Fangcheng Port Project in the People's Republic of China

8/2/2019 Fangcheng Port Project in the People's Republic of China

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CURRENCY EQUIVALENTS

Currency Unit yuan (CNY)

At Appraisal(31 August 1995)

At Project Completion(24 May 2002)

At Operations Evaluation(9 November 2005)

CNY1.00 = $0.12 $0.12 $0.12$1.00 = CNY8.35 CNY8.28 CNY8.08

ABBREVIATIONS

AADT average annual daily trafficADB Asian Development Bankdwt deadweight tonEIRR economic internal rate of returnFCPA Fangcheng Port AuthorityFIRR financial internal rate of returnGCD Guangxi Communications DepartmentIRI international roughness indexMOC Ministry of Communications

OEM Operations Evaluation MissionPCR project completion reportPCU passenger car unitPRC Peoples Republic of ChinaRRP report and recommendation of the PresidentTA technical assistanceWTP wastewater treatment plant

WEIGHTS AND MEASURES

kph kilometer per hourTEU 20-foot equivalent unit

VOC vehicle operating costsvpd vehicles per day

NOTES

(i) The fiscal year (FY) of the Government coincides with the calendar year.(ii) In this report, "$" refers to US dollars.

Director D. Edwards, Operations Evaluation Division 2,Operations Evaluation Department (OED)

Team leader L. Neumann, Senior Evaluation Specialist,Operations Evaluation Division 2, OED

Team members V. Buhat-Ramos, Evaluation Officer, Operations Evaluation Division 2, OEDC. Roldan, Senior Operations Evaluation Assistant, Operations EvaluationDivision 2, OED

Operations Evaluation Department, PE-679


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CONTENTSPage

BASIC DATA iii

EXECUTIVE SUMMARY iv

MAPS vii

I. INTRODUCTION 1A. Evaluation Purpose and Process 1B. Expected Results 2

II. DESIGN AND IMPLEMENTATION 2A. Formulation 2B. Rationale 3C. Cost, Financing, and Executing Arrangements 3D. Procurement, Construction, and Scheduling 4

E. Design Changes 5F. Outputs 5G. Consultants 7H. Loan Covenants 7I. Policy Framework 7

III. PERFORMANCE ASSESSMENT 7A. Overall Assessment 7B. Relevance 8C. Effectiveness 10D. Efficiency 13E. Sustainability 14

IV. OTHER ASSESSMENTS 15A. Impact 15B. Asian Development Bank Performance 17C. Borrower Performance 17

V. ISSUES, LESSONS, AND FOLLOW-UP ACTIONS 17A. Issues 17B. Lessons 18C. Follow-Up Actions 18

In accordance with the guidelines formally adopted by the Operations Evaluation Department(OED) on avoiding conflict of interest in its independent evaluations, the Director General ofOED did not review this report and delegated approval of this evaluation to the Director ofOperations Evaluation Division 2. C. Chandrasekhar was the consultant. To the knowledge ofthe management of OED, there were no conflicts of interest of the persons preparing, reviewing,or approving this report.


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APPENDIXES

1. Cost Breakdown by Project Component 19

2. Financing Plan 203. Berth Capacities 214. Overall Assessment 235. Fangcheng Port Details 246. Average Annual Daily Traffic 367. Economic and Financial Analyses 378. Financial Statements 48

Attachment: Management Response


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BASIC DATALoan 1427-PRC: Fangcheng Port Project

Project Preparation/Institution BuildingTANo.

TA Name Type Person-Months

Amount1

($)Approval

Date

1982 Second Ports Development PPTA 18.5 400,000 16 Nov 19932466 Management and Operational Strategies for

Port AuthoritiesADTA 27.0 490,000 12 Dec 1995

Per ADBKey Project Data ($ million) Loan Documents ActualTotal Project Cost 135.0 97.5Foreign Exchange Cost 62.0 43.3ADB Loan Amount/Utilization 52.0 40.3ADB Loan Amount/Cancellation 11.7

Key Dates Expected ActualFact-Finding Mission 1327 Jan 1995

Appraisal Mission 2130 Aug 1995Loan Negotiations 30 Oct3 Nov 1995Board Approval 18 Jan 1996Loan Agreement 15 Jan 1997Loan Effectiveness Apr 1997 20 Jun 1997First Disbursement 23 Sep 1997Project Completion 30 Jun 1999 Oct 2001Loan Closing 31 Dec 1999 15 Oct 2001Months (effectiveness to completion) 26 52Key Performance Indicators (%) Appraisal PCR PPERFinancial Internal Rate of Return Port: 8.6

Highway: 5.7FPP: 6.9

Port: 7.8Highway: 6.6FPP: 6.8

Port: Highway: 2.0FPP: 20.0

Economic Internal Rate of Return Port: 21.1Highway: 21.4

Port: 33.5Highway: 14.7

Port: 20.0Highway: 19.0

Borrower Peoples Republic of China

Executing Agencies Fangcheng Port Authority port componentGuangxi Communications Department highway component

Mission DataType of Mission No. of Missions No. of Person-DaysFact-Finding 1 90Appraisal 1 50

Project AdministrationInception 1 5Review 6 64Project Completion 1 33Operations Evaluation 1 45

= not calculated, ADB = Asian Development Bank, ADTA = advisory technical assistance, FPP = FangchengPort Project, PCR = project completion report, PPER = project performance evaluation report, PPTA = projectpreparatory technical assistance, TA = technical assistance.1

Represents approved amount of technical assistance.


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EXECUTIVE SUMMARY

This report details the findings of the operations evaluation of the Fangcheng PortProject in the Peoples Republic of China (PRC). The evaluation and performance ratings arebased on the Asian Development Banks (ADBs) Guidelines for the Preparation of PerformanceEvaluation Reports of Public Sector Operations.

The Project aimed to improve the capacity and efficiency of Fangcheng Port. To thisend, it included investment components for the development of port and expressway facilitiesand for institutional development through training and supporting policy dialogue. The latter waspart of a general sector program involving other ADB projects and other internationaldevelopment agencies.

The Project was selected for support because of the need for additional berths andimproved cargo handling efficiency to cater to the rapid growth in trade at that time that wasprojected to continue for the foreseeable future. Southern PRC has other ports, but theGovernments development plan identified Fangcheng Port for major expansion of bulk andcontainerized cargo operations. In addition, Fangcheng Port was the closest port to the less

developed but growing parts of Guangxi, Guizhou, and Yunnan and to parts of Chongqin,Hunan, and Sichuan, all but one of which are landlocked. ADBs operational strategy at the timeemphasized removing transport constraints as a way to improve economic efficiency and growthand favored projects benefiting less developed and landlocked areas.

The executing agencies were the Fangcheng Port Authoritynow known as theFangcheng Port Group Company, Limitedfor the port component and the GuangxiCommunications Department for the expressway component.

Although delayed, project implementation proceeded largely as planned. Berth 9 withbackup cargo facilities was constructed to handle bulk cargo, primarily coal and iron ore, andberth 10 with backup facilities was established as a dedicated container terminal. Under the

expressway component, 20 kilometers (km) of the 45 km, four-lane, divided expressway linkingthe port with the Nanning-Beihai Expressway were built according to plan, with the Governmentfinancing the other 25 km. Actual capacities exceed nominal planned capacities and operationalresults to date indicate that the physical outputs are functioning satisfactorily.

Significant changes in policy were implemented at the same time as the Project,including greater autonomy for port operators and enhanced commercialism and competition inthe sector. As a result, the Fangcheng Port operator, for example, is structured as a state-owned company under the Fangcheng municipal government and competes with other ports inGuangxi and in southern Guangdong.

The Project cost $97.5 million, about 28% less than the appraisal estimate of

$135.0 million, mainly because of lower construction and equipment costs and the lease ratherthan purchase of a tugboat. Only $40.3 million of ADBs approved loan of $52.0 million wasutilized. The loan was repaid in 2005.

The expressway, which was started in August 1995 under advance procurement actionapproved by ADB, was opened to traffic in November 1998. The main port civil works werecompleted by October 1999, but equipment installation took until October 2001. Berth 9 was inuse in 1999 and berth 10 in 2000 using preexisting cranes and equipment. The loan was closedin June 2001 rather than as expected in December 1999. The sources of delay included the


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executing agencies lack of familiarity with ADB procedures and the consequent slowness ofsome procurement activities; the changes in the list of equipment to be procured and the timerequired for these changes to be discussed with ADB; and the slow performance of somesuppliers, particularly for the container cranes.

As a result of the Project, the capacity of Fangcheng Port was increased by 6.4 million

tons per year. Cargo handling rates at both berths 9 and 10 are higher than alternativepreexisting berths because of the specialized equipment and backup cargo areas.

Port throughput increased dramatically from around 4.5 million tons in 1995 (the time ofproject preparation) to around 16.0 million tons in 2004. Without the Project, Fangcheng Portcould not have handled this amount of cargo or handled cargo as efficiently. Some cargo wouldhave had to be shipped through more distant ports and some could have been handled, but in amore congested port environment or as breakbulk1 instead of in containers. The result wouldhave been increased costs and the consequent depression of trade and economic growth. Forship owners, waiting times and service times have been satisfactory despite the substantialincrease in port activity reflected in the increased throughput and the number of ship calls. Forbulk cargo owners, the ability to charter larger ships because of the increased water depth

alongside berth 9 potentially enables them to obtain lower freight rates. In short, by expandingport capacity and improving efficiency, the Project removed a transport bottleneck, fulfilling theexpectations of the stated development strategy. Moreover, as less developed, landlockedprovinces account for around two thirds of both the ports customers and the cargo it handles,the Project also helped support the development of such areas.

Construction of a new road link to the port was appropriate, as the old road links werenarrow with some winding sections and passed through urban areas, making them unsuitablefor cargo transport. For those vehicles using the expressway, travel times and vehicle operatingcosts are less than if they used alternative routes. Travel on the old road links also improvedbecause of avoided congestion.

However, the contribution of the expressway to the expansion of the ports capacity andimprovement of the ports efficiency is less than expected. While at 9,000 vehicles per day in2004 traffic volumes are similar to those expected, traffic is relatively light, about one fifth to onesixth of capacity, and the vehicle mix differs substantially from expectations. In particular, thenumber of medium and large trucks is substantially less than expected because of anoverestimation of the amount of port cargo that would switch from rail to road. This shortfall was,however, compensated for by an unexpected increase in passenger car and light truck trafficresulting from rapid urbanization of areas adjacent to the port. Nevertheless, the shortfall inmedium to large trucks moving cargo to and from the port means that the need for such highcapacity in the short term for port-related businessthe rationale for the chosen expresswaydesignhas not yet materialized. Better traffic estimations may have resulted in an alternativedevelopment approach, such as a phased development of the expressway, which may have

been more cost-effective.

While most landward movement of port cargo is by rail and rail capacity was generallyknown to be inadequate, the Project did not have a railway component.

1Breakbulk refers to cargo that is neither in bulk form, such as applies to large consignments of minerals, grains,and cement, nor containerized, that is, packed into shipping containers of 2045 feet length. Breakbulk cargotypically is in drums, boxes, bundles, and similar small units.


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Overall, the Project is rated as successful. The relevance of the Project to the PRCsdevelopment needs and to Government and ADB strategies is good, although achievementunder this criterion was weakened by the inaccurate estimation of traffic demand and thesubsequent choice of investments to enhance landward cargo movements. The outputs weregenerated and the Project did achieve its intended outcomes, tempered in part by high accidentrates on the expressway. The investment was economically efficient and sustainability is likely.

Several issues arise from experience with this Project. The first is an apparent need for astronger commercial orientation and improved planning in the port. Tariffs are not based onactual costs and not all costs appear to be taken into account in assessing performance and inplanning. This results, for example, in strategies that favor new berth construction to reducecongestion over those that seek higher productivity by improving existing facilities. Betterstrategic planning within the provincial port sector overall is also needed to avoidovercapitalization within the group of ports competing for the same business in southern PRC.Another issue concerns an apparent need for stronger intermodal transport planning,particularly in relation to road, port, and rail, but that might also include waterways and air travel.The Project probably would have benefited from simultaneous investment in added rail capacityalong with the expressway. The separation of modes under different administrative structures

and the different organizational cultures that result constrain coordinated investment. ADBsfunding arrangements can also act as a disincentive to the bundling of components for differentagencies under one project, thereby contributing to reduced coordination.

A key lesson concerns the need to improve traffic demand forecasts for expressways.The Project is not unique in having incorrect estimates as demonstrated by a number of recentproject completion reports for other ADB-financed expressway projects.

As a follow-up activity, the Guangxi Communications Department could investigatewhether more port cargo is better suited for transport by road rather than by rail and whether therelatively high toll rates for large trucks are preventing this from occurring.

David EdwardsDirectorOperations Evaluation DepartmentOperations Evaluation Division 2


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I. INTRODUCTION

A. Evaluation Purpose and Process

1. The Fangcheng Port Project was randomly selected for operations evaluation in 2005.The main project components were completed by the end of 2001. The evaluation had 4 years,

and for some components as much as 7 years, of operational experience to draw upon.

2. This evaluation is based on the Guidelines for the Preparation of PerformanceEvaluation Reports of Public Sector Operations. These guidelines had only recently beenadopted at the time of the evaluation. The core criteria for evaluation and performance ratingare relevance, effectiveness in achieving outcomes, efficiency, and sustainability.

3. The process of evaluation entailed a desk review of project files and related materialfollowed by field studies by an Operations Evaluation Mission (OEM) in the Peoples Republic ofChina (PRC) from 9 to 24 November 2005. The field studies included inspection of the Projectsport and expressway outputs in Fangcheng; discussions with port users and staff of the Ministryof Communications (MOC), the executing agencies and other relevant government agencies,

the Asian Development Bank (ADB), and the World Bank; and collection of operational andother data. Following internal review, a draft report was circulated to the Borrower, the executingagencies, and the concerned departments and offices of ADB. Comments received have beenincorporated into this final report.

4. The Project had previously been evaluated through an ADB project completion report(PCR) circulated in 2002 and based on field studies undertaken in May of the same year.1 Atthat stage, the Project was rated as highly successful. The PCR rating followed ADBsGuidelines for the Preparation of Project Performance Reports.2The Project was assessed ashighly relevant, highly efficacious, highly efficient, and likely to be sustained. The rating for theinstitutional development and other impacts criterion was not explicitly quantified.

5. The PCR describes the main outputs and adequately reviews related implementationaspects, including project costs, disbursements, implementation arrangements, and schedules.However, it could have presented more information to support its evaluation conclusions. Forexample, it does not present traffic estimates and projections for the expressway and thealternative roads to demonstrate use of the expressway and the relevance and effectiveness ofthat investment in achieving project outcomes. The information on port operations is also largelylimited to the project berths and lacks projections, and overall port statistics are not examinedfor causal relationships with the Projects interventions. The appended financial and economicanalyses cannot be confirmed because of the lack of such information and analysis as well asthe absence of clear descriptions of the evaluation model and of information about keyassumptions. The reductions in the time that ships had to spend in port that occurred just priorto the start of project implementation and were much larger than those resulting from the Project

and weak achievement of the predicted shift of cargo from the congested rail service to road,which resulted in significant changes in expressway traffic also could have been usefullyreviewed in the PCR, but were not.

1ADB. 2002. Project Completion Report on the Fangcheng Port Development Project in the Peoples Republic ofChina. Manila.

2These were the guidelines in effect at the time that were subsequently replaced by the Guidelines for thePreparation of Performance Evaluation Reports of Public Sector Operations. An important difference is theomission in the new guidelines of institutional and other impacts from the core rating criteria.


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nature of the port traffic, the assumption of such a large shift does not seem logical. However, inthe absence of relevant reports and records, the feasibility studys rationale cannot be reviewed.

10. The Project and a second project for building additional berths at Yantai Port wereprocessed during the same period and used the same TA for review. The Yantai Port Projectwas approved ahead of the Project. The World Bank and Japan7 were also actively involved in

lending to the port sector at the time. The projects of all three external financiers had similarobjectives of increasing port capacity and efficiency, including by facilitating greatercontainerization of cargo. The advisory assistance provided by ADB and the World Bank andthe policy dialogue they engaged in with the Government also had similar, complementary aimsof increasing port autonomy, business orientation, and competition and installing appropriatemanagement systems, and as such, appear to be part of an adequately coordinated program ofassistance.

B. Rationale

11. The Project was selected for support because of the need for additional berths andimproved cargo handling efficiency to cater to the rapid growth in the countrys trade at the time

that was projected to continue for the foreseeable future. Between 1995 and 2000, theGovernment planned to construct 20 new deepwater berths each year to handle the expectedgrowth in trade, and the Project would contribute two of these new berths. ADBs operationalstrategy at the time emphasized removing transport constraints as a way to improve economicefficiency and growth. These development strategies on the part of both the Government andADB remain applicable at the time of evaluation. The soundness of these general strategies isborne out by the continuation of trade growth, the further expansion of port capacity that hassubsequently taken place, and the high port utilization rates at Fangcheng Port and other ports.

12. Fangcheng Ports hinterland is also served by ports at Beihai and Quinzhou in Guangxiprovince and by Zhanjiang in southern Guangdong province (Map 1). At the time of projectpreparation, Beihai was designated mainly for passenger ships and Quinzhou serviced

industries in its immediate surrounding area. Zhanjiang, a major port, was seen to be in directcompetition with Fangcheng, but with the completion of planned major railways andexpressways in Guangxi, Fangcheng would be closer to much of Guangxi and some of thelandlocked western provinces than Zhanjiang, enabling transport savings in moving goods toand from those areas. In any case, the PRCs rapid growth was deemed to require thedevelopment of many ports, and competition among ports in overlapping areas was seen aspositive for the sector and was part of the planned changes in sector policy.

C. Cost, Financing, and Executing Arrangements

13. The Project cost $97.5 million, about 28% less than the appraisal estimate of$135.0 million (Appendix 1). Most of the cost savings occurred in the port component and the

interest during construction. The port component savings were due to the decision to leaserather than to buy a tugboat, which saved about $2.7 million, some changes in the list ofequipment procured for the port, and lower than expected construction and equipment costsand the resultant nonuse of most of the provision for contingencies. Some of the lower thanexpected construction costs were due to the decision to use dredged material from theapproach channel and alongside the berths for land reclamation in place of some of the quarriedmaterial. The highway component, including an increase in the quantity of construction

7Through the Overseas Economic Cooperation Fund.


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international consultant. ADBs procedures now include the supply of example formats to newexecuting agencies as well as training in procurement.

E. Design Changes

19. No major design changes took place subsequent to appraisal. Minor variations included

the replacement of the planned purchase of a tugboat for the port by a lease arrangement. Theprocured port equipment also differed in detail, but not in overall scope or function from thatoriginally proposed. An important variation was the reduction in the planned number of rubber-tired gantry cranes for handling containers in the container yard. As the volume of containersincreases, the lack of rubber-tired gantry cranes is likely to become a constraint to efficientcontainer operations. The international procurement consultant was also not deemed necessaryand not hired. Cost savings allowed materials for the last 6 km of road linking the port entranceand the end of the expressway to be financed under the Project.

F. Outputs

20. The Projects port component was generally completed as planned (Map 2). Two berths

with cargo areas and ancillary facilities were built: berth 9, 271 meters (m) long, for bulk cargo,mostly iron ore and coal; and berth 10, 227 m long, for containers. The Project funded thematerials and construction works for the berths, cargo areas, support buildings, and ancillaryfacilities and for the expansion of the port rail marshalling area and rail sidings; the dredging ofthe port approach channel; the equipment for container and bulk cargo handling; a powersubstation; the environmental protection equipment for cleaning up oil spills; and the design andsupervision consultants. A tugboat was to be procured, but was leased instead. The municipalgovernment was to provide a solid waste disposal facility and a wastewater treatment plant(WTP) for port and municipal needs under separate financing. The solid waste facility wasestablished, but the WTP has yet to be built (para. 30).

21. Berth 9 added capacity for servicing bulk cargo ships, and because its backup cargo

area has mechanized stacking and unstacking facilities, it has a nominal handling rate aboutdouble that of the other berths. The 13.5 m water depth alongside the berth enables it to handleships of up to 70,000 deadweight10 tons capacityand even larger using specialarrangementsmore than the ports eight preexisting main general purpose berths, which canhandle ships of up to 35,000 deadweight tons. Even though the berth and cargo area has anominal capacity of 2.5 million tons per year (t/yr), its actual capacity is closer to 4.6 million t/yr(Appendix 3).11 The berth has handled close to 4.0 million t/yr since 2001.

22. Berth 10, largely because of its two container cranes, storage yard, and yard equipment,provides specialized capacity for handling dedicated container ships and for handling andstoring containers and their cargo. The berth and cargo area are only for container operationsand function as a separate container terminal within the port, handling all of the ports

containerized cargo. A subsidiary company set up solely for this purpose manages thesefacilities. With a nominal capacity of 90,000 20-foot equivalent units (TEU),12 equivalent to

10Deadweight is a measure of a ships cargo-carrying capacity; effectively, the weight of cargo that can be carried.

11Berth 9 is operationally part of a group of nine berths. Being part of such a large group enables high berthoccupancies, and consequent high throughputs, to be achieved, possibly higher than those used to calculate thenominal capacity.

12Internationally, the 20-foot long shipping container is recognized as the basic unit. Containers of other sizes areexpressed in the equivalents of the 20-foot container, thus a 40-foot container is 2 TEU.


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700,000 tons (t), the terminal should be capable of handling 140,000 TEU/yr,13 which at thecurrent average weight of 13.1 t/TEU equates to about 1.8 million t/yr (Appendix 3).

23. Under the second investment component, 20 km of the 45 km, four-lane, dividedexpressway linking the Fangcheng Port area with the Nanning to Beihai Expressway was builtas planned (Map 3). The expressways capacity is 80,000 equivalent passenger car units, which

with the current mix of vehicle types would equate to an average annual daily traffic (AADT)volume of around 55,000 vehicles per day (vpd).14

24. The expressway, built through flat to rolling terrain, is of concrete block construction. Ithas three interchanges: at Fangcheng and Natan at either end and at Chonglun in between.The Project financed design and supervision consultants; construction materials; constructionequipment and civil works for the Fangcheng-Chonglun section; and expressway operationalequipment, including for toll operations and maintenance. The remaining 25 km were financedseparately by the Government. Loan savings because of lower than expected costs were usedto finance additional construction materials, which were used to build a 6 km section of highwaylinking the end of the expressway to the port entrance. The latter gives port traffic direct accessto the port, effectively bypassing urban areas.

25. Institutional development was effected through policy dialogue, training, and an advisoryTA15 attached to the Second Yantai Port Project approved in 1995.16 The focus was on policyreforms in relation to port pricing; management efficiency and autonomy; and human resourcesdevelopment within the institutions responsible for port and highway planning, construction,management, and operations.

26. Of the project-funded training, 46 person-months were used by Fangcheng Port staffand 53 person-months by GCD staff involved with the highway. The topics were relevant tooperations and the executing agencies indicated that the trained staff members were stillemployed within relevant operational areas. Under the TA associated with the Second YantaiPort Project, a container terminal operations plan was prepared for Fangcheng Port.

27. Compared with the preproject situation, Fangcheng Port, along with most other ports,operates autonomously from MOC and other ports. Currently, it is structured as a state-ownedcompany under the local municipal government. MOC still issues suggested tariffs for thesector, but Fangcheng Port and other ports have the freedom to fix their own rates. MOCsguidelines appear to be broadly followed, but competitive pressure has established a regime ofdiscounts to the MOC rates to lure business from competing ports. Nevertheless, completecommercialism and the adoption of cost-based tariff setting have not been fully established(para. 63).

13 This was based on a 65% berth occupancy ratio. This relatively high rate is possible even though it is for a nominalsingle berth facility. Most of the container vessels calling at the port are small and can be accommodated despitethe high occupancy rates as discussed in Appendixes 3 and 5.

14MOCs technical design standards indicate a capacity of 25,000 to 50,000 vpd for a four-lane expressway, withsuch capacity to be reached within 20 years. The OEMs slightly higher estimate compared with the upper bound ofthis specification could be explained by different assumptions about traffic composition.

15ADB. 1995. Technical Assistance to the Peoples Republic of China for Management and Operational Strategiesfor Port Authorities. Manila (TA 2466-PRC, for $490,000, approved on 12 December 1995).

16ADB. 1995. Report and Recommendation of the President to the Board of Directors on a Proposed Loan to thePeoples Republic of China for the Second Yantai Port Project. Manila (Loan 1411-PRC, for $63 million, approved on12 December 1995).


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28. The expressway is operated by the Coastal Section of the Guangxi ExpresswayAdministration Bureau, which falls under the GCD, part of the Guangxi provincial government.Despite its separate accounts and corporate structure, the expressways receipts are remitted tothe provincial government and estimated operational expenses are budgeted annually. Thesetting of toll rates is a provincial government concern.

G. Consultants

29. The local consultants that prepared the feasibility studies were engaged for detaileddesign and construction supervision. While the generally good quality of construction and theappropriateness of the facilities indicate that the consultants performed adequately in mostaspects, the landward transport of goods to and from the port does not appear to have beenadequately studied in the feasibility study or in the TA review, leading to overestimation of theamount of cargo that would switch from rail to road (paras. 3839). This is a noticeableweakness of the Project. The contribution, if any, to such weakness by either the structure of theconsultants inputs or the performance of any of the consultants cannot be determined becauseof the lack of relevant reports and records relating to both the feasibility study and the ADB-financed TA used to review the feasibility study.

H. Loan Covenants

30. With one exception, the loan covenants related to implementation were complied with.The exception was the construction of a WTP by the Fangcheng municipal government. ADBsPCR reported that this facility and one for solid waste were expected to be completed in 2003. Asolid waste facility was constructed, but the WTP was not. The municipal government nowexpects to build the WTP during 20062007. The land use plan has been completed anddetailed designs are reportedly being prepared. While the delay has been considerable, thefacility will serve much more than just the port and required appropriate planning and timing.The facility is expected to cost around CNY160 million, equivalent to about half the ADB loan forthe Project. Loan covenants related to ongoing operations appear to be complied with, except in

the area of financial targets (paras. 60 and 64).

I. Policy Framework

31. Policy change within the port sector was supported by ADB and the World Bank, andsome key planned changes did occur, particularly in relation to giving port operators moreautonomy. No major unplanned policy changes occurred during and after projectimplementation that affected the Project. The 19971998 Asian financial crisis occurred duringthe middle of the implementation period and might have affected cargo volumes and transportdemand.

III. PERFORMANCE ASSESSMENT

A. Overall Assessment

32. Overall, the Project is rated successful (Appendix 4). The relevance of the Project todevelopment needs and to Government and ADB strategies is good, although the achievementwas weakened by an inaccurate estimation of traffic demand and the subsequent choice ofinvestments to enhance landward cargo movements. The outputs were generated and theProject did achieve its intended outcomes, tempered in part by the high accident rates on the


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for cargo transport.17 However, the timetable for building the expressway to its design capacitydoes not appear to have been the most economical solution. In 2004, about 6 years after itsopening, the expressway carried an average of around 14,000 passenger car units per day(about 9,000 vpd), which is close to expectations for 2004, but still only about one fifth to onesixth the rated capacity (para. 23). An alternative, for example, could have been to build a two-lane highway on a better alignment than the preexisting road. This could have been done by

initially constructing only two lanes of an eventual four-lane divided expressway and building theother two lanes when traffic volumes increased.

38. Slightly less than half the vehicles currently using the expressway are trucks, mostlymedium and small trucks, which differs significantly from the expectation of a large proportion ofheavy trucks. The total traffic volume is on target, however, because the number of passengercars and other light vehicles far exceeds expectations. Transport bottlenecks along other partsof the provincial and interprovincial expressway network may contribute to the lowered trucktraffic, and the rapid growth of the urban population adjacent to Fangcheng Port can explain theunexpected rise in light vehicle traffic. In relation to the relevance of the project design, animportant implication of the markedly different truck traffic is that the expressways contributionto port operations is substantially below expectations.

39. One important reason for the lower than expected truck traffic relates to the assumptionin the Projects detailed design that 40% of the cargo that arrived or left the port by rail wouldtransfer to road once a better road link was established. This has not happened to the extentexpected, and rail continues to serve about 6080% of all cargo. In the first 5 years after theproject expressway opened, truck transport of cargo to and from the port did rise quitesignificantly, while rail transport rose only modestly. Nevertheless, the increase was from a lowbaseline, and the switch from rail to road was much less than predicted. An examination of portcargo shows that about 60% is bulk product that is more suited to rail than road. Moreover, themajority of trade through Fangcheng Port has its origin or destination in neighboring provinces,which is also a factor favoring rail transport over road transport because rail is cheaper thanroad over long distances. Insufficient rail capacity was cited as a constraint in various

documents, including the RRP and the PCR for the Project. Despite the obvious demand for railtransport and a need for some improvement, the capacity of the Fangcheng line was upgradedonly in 2005, when the nominal one-way line capacity was increased from 7.0 million t/yr to12.0 million t/yr. Moreover, the constraint seems to be related more to the availability of rollingstock than to line capacity. In retrospect, the need for expressway capacity appears to havebeen overestimated, while at the same time, the need to address railway constraints was notgiven the urgency or attention required. In this respect, the project design was not entirelyconsistent with development needs.

40. In the absence of the feasibility study report, the reasons why rail was not included androad demand was overestimated cannot be determined. However, differences in developmentapproaches within the road and railway sectors resulting partly from each being under different

administrative structures and ADBs reluctance to bundle components for different ministriesunder a single project may have caused rail to be excluded from the Project.18

17ADBs East and Central Asia Transport and Communications Division point out that, for similar reasons, the 6 kmlink between the expressway and the port entrance, the materials for which were funded out of loan savings, is alogical component and, in retrospect, should have been included in the original project design. OEM concurs.

18The railway link to Fangcheng Port is a district railway and is nominally under the Guangxi provincial government.However, the Railway Ministry exerts influence through technical links and would have been involved if rail hadbeen included as a project component. In addition, the Railway Ministry controls the allocation of railway wagons,an important factor in determining actual rail capacity.


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50. The preexisting road access to the port was by class 3 and 4 rural roads, which wereclearly inadequate for a major port because they were narrow and had relatively steep gradesand tight turns. These roads connected to the class 2 Nanning-Beihai Highway, which wassupplemented by a class I expressway in 1997. Given the low capacity of the road system,historically, cargo transport to the port relied largely on railway links from Nanning and Litang.

51. Data for the expressway indicate that an average of 2,411 vpd passed through the portsexit toll gate in 1998, the year the expressway opened. The OEM assumed that equal numbersof vehicles travel in and out of the port, so the 1998 AADT would have been 4,822 vehicles(Appendix 6). By 2000, the AADT was 6,514 vehicles and by 2004 it was 8,830 vehicles. TheRRPs expectation was 7,000 vpd by 2000 and 30,000 by 2020.

52. Even thought the RRP presents few traffic figures, its discussion and economic analysesindicate that the majority of traffic on the road was expected to consist of trucks, particularlyheavy to medium trucks, on port-related business. This was expected to occur because of ashift of around 3 million t of cargo from rail to road by 2000.22 If the average cargo per truck was10 t and with no backloading,23 a shift of this magnitude would require about 1,600 large trucktrips per day.24 In 2000, the number of large trucks entering and exiting Fangcheng Port was

only 124 per day. The OEM estimates that a little less than 1.0 million t of cargo, about one thirdof the amount expected, had switched from rail to road by 2000 and was carried primarily insmall and medium trucks. Toll rates for trucks are high (para. 64), but the lack of large trucks onthe alternative, nontoll roads (para. 55) indicates that the tolls are not forcing this class of truckaway from the expressway. While the high toll rate might be discouraging the expansion oftrucking operations, the main reason for the low numbers of large trucks appears to be thatmost port cargo is bulk cargo and/or has to be transported over long distances, both of whichfavor the use of the rail.

53. Small and medium trucks account for about half the traffic on the expressway, and alarge proportion of the traffic, about 40% in 2000, consisted of cars and similar light vehicles, amuch larger proportion than expected at appraisal. Urban development adjacent to Fangcheng

Port has been substantial and rapid, and this has been the source of many of the cars and lighttrucks.

54. Travel time between Fangcheng Port and the Nanning-Beihai road is about half an hourfor cars traveling at 100120 kilometers per hour (kph) and 3540 minutes for trucks traveling atan average of 80 kph. Previous journey times were half an hour longer or more because ofrelatively slow travel times of 3050 kph resulting from congestion.

55. The OEM estimates that traffic on the preexisting roads in 2004 was around 500 vpd orless. Most vehicles are light to medium, heavy trucks being uncommon. The OEMs bestestimate of traffic on the preexisting roads prior to the opening of the expressway was about2,800 vpd in 1997, compared with a nominal capacity of 2,000 vpd. Current travel speeds on

these roads are low, around 50 kph, but congestion on the preexisting roads would have easedfollowing the opening of the expressway and the diversion of a substantial amount of traffic to it.

22Port cargo was expected to increase by 15% per year to reach about 9.3 million t in 2000. Of this, around 80%would have been transported by rail, but 40% of cargo transported by rail was expected to switch to road with theopening of the expressway.

23Backloading refers to the practice whereby a truck that brings cargo to the port also takes cargo away and viceversa, that is, two cargo movements. No backloading means the number of trucks needed increases. If all truckscarried equal amounts in and out of the port, the number of trucks needed would be halved.

24Each truck makes two trips, one full, one empty.


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Item

A. Port Component1. Civil Works 7.30 21.30 28.60 1.79 24.00 25.79

2. Equipment 23.00 8.10 31.10 16.75 0.50 17.25

3. Land Acquisition 0.00 0.00 0.00 0.00 0.00 0.00

4. Supervision and Training 0.50 2.00 2.50 0.28 2.40 2.68

5. Contingencies 4.80 11.20 16.00 0.00 0.30 0.30

6. Interest during Construction 3.40 4.50 7.90 1.13 3.85 4.98

7. Taxes and Duties 0.00 2.90 2.90 0.00 0.00 0.00

Subtotal 39.00 50.00 89.00 19.95 31.05 51.00

B. Highway Component

1. Civil Works 5.70 10.10 15.80 8.68 13.30 21.98

2. Equipment 12.70 4.30 17.00 11.13 6.40 17.53

3. Land Acquisition 0.00 0.90 0.90 0.00 1.10 1.10

4. Supervision and Training 0.40 0.20 0.60 0.44 0.20 0.64

5. Contingencies 2.90 5.90 8.80 0.00 0.00 0.006. Interest during Construction 1.30 0.00 1.30 3.07 0.00 3.07

7. Taxes and Duties 0.00 1.60 1.60 0.00 2.20 2.20

Subtotal 23.00 23.00 46.00 23.32 23.20 46.52

Total 62.00 73.00 135.00 43.27 54.25 97.52

Source: Asian Development Bank. 2002. Project Completion Report on the Fangcheng Port Development Project in the People's

Republic of China. Manila.

COST BREAKDOWN BY PROJECT COMPONENT($ million)

Appendix 1 19

Foreign

Exchange

Local

Curency

Appraisal Estimate

Total

Foreign

Exchange

Local

Curency

Actual

Total


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24 Appendix 5

FANGCHENG PORT DETAILS

A. Berth Development

1. At the time of project planning, Fangcheng Port had eight multipurpose berths suitablefor ships up to 30,000 deadweight tons (dwt) plus some other specialized berths. Additional

nonproject works prior to 1999 added more specialized berths and berths for small ships,referred to as transitional berths. In 1998, the port had 20 operational berths with a total of2,673 meters (m) of quay, of which the original 8 multipurpose berths, berths 18 with a totalquay length of 1,511 m, are the most relevant to the operation of the project berths.

2. Before the project berths became operational, bulk cargo was handled at any of theeight multipurpose berths 18 using portal cranes with grabs together with hoppers, trucks, andother facilities. Breakbulk was also handled at the eight multipurpose berths, as well as at thetransitional berths. Containers were handled at the 181 m long berth 2 using the ports two35 ton (t) lift capacity portal cranes. Most container traffic was via small, specialized containervessels of less than 5,000 dwt carrying 50 to 350 20-foot equivalent units (TEU).

3. In October 1999, the 271 m long, project-funded berth 9 became operational for bulk oreand coal. Iron ore, coal, and other bulk cargo continued to be handled at other berths,particularly berths 13 for coal and 57 for iron ore. The project berth, as well as adding quaylength, had deeper water alongside and could accommodate larger vessels of up to 70,000 dwt;was complemented by the project-funded cranes, conveyor belts, and related equipment; andhad a larger and closer area for stacking bulk ore. Berth 9 also handled some breakbulk,particularly that arriving in large vessels, but most breakbulk continued to be handled at berths18.

4. The 227 m long, project-funded berth 10 came into operation in 2000 mainly forcontainer ships using large portal cranes transferred from berth 2, and with the completion ofthe installation of the specialized container cranes, from late 2001, it became a dedicated

container terminal. The main advantage of berth 10 is its specialized nature for containerhandling resulting from both the cranes and the adjacent container yard. The additional berthand yard increased the ports capacity, while the specialized nature of the berth conferredgreater efficiency and speed, factors important to owners of container vessels.

5. Berth 11 came into operation in 2001 and berth 12 in late 2002. These nonproject berthsmostly handle grain and other agricultural products and support a private foreign joint venturebusiness that produces vegetable oil. They also can handle breakbulk.

6. A the time of the Operations Evaluation Mission, multipurpose berths 1317 were underconstruction, as was a major bulk ore and coal terminal capable of handling ships up to200,000 dwt and a chemical terminal for ships up to 50,000 dwt. Berths 1822, for containers

and multipurpose, were also planned to enable the port to cater to a projected annualthroughput of 50 million t by 2010.

7. As of 2005, Fangcheng Port had 28 berths, of which at least 12 can accommodatevessels of up to 30,000 dwt, although 88% of ships calling at the port are smaller than this.Berths 912 can accommodate larger ships, and even the other berths can accommodate largerships with tidal assistance. During operations, berth 10 is reserved for container ships and theoccasional ship for which the large capacity container crane is needed to lift heavy objects. The


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Appendix 5 25

other berths, particularly 19, 11, and 12, are used for dry bulk and breakbulk cargo and areassigned ships according to ship size and berth availability.

B. Cargo Throughput

8. From 4.6 million t in 1995, cargo throughput increased steadily to 8.1 million t in 1999 as

the project berths were in the last stages of completion, and eventually to 16.1 million t in 2004(Table A5.1). Throughput for 2005 was projected at 18.5 million t, and the port expects tohandle around 50 million t by 2020. Cargo growth from 1995 to 2004 averaged 15% per year,accelerating to around 20% per year in 20032004.

9. Historically, foreign trade has dominated port throughput, but domestic trade has grownmore rapidly, albeit from a low base, and in 20032004 accounted for around 1214% of portthroughput. During 20002004, slightly more than half of port trade was inward, and inwardtrade appears to have been increasing slightly faster than outward trade (Table A5.2).

10. Fangcheng is primarily a bulk cargo port. Coal and bulk ores accounted for 5563% ofthroughput during 20012004 (Table A5.2). A further 12% of throughput consists of oil and

chemical liquid bulk cargo and cement, most of which is in bulk form. Additional bulk cargoconsists of fertilizer, woodchips, and foodgrains for the vegetable oil processing mill locatedwithin the port area. In aggregate, bulk commodities account for an estimated 80% of totalthroughput. The remainder of the port throughput is breakbulk and containerized general cargo.

11. Until 2000, the number of containers passing through the port was less than 5,000 TEUper year. In 2000, berth 10 started operations and the port operator encouraged container linesto start services through the port. Container throughput subsequently grew rapidly to reach80,000 TEU by 2004, representing about 6% of the port cargo throughput. When measured interms of TEU, inward and outward movements are about equal; however, by weight, outwardcontainerized cargo greatly exceeds inward containerized cargo (Table A5.1).

12. A slight seasonality factor has developed in the port trade that is reportedly morenoticeable in container operations. This is due to the recent rapid growth in domestic sugarshipments from Guangxi to northern areas of the Peoples Republic of China. Reportedly, theincrease in such trade occurs during MarchJune.

C. Ship Calls

13. The number of ships calling at Fangcheng Port has increased at an average of 10% peryear from 1995 to 2004 (Table A5.1). The increase has not been even, with a decline innumbers during 19971999 followed by a more rapid increase. In addition, the growth indomestic trade ship calls has been much more rapid than that of foreign trade ship calls, withthe former increasing, on average, by more than 30% per year during 19952004, while foreign

trade ship calls grew by an average of only 5% per year during the same period. Thus by 2004,the strong dominance of foreign trade ships, which includes both those registered in thePeoples Republic of China and elsewhere, had fallen to 60% of all ship calls at FangchengPort.


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30 Appendix 5

22. The Operations Evaluation Mission noted that the port appeared to be reasonably wellmaintained, although dusty because of the bulk mineral cargo operations. Although not a majorproblem, the coal dust at berth 9 does cause some problems with container operations atadjacent berth 10, particularly during times when containers are being filled or unloaded. Othernotable aspects were that containers in the berth 10 container yard were kept at relatively lowstacking heights of two or three containers, reportedly to keep operating costs low. While not an

issue at present, claims that the yard was congested with a throughput of 80,000 TEU per yearmust be discounted, as the equipment is capable of stacking in blocks four containers high. The12-hectare yard is adequate for 12,000 TEU at a time with an average stacking of three high,although more yard equipment than is currently deployed might be needed for this volume. Witha maximum dwell time of 10 days, this yard area is adequate to handle a throughput of 300,000TEU. Some lost efficiency due to the container crane waiting for containers to arrive for loadingonto vessels was noted. This suggests that the yard equipment may not be sufficient,particularly the number of rubber tired gantry cranes. Two of the four planned rubber tired gantrycranes under the Project were not procured, but may now be needed.

23. Berth 9 came into operation in 1999 and is operated as one of nine berths, along withberths 18, for dry bulk and general breakbulk cargo, although because of its specialized bulk

cargo backup area and deep water alongside, it is used primarily for dry bulk cargo. Throughputat berth 9 quickly grew to 3.4 million t per year by 2001 and subsequently fluctuated between3.4 and 3.9 million t per year of bulk coal and ores (Table A5.4). Berth 10 became operational in2000, and throughput has increased steadily since then, reaching 80,000 TEU, equivalent to alittle over 1.0 million t, in 2004. Based on the operations evaluation model for the port, withoutthe Project the main port berths 18 would probably have reached their limits early in 2003, andin 2004, about 4.8 million t, equivalent to around 30% of the total actual port throughput for thatyear, would have had to be diverted to other ports. In actuality, the port also has berths 11 and12, which started operations in 2001 and 2002, respectively, and these berths handle some ofthe cargo, particularly breakbulk cargo, that otherwise would be handled at berths 18.

E. Port Efficiency

24. The available efficiency statistics for Fangcheng Port show a dramatic improvement in1996, correlating with a change in management at the port (Table A5.5). Compared withaverage ship waiting times of several days per ship in 19941995, ship waiting times werealmost eliminated in 1996. The 1996 improvements are also reflected in other statistics thatindicate shortened average berth occupancy times; reduced average nonoperation times; andimproved cargo handling rates, such as hourly hatch productivity and tons of cargo handled pership-hour. The latter more than doubled compared with rates for the previous 2 years to reach71.7 t per ship-hour. In 1996, the port appears to have been operating quite efficiently, with aberth occupancy ratio of 36%, which can be considered low in view of the large number ofavailable berths. Most shipping was in small ships, so water depth and other physicalarrangements were not a major concern. The port still had capacity in view of the low berth

occupancy ratio and as reflected in the relatively low throughput per meter length of berth of justunder 2,000 t. Significantly, the operational time of the berths was low at around 21%, meaningthat as well as the time that berths were not in use, a substantial part of the time that ships wereoccupying berths was not being used productively. Both these aspects of nonproductive use ofthe berths provided scope for further efficiency and capacity gains.


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Appendix 5 33

25. By 1998, the year before berth 9 became operational, port throughput had increased by40% relative to 1996, but the number of ship calls had fallen, implying an increase in averagecargo per ship. The efficiency statistics remained good, except that the productive part of thetime that ships occupied a berth decreased further. In 1998, around 80% of the cargo passedthrough only six berths that accounted for 1,112 m of quay length. These were berths 3, 4, 6, 7,

8, and the transitional berth adjacent to berth 3 used for discharging cargos of cement. Althoughberth occupancy for the overall port was around 28%, for these berths the occupancy ratio wasabout 51%. About 40% of the time that ships were alongside was nonoperational, however,representing lost time or inefficiency.

26. By 2004, cargo throughput had increased by a further 130% to 16.0 million t. Thenumber of ship calls had increased by a similar 130% compared with 1998. Cargo handlingproductivity had increased significantly to 132 t per ship-hour and around 119 t per hatch-hour,and overall berth productivity was at 4,200 t per meter length of berth. Average berth occupancywas at 41% and ship waiting time averaged 0.13 days per ship call.

27. However, the broad port statistics mask important aspects of port operation (Table

A5.6). In 2004, not all berths were in full operation. The transitional berths, for example, hadbeen taken out of cargo service, as the adjacent land was used for fabricating caissons for portconstruction works. As with the situation in 1998, 80% of cargo was passing through a smallnumber of the ports berths, that is, berths 612, which have a combined quay length of 1,696m, resulting in productivity of more than 7,500 t per meter of berth. Berth 9 was the busiest,handling 22% of all port cargo, and berth 10 handled a further 7%. Berth occupancy ratios foreach berth show that all the main berths were occupied for 6075% of available time, withberths 1, 2, 9, 10, and 11 having the highest occupancy ratios. Although berth throughputsincreased slightly to moderately in many berths other than the seven most heavily used berths,as new berths became available, they seem to have become the favored places for portoperations, and ships with slower operations or problems were assigned to older berths.Productivity improvements at the older berths could possibly substitute for the need to build

some of the additional berths planned.

F. Landward Cargo Movements

28. Prior to the Project, the port was connected to the hinterland by a single track railway lineand a class 3 road. The railway, under district operation, runs from Fangcheng Port to Qinzhou,about 5060 kilometers away, where it is joined by branches from two other destinations, andthence goes on to Nanning. Connections to the national rail network occur at Qinzhou andNanning. The class 3 road runs for 22 kilometers from Fangcheng Port to Fangcheng, from wheretwo class 4 roads connect to the national highway going to Nanning or east toward Beihai. Littleinformation about traffic on both the railway and the road is contained in the Asian DevelopmentBank report and recommendation of the President1 and files nor is the feasibility study or other

information for the pre- and early project periods available. The report and recommendation of thePresident states that the single track railway was heavily utilized. It is known that this track had aone-way capacity of 7.0 million t, which was upgraded to 12.0 million t in 2005. Concerning theroad, the appraisal document states that it was congested and had a nominal capacity of 2,000vehicles per day.

1ADB. 1995. Report and Recommendation of the President to the Board of Directors on a Proposed Loan to thePeoples Republic of China for the Fangcheng Port Project. Manila.


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34 Appendix 5

29. Historically, most cargo has moved between the port and the hinterland by rail. Thelimited information available suggests that around 90% of cargo moved by rail in 1995. Theproject expressway opened in 1998, and a significant amount of truck traffic started to use theroad from the start of operations. Some of this was diverted traffic from the old roads, but somewas traffic with cargo diverted from rail. During 20012004, the railways share of cargodecreased, but was still accounted for more than 70% of the cargo moved out of the port byeither road or rail (Table A5.7).

Item 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

A. Productivity t/m length

1. Berths 18 2,492 2,978 3,689 3,985 4,602 4,117 3,863 3,603 4,177 5,182

2. Berth 9 2,076 8,856 12,689 13,885 14,471 12,870

3. Berth 10 390 733 2,479 2,988 3,925

4. Berths 19 4,218 4,838 5,205 5,167 5,743 6,351

5. Berths 112 4,059 4,845 5,959

6. Berths 612 4,713 5,801 7,263

B. Average Handling Rates (t/hr)

1. Berths 18 123 201 250 278 311 332 305 254 230 226

2. Berth 9 526 870 1272 878 756 669

3. Berth 10 173 137 262 242 267

4. Berths 19 321 401 424 358 313 284

5. Berths 112 307 302 2926. Berths 612 408 431 399

C. Berth Occupancy Ratios (%)

1. Berths 18 72 55 53 51 51 50 47 50 60 74

2. Berth 9 21 49 43 63 76 80

3. Berth 10 0 12 45 66 73 81

4. Berths 19 48 50 47 51 61 74

5. Berths 112 50 61 76

6. Berths 612 43 58 76

7. Whole Port 52 36 32 28 27 25 27 29 34 41

D. Proportion of Berth Time that is Operational (%)

1. Berths 18 60 58 60 61 62 54 58 61 66 67

2. Berth 9 58 64 71 77 78 75

3. Berth 10 61 38 45 54 57

4. Berths 19 62 55 59 63 68 68

5. Berths 112 67 66 68

6. Berths 612 76 67 68

7. Whole Port 58 57 60 58 59 54 55 64 65 67

hr = hour, m = meter, t = ton.

Source: Mission estimates based on data from the Fangcheng Port Group Company, Limited.

Table A5.6: Selected Group of Berth Statistics


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Appendix 7 37

ECONOMIC AND FINANCIAL ANALYSES

A. General Model

1. In analyzing the Project, the with and without project scenarios were defined as with boththe port and expressway components or without either. The majority of traffic on the expressway

was expected to derive from port-related activity, and considering the expressway componentwithout the port component was inappropriate. Similarly, given the small capacity andunsuitability of the existing road connections for large volumes of cargo movements, portdevelopment without road improvements was also not logical.

2. With the Project, the port is defined as berths 18 plus the project-financed berths 9 and10. Berths 19 can be operated as a group for dry bulk and breakbulk cargo. All container shipsand containers are handled at berth 10. The ports other berths, namely, the oil berth, berth 0,and the transitional berths, and the cargo handled at those berths are not included, as theiroperations or cargo can be reasonably identified and are different from the cargo operations ofberths 110. Berths 11 and 12 came into use in 2001 and 2002, respectively, and have similaroperations as berths 19. However, inasmuch as berths 11 and 12 constitute an alternative to

berths 9 and 10, for a proper with and without project comparison, the analysis assumes thatberths 11 and 12 were not built. This required some adjustment of actual average handling ratesand berth times to a theoretical situation as discussed later.

3. Without the Project, the port is defined as berths 18. Containers are assumed to behandled at berth 2 using portal cranes, which was the situation prevailing prior to the completionof berth 10.

4. The annual capacities of the berths have been defined as 11.0 million tons (t) for berths18, 4.6 million t for berth 9, and 1.8 million t for berth 10 (Appendix 3). 1 In 2004, berths 18handled about 7.8 million t, berth 9 handled some 3.5 million t, and berth 10 handled about1.1 million t in 80,000 20-foot equivalent units.

5. Under the general model, cargo at the port is assumed to grow at 15% per year until2010, the approximate growth rate achieved during 19992004, and 10% per year thereafterand to maintain the same proportionate mix of commodities as during 20002004 (Table A7.1).Assuming that cargo is reasonably equally distributed over berths 19, these berths will havereached their capacity limits in 2005. Container operations will continue to grow until berth 10scapacity is reached in 2007. Cargo beyond this level has been designated as excess cargo andhas been excluded from the analyses, as the added cost or investment involved in handling thiscargo is the same in both the with and without project scenarios. In actual practice, it would behandled at berths 11 and 12.

1The capacity of berths 18 would be slightly higher in the with project scenario than the without project scenario, asthey constitute a group of nine rather than a group of eight. A larger group could operate with a higher berthoccupancy ratio and still keep the ratio of waiting time to service time at acceptable levels, defined to be 0.2.However, for the sake of simplicity the analysis ignores this small increase in capacity.


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tem 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2

A. With Project

1. Total Cargo 6,976 8,080 9,227 10,032 11,162 13,196 16,085 18,497 21,272 24,463 28,132 32,352 37,205 40,925 4

Less Cargo for Special Berths 916 549 495 397 401 371 310 357 411 472 543 625 718 790

2. Balance of Cargo 6,060 7,532 8,731 9,635 10,761 12,825 15,774 18,140 20,861 23,991 27,589 31,727 36,487 40,135 4

Containerized Cargo 0 0 0 245 627 745 1,020 1,276 1,595 1,800 1,800 1,800 1,800 1,800 Berth 9 0 563 2,400 3 ,439 3,763 3,922 4 ,000 4 ,600 4,600 4 ,600 4 ,600 4,600 4,600 4 ,600

Berths 18 6,060 6,969 6,331 5,950 6,372 8,159 10,754 11,000 11,000 11,000 11,000 11,000 11,000 11,000 1

Excess Cargo Beyond

With-Project Port Capacity 0 0 0 0 0 0 0 1,265 3,667 6,591 10,189 14,327 19,087 22,735 2

B. Without Project

1. Total Cargo 6,976 8,080 9,227 10,032 11,162 13,196 16,085 18,497 21,272 24,463 28,132 32,352 37,205 40,925 4

Less Cargo for Special Berths 916 549 495 397 401 371 310 357 411 472 543 625 718 790

2. Balance of Cargo 6,060 7,532 8,731 9,635 10,761 12,825 15,774 18,140 20,861 23,991 27,589 31,727 36,487 40,135 4

Berths 18 6,060 7,532 8,731 9,635 10,761 11,000 11,000 11,000 11,000 11,000 11,000 11,000 11,000 11,000 1

Diverted Cargo 0 0 0 0 0 1,825 4,774 5,876 6,195 6,400 6,400 6,400 6,400 6,400

Excess Cargo Beyond

With-Project Port Capacity 0 0 0 0 0 0 0 1,265 3,667 6,591 10,189 14,327 19,087 22,735 2

ources: Appendix 5 of this report and mission estimates.

Table A7.1: Port Throughputs ('000 t)


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Year Truck A Truck B Truck C Truck D Truck E Bus B Bus C Bus D Car TractorTotal

Vehicles

Total

PCU

A. Traffic Diverted from Old Roads

1998 244 139 379 21 10 45 191 2 680 1,711 2,469

1999 394 224 612 34 17 72 308 2 1,098 2,761 3,986

2000 429 244 667 37 19 78 336 2 1,197 3,009 4,346

2001 408 232 634 35 18 74 319 2 1,137 2,859 4,1292002 445 253 691 38 20 81 348 2 1,239 3,117 4,503

2003 552 314 857 47 25 100 432 2 1,536 3,865 5,584

2004 580 330 900 49 26 105 454 2 1,613 4,059 5,863

2005 621 353 963 52 28 112 486 2 1,726 4,343 6,273

2010 870 495 1,351 74 39 158 681 3 2,421 6,091 8,798

2015 1,221 695 1,894 103 55 221 956 4 3,395 8,544 12,340

2020 1,558 887 2,418 132 70 282 1,220 5 4,333 10,904 15,749

B. Traffic with Cargo Diverted from Rail

1998 332 190 517 29 20 1,087 1,857

1999 344 195 537 32 21 1,128 1,931

2000 373 212 583 34 23 1,224 2,095

2001 356 203 554 32 22 1,166 1,995

2002 385 218 599 36 24 1,262 2,1632003 479 272 746 44 29 1,570 2,685

2004 494 282 776 46 32 1,629 2,797

2005 528 302 830 49 34 1,743 2,993

2010 741 423 1,164 69 48 2,444 4,197

2015 1,039 594 1,632 96 67 3,428 5,887

2020 1,326 758 2,083 123 86 4,375 7,513

C. Generated Traffic

1998 111 63 172 10 81 347 4 1,236 2,024 2,643

1999 115 65 179 11 84 360 8 1,282 2,103 2,754

2000 124 71 194 11 92 390 8 1,391 2,281 2,985

2001 119 68 185 11 86 371 8 1,323 2,169 2,839

2002 128 73 200 12 93 402 8 1,435 2,351 3,075

2003 160 91 249 15 118 500 10 1,786 2,928 3,8302004 165 94 259 15 123 540 12 1,935 3,142 4,104

2005 176 101 277 16 132 578 13 2,070 3,362 4,391

2010 247 141 388 23 185 810 18 2,904 4,716 6,159

2015 346 198 544 32 259 1,137 25 4,073 6,614 8,638

2020 442 253 694 41 330 1,451 32 5,198 8,441 11,024

D. Total Expressway Traffic

1998 686 392 1,068 60 30 126 538 6 1,916 4,822 6,969

1999 852 484 1,328 76 38 156 668 10 2,380 5,992 8,670

2000 926 526 1,444 82 42 170 726 10 2,588 6,514 9,426

2001 882 502 1,372 78 40 160 690 10 2,460 6,194 8,963

2002 958 544 1,490 86 44 174 750 10 2,674 6,730 9,741

2003 1,190 676 1,852 106 54 218 932 12 3,322 8,362 12,099

2004 1,238 706 1,934 110 58 228 994 14 3,548 8,830 12,7632005 1,325 755 2,069 118 62 244 1,064 15 3,796 9,448 13,656

2010 1,858 1,060 2,902 165 87 342 1,492 21 5,325 13,251 19,154

2015 2,606 1,486 4,071 232 122 480 2,092 29 7,468 18,586 26,864

2020 3,326 1,897 5,195 296 156 612 2,670 38 9,531 23,721 34,286

PCU = passenger car unit.

Note: PCU values: 1.0 for cars and class A trucks, 1.5 for class B trucks and buses, 2.0 for class C trucks and buses, 3.0 for

class D trucks and buses, 6.0 for class E trucks.

Source: Mission estimates with expressway total traffic 19982004 from Appendix 6 of this report

Table A7.2: Expressway Traffic

40 Appendix 7


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44 Appendix 7

20. Maintenance savings on the old road are estimated by the difference in the period whenit has to be resurfaced to maintain an average roughness of 4.0. The cost of resurfacing theentire length is assumed to be CNY13 million. The maintenance cycle is estimated to be around5 years without the Project, about twice as often as with the Project.

4. Results

21. The EIRR for the port component was recalculated to be 20% (Table A7.4) and for theexpressway 19% (Table A7.5). The EIRR for the entire Project was 20%.

Year

1995 0 0 0 0 01996 0 0 0 0 0

1997 50 50 0 0 0 0 (50)

1998 61 61 0 0 0 0 (61)

1999 55 55 3 1 0 4 (51)

2000 82 3 21 106 16 10 0 26 (80)

2001 78 6 26 109 31 36 0 67 (42)

2002 6 35 41 29 57 0 86 45

2003 6 37 44 34 83 17 134 90

2004 6 40 46 33 80 42 155 109

2005 7 41 48 33 80 52 164 117

2006 7 44 50 33 80 54 167 117

2007 0 7 44 51 33 80 56 169 118

2008 40 7 44 91 33 80 56 169 78

2009 74 7 44 125 33 80 56 169 44

2010 17 7 44 68 33 80 56 169 1012011 0 7 44 51 33 80 56 169 118

2012 0 7 44 51 33 80 56 169 118

2013 0 7 44 51 33 80 56 169 118

2014 0 7 44 51 33 80 56 169 118

2015 3 7 44 53 33 80 56 169 116

2016 0 7 44 51 33 80 56 169 118

2017 0 7 44 51 33 80 56 169 118

2018 0 7 44 51 33 80 56 169 118

2019 0 7 44 51 33 80 56 169 118

2020 0 7 44 51 33 80 56 169 118

EIRR 20%

EIRR = economic internal rate of return.

Source: Operations Evaluation Mission.

Additional

Operating

Cost

Incremental Costs Incremental Benefits

Total

Benefits

Net

Benefits

Table A7.4: Economic Analysis of Port Component

(CNY million at mid-2002 prices)

Total

Cost

Saved

Ship Service

Time

Saved

Ship Waiting

Time

Avoided Land

Transportation

Cost from

Diverted Cargo

Capital

Cost

Asset

Replacement

Incremental

Maintenance


56/63


57/63


58/63


59/63


60/63


61/63


62/63


63/63

5. We believe the expressway design was appropriate. Designing of lowerclass Project highway would have great disadvantages at efficiency and safetylevels. This is why the highway was designed with two-lane access toaccommodate future demand, maintain consistency with NTHS standards of theNTHS, and ensure efficiency. This is also the most cost-effective approach as it

is cheaper than building a new highway, or widening the Project highway, infuture, to accommodate travel demand. Building a high-standard highway hassignificant impact on road safety improvement, and the number of accidents hasgone down with the opening of the new expressway. Further, road safety is notas much a project-related issue as an issue that needs to be addressed with aholistic approach at the national level. ADB is providing TA support for theGovernments efforts in this area, and is working closely with different executingagencies to adopt safetyconscious approach for road planning, design, andoperation.

6. While we agree with the PPER observations, we believe that many of theissues raised in the PPER are not project-specific, but are larger issues that ADB

is engaging through policy dialogue and TA interventions at the national level.

B. Lessons Learned and Follow-up Action

7. We agree with the lessons identified in the PPER. The mix of vehicle typeis an important issue in forecasting traffic, and we have taken note of this issue inprocessing current projects. We also agree with the observation on theimportance of baseline information and records that can be used for projectreviews at a later date, and have taken action for ensuring this in our ongoingand future projects.

8. We also note the suggested follow up action on the toll rates. We wish to

inform that a Toll Diversion Model-Applications Manual was developed througha technical assistance grant jointly with the Ministry of Communication inSeptember 2000, and is currently being used for our operations. The issue ofappropriate levels for tolls, and their effect on traffic diversion, will be discussedwith Guangxi Communications Department in policy dialogue during thedevelopment of the proposed Guangxi Longlin-Baise expressway project, forwhich the PPTA was recently approved.

C. Conclusions

9. Management agrees with the reports conclusion that the relevance of theProject to development needs and to the Government and ADB strategies is

good, and the outputs were generated and the Project achieved its intendedoutcomes. We also agree that the investment was economically efficient and theprobability of sustainability is high. We also take note of the issue of inaccurate