé Task Team Leader: Simon David Ellis/Hasan Afzal Zaidi PAKISTAN Karachi Port Improvement Project CONTENTS Page I. STRATEGIC CONTEXT AND RATIONALE ................................................................. 1 A. Country and sector issues.................................................................................................... 1 B. Rationale for Bank involvement ......................................................................................... 3 C. Higher level objectives to which the project contributes .................................................... 4 II. PROJECT DESCRIPTION ................................................................................................. 4 A. Lending instrument, Financing Arrangements and other approaches ................................ 4 B. Program objective and Phases ............................................................................................ 4 C. Project development objective and key indicators .............................................................. 4 D. Project components ............................................................................................................. 5 E. Lessons learned and reflected in the project design ............................................................ 7 F. Alternatives considered and reasons for rejection .............................................................. 7 III. IMPLEMENTATION ...................................................................................................... 8 A. Partnership arrangements (if applicable) ............................................................................ 8 B. Institutional and implementation arrangements .................................................................. 8 C. Monitoring and evaluation of outcomes/results .................................................................. 8 D. Sustainability....................................................................................................................... 9 E. Critical risks and possible controversial aspects ................................................................. 9 F. Loan/credit conditions and covenants ............................................................................... 10 IV. APPRAISAL SUMMARY ............................................................................................. 10 A. Economic and financial analyses ...................................................................................... 10 B. Technical ........................................................................................................................... 12 C. Fiduciary ........................................................................................................................... 12 D. Social................................................................................................................................. 13 E. Environment ...................................................................................................................... 13 F. Safeguard policies ............................................................................................................. 14 G. Policy Exceptions and Readiness...................................................................................... 14 Annex 1: Country and Sector or Program Background ........................................................ 16 A. Economic developments. ................................................................................................... 16 B. National Trade Corridor Improvement Program. ............................................................ 16 C. Ports sector. ...................................................................................................................... 17 D. Cargo volumes. ................................................................................................................. 20 E. Karachi Port Trust (KPT). ................................................................................................ 21 F. Port facilities. .................................................................................................................... 21 G. Port operations. ................................................................................................................ 22 H. Future investment and business plans. ............................................................................. 22 I. Port finances. .................................................................................................................... 23 J. Environmental management. ............................................................................................ 24 Annex 2: Major Related Projects Financed by the Bank and/or other Agencies ................ 25 Annex 3: Results Framework and Monitoring ....................................................................... 26 Annex 4: Detailed Project Description ..................................................................................... 29 Annex 5: Project Costs .............................................................................................................. 33 Annex 6: Implementation Arrangements ................................................................................ 34 Annex 7: Financial Management and Disbursement Arrangements .................................... 38 Annex 8: Procurement Arrangements ..................................................................................... 45 Annex 9: Economic and Financial Analysis ............................................................................ 51 Annex 10: Social Development Issues ...................................................................................... 64 Annex 11: Safeguard Policy Issues ........................................................................................... 65 Annex 12: Project Preparation and Supervision ..................................................................... 69 Annex 13: Documents in the Project File ................................................................................. 71 Annex 14: Statement of Loans and Credits .............................................................................. 72 Annex 15: Country at a Glance ................................................................................................. 75 Annex 16: Maps IBRD PAK 37752 ........................................................................................... 77 PAKISTAN KARACHI PORT IMPROVEMENT PROJECT PROJECT APPRAISAL DOCUMENT SOUTH ASIA REGION SUSTAINABLE DEVELOPMENT DEPARTMENT, TRANSPORT UNIT Date: August 13, 2010 Team Leader: Simon David Ellis/Hasan Afzal Zaidi Country Director: Rachid Benmessaoud Sectors: Ports, Waterways and Shipping (100%) Themes