Document of l iY The World Bank FOR OFFICIAL USE ONLY Public Disclosure Authorized Report No. P-3473-ZR REPORT AND RECOMMENDATION OF THE PRESIDENT OF THE Public Disclosure Authorized INTERNATIONAL DEVELOPMENT ASSOCIATION TO THE EXECUTIVE DIRECTORS ON A PROPOSED DEVELOPMENT CREDIT IN AN AMOUNT EQUIVALENT TO US$25 MILLION Public Disclosure Authorized TO THE REPUBLIC OF ZAIRE FOR A PORTS REHABILITATION PROJECT February 25, 1983 Public Disclosure Authorized This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contentsmay not otherwisebe disclosedwithout World Bank authorization. CURRENCY EQUIVALENTS Currency Unit = Zaire (Z) Z1.00 = US$0.18 US$1.00 = Z5.50 WEIGHTS AND MEASURES 1 meter (m) = 3.28 feet 1 kilometer (km) = 0.62 mile 1 sq kilometer (km2) = 0.386 square miles 1 square meter (m2) =10.76 square feet 1 cubic meter (m3) = 1.13 cubic yards ACRONYMS AND ABBREVIATIONS AfDB = African Development Bank CFMK = Chemin de Fer de Matadi a Kinshasa (Matadi to Kinshasa Railway) CMZ = Compagnie Maritime Zairoise (National Shipping Company) FAC = Fonds d'Aide et de Cooperation (France) (Aide and Cooperation Fund) Gecamines = La Generale des Carrieres et des Mines (General Mines and Quarries Company) GEEP = Groupe d'Etudes, Economie et Planification (The economic studies and Planning Section of MTC) KfW = Kreditanstalt fir Wiederaufbau (Federal Republic of Germany) MP = Ministry of Planning MPW = Ministry of Public Works MTC = Ministry of Transport and Communications OR = Office des Routes (National Highways Bureau) ONATRA = Office National des Transports (National Transport Bureau) PCR = Project Completion Report PIP = Public Investment Program RVA = Regie des Voies Aeriennes (National Airways Authority) RVF = Regie des Voies Fluviales (National River Authority) RVM = Regie des Voies Maritimes (National Maritime Authority) SNCZ = Societe Nationale des Chemins de Fer Zairois (National Railway Company) TEU = Twenty-foot Equivalent Unit VN = Voie Nationale (the Rail/River Transport System) ZOFI = Zone Franche d'Inga (the Free Zone at Inga) FISCAL YEAR January 1 - December 31 FOR OFFICIAL USE ONLY ZAIRE PORTS REHABILITATION PROJECT CREDIT AND PROJECT SUMMARY Borrower : Republic of Zaire Beneficiary : Office National des Transports (ONATRA) Amount : SDR 23.1 million (US$25.0 million equivalent) Terms Standard IDA terms Relending Terms : Fourteen years, including 4 years of grace, at an annual interest rate of 15 percent. Co-lenders : African Development Bank (AfDB) US$21.0 million equivalent, for 19 years, including 4 years of grace, at 11.5 percent interest per annum; Caisse Centrale de Cooperation Economique (CCCE-France), US$5.0 million equivalent, 15 years, including 5 years of grace, at 10 percent per annum; and Fonds d'Aide et de Cooperation (FAC-France), US$1.0 million equivalent (grant). Project Description The Project seeks to rehabilitate the deep-water port at M4atadi and the river port at Kinshasa, and includes: civil works for the reconstruction or construction of quays and related facilities and service systems; procurement of cargo handling and fire-fighting equipment, and replacement of ONATRA's main computer; and the provision of consulting services for supervision of civil works, technical assistance, training and studies. Project Benefits : The main benefit of the Project would be to arrest the deterioration of the facilities and improve the productivity of the two ports which handle the bulk of Zaire's international trade and, in the case of Kinshasa, a major portion of national trade as well. Technical risks associated with the Project are minimal, given the proven capability of ONATRA, and the supervision of works by consultants. This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. (ii) Estimated Costs Local Foreign Total (net of taxes) 1/ .......US$ thousand. Civil works at Matadi 7,584.3 10,326.7 18,411.0 Civil works at Kinshasa 19,634.7 15,687.3 35,322.0 Equipment: Matadi 126.5 1,134.5 1,260.0 Kinshasa 383.5 6,535.5 6,919.0 Computer 242.0 968.0 1,210.0 Consulting services: to ONATRA 1,174.0 4,161.0 5,335.0 to Government 55.0 220.0 275.0 Total Baseline Costs 29,200.0 39,533.0 68,733.0 Physical contingencies 2,852.0 3,819.0 6,671.0 Price contingencies 5,948.0 8,648.0 14,596.0 Total Project Costs 38,000.0 52,000.0 90,000.0 Financing Plan Local Foreign Total ........ S$ million IDA 25.0 25.0 AfDB 21.0 21.0 CCCE 5.0 5.0 FAC 1.0 1.0 ONATRA 38.0 38.0 TOTAL 38.0 52.0 90.0 Estimated IDA Disbursements IDA Fiscal Years 1984 1985 1986 1987 ......... US$ million ........... V Annual 4.0 8.5 8.5 4.0 Cumulative 4.0 12.5 21.0 25.0 Economic Rate of Return: 35 percent for 95 percent of project costs (Matadi Port: 50 percent; Kinshasa Port: 25 percent). Appraisal Report: Report No. 4169-ZR, dated February 16, 1983 Maps: IBRD 16564, 16566, 16567 IF The Government of Zaire has exempted the project from customs duties and from local turnover tax. INTERNATIONAL DEVELOPMENT ASSOCIATION REPORT AND RECOMMENDATION OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT TO THE REPUBLIC OF ZAIRE FOR A PORTS REHABILITATION PROJECT 1. I submit the following report and recommendation on a proposed development credit to the Republic of Zaire for the equivalent of SDR 23.1 million (US$25.0 million equivalent) on standard IDA terms to help finance a ports rehabilitation project. The proceeds of the proposed Credit (except for the equivalent of US$500,000, for studies) would be relent by the Republic of Zaire to the Office National des Transports (ONATRA) for a period of 14 years, including 4 years of grace, at an interest rate of 15 percent per annum. Co-financing for the Project is being considered by the African Development Bank (AfDB) for the equivalent of US$21.0 million; by the Caisse Centrale de Cooperation Economique (CCCE-France), for the equivalent of US$5.0 million, and by the Fonds d'Aide et de Cooperation (FAC-France), for US$1.0 million equivalent. PART I - THE ECONOMY 1/ 2. The last economic memorandum (Report No. 3287-ZR) was distributed on June 8, 1981 and focused on developments in 1979 and 1980. An economic mission visited Zaire in March 1982; its report has been recently discussed with the Government and will be distributed in January 1983. Background 3. Zaire is the third largest country in Africa in terms of area and the fifth largest in terms of population, but its GNP per capita, estimated at about US$220 in 1980, ranks among the lowest in the continent. Approximately one-third of its population of about 28 million live in urban areas, and the population density is 12 persons per sq. km. Urbanization has been proceeding at a rate of about 7 percent per annum, or more than two and a half times the rate of population growth. Although agriculture (commercialized and subsistence) normally accounts for 30 percent of GDP, it provides employment and income for more than three-quarters of the population. Mining and mineral-processing normally account for about 18 percent of GDP; this sector has traditionally been the largest source of public revenue and provides more than two-thirds of the country's export earnings. (The shares cited are 1979-81 averages). 4. When Zaire gained independence in 1960, it was ill-prepared for the change, both technically and institutionally. The first six to seven years following independence were marked by violent political strife and a severe disruption of the economy. But after the restoration of political order and stability in 1967, GDP grew by about 7 percent in real terms annually until 1974. Since then, however, Zaire has been experiencing serious economic difficulties which have brought about a continuous decline in per capita income. 1/ This section is reprinted verbatim from Report No. P-3447-ZR, of January 11, 1983; (Report and Recommendation of the President for a Northeast Rural Development Project). -2- Beginning of Current Difficulties 5. Although the downswing of the Zairian economy started in 1975, the current difficulties of Zaire are in many respects the result of developments which took place in earlier years. Among these were: the progressive accentuation of the country's dependence on the mining sector, accompanied by the relative neglect of agricultural production; heavy external borrowing during 1973-74, mostly from private banks, at average terms inconsistent with Zaire's level of development and for projects with long gestation periods and uncertain economic benefits; and attempts to change drastically the ownership structure of the economy through the zairianization and nationalization measures of 1973-74. Though since rescinded, the zairianization and nationalization measures had particularly adverse and lasting effects on the economy: they seriously damaged private sector confidence both at home and abroad, severely disrupted the transport and marketing, links between urban centers and the interior, and resulted in the neglect of the country's productive capacity and infrastructure. The deterioration of Zaire's terms of trade since 1975, owing largely to the fall in the international price of copper, was a major contributor to both the severity and the duration of the crisis. 6. Zaire's attempts to cope with the crisis were uneven and uncoordinated. As a result, by 1978, commercialized GDP contracted to about 10 percent below the pre-crisis (1972-74) level; the overall budgetary deficit attained a record level equivalent to about 12 percent of commercialized GDP; and deficit financing, together with the worsening shortages of basic consumer goods, fuel and intermediate products, pushed the annual inflation rate to about 50 percent.