Document of

The World Bank

FOR OFFICIAL USE ONLY

Report No. 6294-MAG

STAFF APPRAISAL REPORT

MADAGASCAR

PORTS REHABILITATION PROJECT

November 14, 1986

Transportation DivisionEastern and Southern Africa Regional Office

This document has a restricted distribution and may be used by recipients only in the performance oftheir official duties. Its contents may not otherwise be disclosed without World Bank authorization.

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CURRENCY EQUIVALENTS

Unit Malagesy Franc (FMG)US$1.00 FMG 630 a/FMG 1 million US$1,587 a/

WEIGHTS AND MEASURES: METRIC

1 meter (m) 3.28 feet (ft)I cubic meter (m3) 35.29 cubic feet (cu.ft)1 kilometer (>I) 0.62 mile (mi)1 square kilometer (km2) 0.386 square mile (sq.mi)1 hectere (ha) 2.47 acre (ac)1 kilogram (kg) 2.2 pounds (lbs)1 metric ton (m ton) 2,204 pounds (lbs)1 liter (1) 0.26 US gallons (gal)

ABBREVIATIONS

CCCE - Caisse Centrale de Cooperation EconomiqueCMN - Compagnie Malgache de NavigationDAC - Direction de l'Aviation Civile, de la Mari.e Marchande, et

de la Meteorologie, MTRTDGP - Directeur General du PlanFAC - Fonds d'Aide et CooperationMC - Ministry of CommerceMPARA - Ministere de la Production Agricole et de la Reforme

Agraire (Ministry of Agriculture)MTP - Ministere des Travaux Publics (Ministry of Public Works)MTRT - Ministere des Transports, du Ravitaillement et du

Tourisme (Ministry of Transport, Supplies and Tourism)NTP - National Transport PlanPIP - Public Investment ProgramRNCFM - Reseau National des Chemins de Fer Malagasy (Madagascar

National Railway)SEPT - Societe d'Exploitation du Port de Toamasina (Toamasina

Port Authority)SMTM - Societe Malagasy des Transports MaritimesTSM - Transport Sector Memorandum

Fiscal Year

January 1 - December 31

a/ See para 3.20

(M) FOR OMCIAL Usr ONLY

MADAGASCAR

PORTS REHABILITATION PROJECT

STAFF APPRAISAL REPORT

Table of Contents

Pate No.

I. THE TRANSPORT SECTOR

A. Geographic and EconomicSetting..........................1B. The Transport System ................................ 9999 2C. Transport Sector Management...... .................. 4D. Transport Policy ...................................... 5E. Sector Investment Planning ........................,.....6F. Bank Group Role in Transport .......................,...7G. Rationale for Bank Involvement.............,.............7

II. THE MARITIME SUBSECTOR

A. InternZational Shipping 8B. Coastal Shipping ... 8C. Shipping Fleet ...........................................9D. ThePot9

III. THE PROJECT

A. Project Objectives ......................................16B. Project Scope ........ C. Project Description ....................... ... 17D. Cost Estimates 999999.99 ................................. 19E. Financing ..... 999999999.9.9........ ...............2

F. Project Implementation and Monitoring .............................22G. Procurement ................... ,... .................23H. Disbursements ......... ... ooo..o...o.ooo..ooo..o.o...24I. Env'ronmental Aset ...................27

IV. ECONOMIC EVALUATION

A. General Objectives ......... o.o......................28B. Forecast of Future Traffic..............................29C. Navigation Aids and Shipping ............................30D. Cargo Handling Improveihents and Dredging ............. .31E. Economic Rate of Return ...................F. Rik .P32

Silvio Capoluongo (Mission Leader), B. Bostrom (Senior Economist), A.Litvak (Port Engineer), C. Tran-Luu (Training Specialist), J. Curienand J. McCaul (Consultants) prepared this report. Dr. Mario D. Fenyoassisted in Its preparation.

This document has a restricted distribution and may be used by recipients only in the performanceof their official duties. Its contents may not otherwise be disclosed without World Bank authorization.

M)

V. FINANCIAL EVALUATION

A. Societe d'Exploitation du Port de Toamasina (SEPT) ...... 34B. The Ports Budget ............................... 37C. The Cargo HandlingCompani.............................38D. Financial Objectives ....................................E. Financial Covenants ................ . 39

VI. AGREEMENTS REACHED AND RECOMENDATION .................. #41

ANNEXES

1.1 Public Investment Plans for the Transport Sector2.1 Develonment of Port Traffic2.2 Development of Toamasina Traffic 1978-842.3 Cabotage Fleet as of November 19852.4 Port Installations2.5 Physical Description of the Port Sector2.6 New Organization2.7 Organization Chart-September 5 19852.8 SEPT Action Plan and Performance Indicators3.1 Cost Estimates3.2 Training Program3.3 Implementation Schedule3.4 Performance Indicators for Ports Other than Toamasina4.1 Forecast of Port Traffic 1990-19954.2 Ship Loading!Unloading P.ates4.3 Summary of Costs and Benefits4.4 Details of Economic Benefit Calculations4.5 Summary for Each Project4.6 Economic Returns and Sensitivity Tests5.1 SEPT Income Statements for the Years Ended December 31st5.2 SEPT Balance Sheets at December 31st5.3 SEPT Funos Statements5.4 SEPT Ratio Analysis 1980-19855.5 SEPT Financial Forecast - Assumptions5.6 SEPT Pro-forma Income Statements for the Years Ended December 31st5.7 SEPT Pro-forma Balance Sheets at December 31st5.8 SEPT Pro-forma Funds Statements5.9 SEPT Pro-forma Ratio Analysis 1986-19955.10 1984 Ports Budget5.11 Ports Budget - Main Accounts5.12 Pro-forma Ports Budget5.13 Pro-forma Ports Budget: Assumptions

Map

1. Madagascar, Ports Rehabilitation Project (IBRD #19595)

(iv)

MADAGA_ AR

PORTS REHABILITATION PROJECT

LIST OF DOCUMENTS AVAILABLE IN THE PROJECT FILE

1. Dossier 1, Trafic maritime, situation actuelle et perspectives,MTRT, November 22, 1985

2. Dossier 2A, Les projets techniques, MTRT, November 22, 19853. Dossier 2B, Projet de renforcement institutionnel, MTRT, November

22, 19854. Dossier 2C, Plan de formation, MTRT, November 22, 19855. Dossier 3, Moyens de desserte, November 22, 19856. Dossier 4, Evaluation economiqre des projets, MTRT, November 22,

19857. Dossier 5, Analyse financiere des projets, MTRT, November 22, 19858. Dossier 6: Les dragages, MTRT, November 22, 19859. Dossier 7, Etude operationnelle et financiere, premiere phase,

MTRT, January 31, 1986.10. Etude de la desserte maritime de Madagascar, phase 2, Ponds d'Aide

et de Cooperation, December 198311. Madagascar Ports Project: Aspects institutionnels et

organisationnels, Bossard International Entreprise, January 198612. Preliminary Assessment of Madagascar Shipping, International

Maritime Associates, Inc., January 24, 198613. Renseignements statistiques, Annie 1983-1984, SEPT, n.d.14. Rapport d'audit des etats financiers de l'exercice clos le 31

decembre 1984, SEPT, April 198615. Madagascar: etude de la signalisation maritime, tome I, MTRT,

September 198516. Elaboration d'un plan de formation, propos'tion du 4/12/85, MTRT17. Elaboration d'un plan de redressement du port de Toamasina, MTRT.

MADAGASCAR

PORTS REHABILITATION PROJECT

I. THE TRANSPORT SECTOR

A. Geographic and Economic Setting

1.01 Madagascar is a large and diverse island with a good natural basefor agriculture. Ecological zones are varied and the agricultural sector isequally diverse. Rice and assava are the main food crops, while cattleraising is common in most areas. Most exports, of which coffee, cloves andvanilla are the most important, are of agricultural origin though someminerals, mainly graphite, chromite and mica, are also exported. Thecountry's mineral resources are limited, but recenu exploration indicatesthat petroleum might be found in commercial quantities. Manufacturingconsists almost entlrely of consumer goods industries ctering to localdemand and agro-industries.

1.02 Fourth largest island in the world, Madagascar covers an area ofabout 590,000 km2. The topography is generally rugged and a centralmountain range traverses the country from north to south. The climate ismarine tropical with cyclones and heavy rainfall particularly frequent onthe east ceast. The country is sparsely populated (about 17 per km square)and the population is unevenly distributed, with about one half of allinhabitants occupying the central one-quarter of the island. Totalpopulation is estimated at about 9.8 million and growing at about 3% p.a.Ninety percent of the population works in the agricultural sector; itsoutput accounts for 401 of the Gross Domestic Product. Industry accountsfor 14X of GDP and annual per capita income is about US$265. Madagascar isthus at an early stage of development.

1.03 Prompted by economic stagnation and a 12% decline in per capitaincome in the 1970's, significant investments were made in all sectors ofthe economy in 1979-81. Financed largoly by foreign borrowing, the spendingboom left the country with a debt service burden that is straining theeconomy. Economic developments over recent years reflect the need tocorrect serious imbalances on external account and in the Government budget.With generally declining expor.s, the imbalance on external account has beencorrected by cutting back imports. Imports declined steadily betweena 1981and 1984; the volume of imports in 1984 was 23% lower than in 1979. Reducedimports of raw materials and spare parts have adversely affected production.The volume of GDP declined by about 9% in 1981, and 2% in 1982. Estimatesfor 1983-85 suggest a growth of 1% to 2% p.a. Industrial output hasdeclined and there are now serious shortages of a number of basic goods suchas soap, candles, oils. Shortages of new equipment and spare parts haveaffected the transport system and greatly diminished its capacity. Economicpolicy has recently focused on structural adjustment with IMF and World Banksupport. Progress, however, continues to be constrained by the externaldebt overhang and the legacy of past policies. I

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B. The Transport System

1.04 Madagascar depends on shipping for its transport link witut theoutside world. It has four international ports, 13 coastal shipping ports,about 15 minor ports and a navigable canal along part of the east coast.The country's internal transportation infrastructure includes an extensivebut poor road network, two rail systems of considerable length and a well-developed air network. The transportation infrastructure fails to provideaccess to all productive areas of the country. Madagascar's lifeline,between the port of Toamasina and the central plateau where most of thepopulation lives, consists of a railway line and a highway, RN 2, two thirdsof which has just been rebuilt with assistance from China. The old sectionsof RN 2 are built to inadequate standards. Costly road construction, poorroad maintenance (paras 1.17 and 1.26) and inadequate overlandcommunications have led to the development of an extensive system of portsand coastal shipping and to an air transport network derser than in mostcomparable countries.

Road Transport

1.05 About 5,200 km. of Madagascar's nearly 50,000 km. of roads arepaved. The paved highway network consists of a main north-south linkconnecting Mahajanga on the west coast with Antananarivo, the capital, andFianarantsoa in the highlands, and the east-west road linking Antananarivo,Moramanga and Toamasina (Map IBRD t 19595). Only parts of the north-southhighway can sustain heavy vehicle traffic. A new paved section of theToamasina-Moramanga road provides all-weather transit between Moramanga andBrickaville on the coast. While this development greatly improved roadcommunications between Antananarivo and Toamasina, heavy truck traffic willcontinue to be constrained because the highland Moramanga-Antananarivo road(115 km), as most of the island's roads, was built to low standards, and isnarrow and badly aligned. The Bank and Switzerland are financing therehabilitation of the Manajanga-Antananarivo road, RN 4, under the SixthHighway Project. In the framework of the priority road network establishedunder that project, other donors (European Development Fund, Germany,Switzerland, and the African Development Bank) are financing rehabilitationof the worst stretches of the main highway axes.

1.06 Tota_ vehicles in 1984 numbered 42,000, some 13,000, or 31%, ofwhich are trucks and pickups. Less than 50% of the commercial fleet isoperational. By contrast, in 1976, there were 104,000 vehicles, 47% ofwhich were commercial. This development reflects scarce funds for fleetreplacement as well as a severe decline in economic activity (para 1.03).Passenger transport is provided by cooperative and individual carriers andregulated by the Ministare des Transports, du Ravitaillement et du Tourisme(MTRT) and provincial authorities. The trucking industry is also regulatedby MTRT and local authorities. Until early 1986, entry to the industry wasnominally screened by the Government on the basis of supply and demand, but,in practice, was generally open to capable entrants. Transport tariffs weredetermined within a minimum-maximum rate system established by MTRT andlagged behind cost inflation. Under the Sixth Highway Project, the Bankurged further liberalization. During negotiations of the Third RailwayProject (Cr. 1694-MAG), in March 1986, Government agreed to remove remainingrestrictions to the free movement of goods and to freedom of pricing and hassince ac ed to carry out this agreement.

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Rail Transport

1.07 The railways are operated by the Reseau National des Chemins de PerMalagasy (RNCFM), a parastatal agency under the supervision of MTRT. ~herailways consist of two separate and unconnected single track systems ,MapIBRD #19595). The northern system (about 700 km) connects Antananarivo, thecapital, and industrial areas in the high plateau region with the main portof Toamasina and the rice and chrome producing area of Lac Alautra. Thesouthern system (163 km) connects the regional center of Fianarantsoa andthe main coffee producing areas in the South with the port of Manakara. TheAntsirabe-Antananarivo-Toamasina line is t.e most important line and themain mode of transport between the most populated and developed parts of thecountry. Almost half the population of Madagascar lives in the area servedby the railway.

1.08 RMCFM is expected to remain the main means of transport for bulkcommodities such as petroleum products, grain, chemicals and constructionmaterials from Toamasina to the central highlands. Long-term projectionsindicate that rail traffic is unlikely to increase significantly even if theeconomy continues to grow, due to increased road competition for non-bulkcommodities. Freight traffic by rail is thus expected to stabilize at thecurrent level of 224 million ton-km p.a. In the short-to-medium term,despite some 302 decline in passenger traffic since 1979, the peak year, therailway will still continue to carry a substantial number of passengersbecause many existing road vehicles need to be replaced. Their replacemeLtmay take some time given the current scarcity of foreign exchange.

Air Tranasort

1.09 By regional standards, Madagascar has developed a dense domesticair transport network in response to the distance between populationcenters, the rugged terrain, costly construction and the poor condition ofsurface transport. There are 56 airports, 17 of which are built to all-weather standards and five of which are suitable for international flights;the remainder are gravel or grass strips. The international airport atAntananarivo handles 502 of all traffic; 15 small airports generate 30% ofthe traffic; and 40 very small airports share the remaining 20Z of totaltraffic. Service to many small airports is not financially profitable butensures access to otherwise isolated areas.

1.10 Air Madagascar, 80% owned by the Government, 18X by Air France and2% by private shareholders, provides international service to Paris,Marseilles, several countries in East Africa and all domestic service.Aircraft in its fleet include a B-747 (combination cargo/passengers) forservice to Europe, two B-737's for domestic and regional service, two HS-748's and four Twin Otters for domestic service, and several smalleraircraft for air-taxi and charter services. In 1984, Air Madagascarsuccessfully renegotiated maturities on its long term debt obligations toforeign banks, and in 1985 began a financial improvement program.

Ports and Coastal ShiDpint

1.11 Because it is an island, Madagascar will continue to rely onmaritime shipping for the bulk of its foreign trade and on coastal shipping

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for an important part of its internal trade. Indeed, shipping by water isthe only means of transporting freight between many areas of the countrywith no access to all-weather roads. Toamasina, the main internationalport, handles 552 of the total traffic; Mahajanga, 11%; Antsiranana, 5%; andToliara, about 4%. The remaining 25% of traffic is handled by all otherports catering almost exclusively to coastal shipping vessels. The port ofToamasina has adequate capacity to handle present tra!fic, but operationsare hampered by low labor productivity and poor condition of the equipmentfor lack of maintenance and spare parts. Poor performance at the port ofToamasina has led to the diversion of some international traffic to the portof Mahajanga. Capacity there is limited, howr-,er, as the port requireslightering and the transfer inland of goods delivered at Mahajanga isrestricted by the condition of the road connecting it to the capital (RN 4).Rehabilitation of the worst sections of RN 4 is included in the ongoingSixth Highway Project.

1.12 The Societe Malgache des Transports Maritimes (SMTM), the statecontrolled international shipping line, operates three cargo vessels.Coastal shipping is handled primarily by the Compagnie Malgache deNavigation (CMN), 92% state-owned, operating nine vessels of which eight areleased from the government. The government-owned oil company, SOLIMA,operates three tankers, and a number of lighters and barges. Severalprivate operators operate small vessels along the coast and to nearbyislands in the Indian Ocean. Parts of the intracoastal waterway on the EastCoast are being rehabilitated with AfDB financing but initial traffic isexpected to be light (para. 1.20). It is Goverment's objective to improvethe efficiency of coastal fshipping and ports' services. To this end, in1983, the Government carried out a comprehensive sector survey with Frenchaid. This study (paras. 1.21 -1.23) forms the basis for the proposedproject.

C. Transport Sector Management

1.13 Several ministries and Government organizations share responsibilityfor the transport sector: the Ministry of Transport, Supply and Tourism(Ministere des Transports, du Ra,vitaillement et du Tourisme, MTRT) and theMinistry of Public Works (Mitnistere des Travaux Publics, MTP) play the mostimportant role. MTRT is responsible for road, rail, air and water transport,end ovetsees several autonomous Government agencies, including the nationalRailway (RNCFM), Air Madagascar, the Port of Toamasina, and the shippingcompanies. MTP is responsible for planning, building and maintaininghighrays and other Government civil works except ports and airports.

1.14 Other Government agencies that influence transport policy include:the Ministry of Commerce (MC), the Ministry of Agriculture (Ministere de laProduction Agricole et de la Reforme Agraire, MPARA), the Director Genetralof Planning (Directeur General du Plan, DGP), and the local governments.MC's responsibility to collect and market crops significantly affects roadtransport capacity and its control of prices of basic commodities influencestransport tariffs. MC also regulates the importation and assembly of motorvehicles, and, in concert with the Central Bank, allocates foreign exchangefor imports. MPARA and the military operate large state-owned roadtransport enterprises. Finally, each provincial government operates atrucking company.

1.15 MTRT's Planning Director is charged with transport sector planning.The director's main task is to coordinate transport investment plans withother agencies. Pending the completion of a WAtional Transport Plan (para1.19), scheduled for December 1986, the DGP began to establish a PublicInvestment Program (PIr) with assistance primarily from MTRT and MT? for thetransport sector. IDA and other bilateral and multilateral aid agencieshave helped improve sector planning, but more assistance is needed. Duringpreparation of the Sixth Highway Project, planning improved. The office ofMTRT's planning Director was established and supported by technicalassistance financed by France and IDA. The planning effort was wellcoordinated with DGP and MPARA and yielded a priority 'Economic RoadNetwork" list of about 10,000 km (4,300 km psved roads, 3,300 km engineeredearth roads and 2,400 km feeder roads). This was the agreed basis for theIDA Sixth Highway Project.

D. Transport Policy

1.16 Development of the transport sector has been influenced by:(i) rugged topography and a tropical climate with heavy rains and frequentcyclones; (ii) unevenly distributed population concentrated in e fewisolated regional centers; and (iii) lack of suitable construction materialsin some parts of the island. As a result, road construction and maintenanceis costly and the less populated regions remain relatively isolated.Transport needs are relatively well served on the central plateau where halfof the population is concentrated.

1.17 Government. policy towards transport development is to: (i) connectregional capitals by all-weather roads; (ii) improve corimunications betweenthe centrally located capital and the main seaport of Toat asina (theAntananarivo- Moramanga-Toamasina road/rail corridor); (iii) improve roadmaintenance; and (iv) improve the transport organizations and services. Anoverriding objective is to satisfy the country's quantitative andqualitative transport requirements at a reasonable cost, taking into accountbalance of payments difficulties. IDA is in general agreement with theseobjectives, and has successfully supported them through several projects(para. 1.24).

1.18 A program of action to better coordinate measures relating toinfrastructure and means of transport has been established for the 1984-1987period. It seeks to: (i) coordinate and plan transport services,complementarity, infrastructure, and pricing; (ii) improve the quality ofservice by introducing competition between the different transport modesand, where possible, between different operators of a given type oftransport; (iii) reorganize training of infrastructure specialists andtransport company personnel; (iv) rehabilitate transport companies byimporting sufficient quantities o- spares and supplies and through regularupkeep of infrastructure; and (v) replace obsolete transport material andkeep the fleet properly maintained. Other objectives relate to the generaldevelopment of Madagascar. The overall policy goals are to providetransport at a lower cost and to reduce regional isolation throughrehabilitation of the secondary road network.

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E. Sector Investment Planning

National Transport Plan

1.19 The Government's sector policy objectives are likely to changelittle over the medium term. What may change, however, is the relativeemphasis on different aspects, modes, or geographical areas. To assist inthis process, IDA and FAC are supporting the development of a NationalTransport Plan (NTP) by MTRT. The NTP work began in 1985 and the MTRT teamhas so far completed several detailed studies concernlng tariff policy,origin and destination of road traffic, relation between road transportcosts and tariffs, and port services in the northeast of Madagascar. Afirst draft investment plan for the sector for 1986-1990 has been preparedand considered in the formulation of the project.

1.20 The draft investment plan (Annex 1.1) continues to emphasize roadrehabilitation and maintenance but is otherwise fairly balanced betweentransport modes and clearly meets many of the urgent needs forrehabilitation of the sector. The main problem is availability ofresources. Less than half the investments originally planned for 1984 and1985 were in fact made mainly because of budget cuts. A separate issue isthe investment in the Canal des Pangalanes (para. 1.12), financed by AfDB.About 9% of the total investment of the National Transport Plan is allocatedto this project. While the general project objectives appear reasonable,the assumptions underlying the economic evaluation of this project,particularly the traffic forecasts, appear rather optimistic. In thecontext of the Public Investment Review, the Government has expressed theintention to work closely with the Bank as well as AfDB to ensure thatinvestment and operating costs of the Canal be kept to a minimum and therisk of cost overruns be prevented as much as possible.

The Ports Rehabilitation Prozram

1.21 The need for port rehabilitation was recognized in 1982. Thisrecognition led to an agreement with France's FAC to finance a study ofports and shipping completed in 1983. The objectives of the study were: (i)to develop a program to rehabilitate and maintain Madagascar's ports; (ii)to Improve coastal shipping; and (iII) to collect relevant port and trafficstatistics to be used as a basis for a sector investment plan. The studywas divided in two phases. During the first phase, the consultants preparedan inventory of all ports and their physical characteristics, studicd theeconomies of each coastal area and their transport needs, and preparedtraffic projections.

1.22 During the second phase of the study, the consultants evaluatedalternative ways to meet the transport needs of the coastal regions andcatried out a comparative economic analysis of all practical alternativeinvestments. The report also included hydrographic surveys and studies onport maintenance, cargo !'andling and coastal shipping. Furthermore, itrecommended that thie Government rationalize and streamline institutionalarrangements, establish improved accounting and financial systems for allports, and employ specialists to design an effective system of navigationalaids.

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1.23 In 1984, the Bank found that the study financed by France was agood basis for a port rehabilitation program and, at the request of theGovernment, agreed to finance technical assistance required to prepare theproposed project with a PPF advance, to supplement grants for the samepurpose by France and the UK .

F. Bank Group Role in TransRort

1.24 Bank involvement in Madagascar9s transport sector is substantial.Between 1974 and 1986, the Bank supported ten transport projects with IDACredits totalling just over US$110 million, six in highways, one in ports,and three in railways. The Bank has played and expects to continue to playa critical role in improving the institutional capacity and policy frameworkfor the sector.

1.25 The first port project (Credit 200-MAG, US$9.6 million, 1970)consisted of the extension of the deep water berth at Toamasina, thecreation of the Toamasina Port Authority (SEPT), and technical assistancefor management and training. In 1973, the credit was increased by US$1.8million to cover a shortage of funds resulting from a currency realignment.PPAR No. 2299, dated December 22, 1978, concluded that (i) the physicalobjectives of the project were satisfactorily carried out; (ii) a lower,revised economic return of 7.0% i-as due to lack of traffic growth resultingfrom adverse local and international political and economic conditions thatcould not have bQen foreseen at the time of appraisal; and (iii) althoughthe technical assistance for institution building did not achieve fullysatisfactory results, initially because of the poor performance of technicalassistants, the Port Authority made some progress towaris autonomy andImproved management. These positive achievements. however, were relativelyshort-lived because of the country's economic deterioration, SEPT's weakmanagement, and labor problems.

G. Rationale for Bank Involvement

1.26 Transport is a key sector in the Bank's lending strategy inMadagascar because transport constrains economic development in othersectors as indicated in the Transport Sector Memorandum (TSM). The Bank hasinvested heavily in the sector and has seen results: (i) a graduallyincreasing emphasis on rehabilitation versus new investments; (ii) progresstowards the creation of a highway maintenance system; and (iii) increasedmanagement and financial autonomy for the Railway which enabled it tosignificantly improve its operations. The Bank has been promoting anintegrated approach to transport to help Madagascar's economy, to maintainan ongoing dialogue with the Government with a view toward promoting policyreform, and to balance the Bank presence among subsectors.

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II. THE MARITIME SUBSECTOR

A. International Shioping

2.01 Because it is an island, Madagascar depends on shipping by sea forall its foreign trade except for a mitor volume of high value commoditiesshipped by air freight. Only about 5,000 tons of total 1985 exports andimports totaling about 1.1 million tons were shipped by air. Internationalsea trade essentially falls into three categories: scheduled linerservices, dry bulk, and liquid bulk transport. Most high value generalcargo moves by regular scheduled liner services and conference lines; theconference between Europe and the Indian Ocean is the most important. Thisconference, CIMACOREM, includes European carriers and the Societe Malagasydes Transports Maritimes (SMTM) which operates two modern ships equipped tohandle containers. The major part of bulk cargoes such as rice imports andchrome exports are shipped by specially chartered vessels. The sameapplies to the third major category, oil imports, except for a minor volumehandled by the national oil company SOLIMA on its own ships.

2.02 Madagascar's most important international port is Toamasina on theeast coast. In 1984, it handled dry cargo imports of some 321,000 tons,169,0OO tons of trans-shipment, and 250,000 tons of oil imports, or about80% of the country's total oil consumption. Exports through Toamasina were182,000 tons or 58% of total exports of 315,000 tons. An overview of porttraffic in Madagascar is given in Annex 2.1 and in more detail forToamasina in Annex 2.2. The clear domination of Toamasina is due toseveral factors, the most important of which is that it is the only deep-water port with easy road and rail access to the capital and to the centralplateau, the most populated and developed area of the country. This inturn made it the obvious choice for the SOLIMA oil refinery. Other portswith direct export traffic are Nosy Be and Port St. Louis for sugar andfish, Mahajanga for textiles and Tolagnaro for sisal and mica. Ports withdirect import traffic include Nosy Be for oil, and Mahajanga, Antsiranana,Toliara and Morondava for dry cargo.

B. Coastal Shipping

2.03 Coastal shipping performs two main functions: it distributeslocally produced commodities such as rice, sugar, salt and corn to otherparts of the island, and it acts as a collector for trans-shipment ofexports such as coffee, cloves and certain minerals and imports such ascement, rice and oil products. The coastal shipping fleet is listed inAnnex 2.3. In 1984, some 224,000 tons of dry cargo and 120,000 tons ofpetroleum products were carried Dy a fleet of 14 vessels larger than 500dwt, three of which are tankers. By way of comparison, internationaltraffic was 763,000 tons of dry cargo exports and imports, and 314,000 tonsof imported oil. Most ports have lighterage operations; the mainexceptions are Toamasina and Toliara in the southeast, Vohemar andAntsiranana in the north. Port installations are summarized in Annex 2.4.Another 15 or so smaller communities are only served by sailboats and smalllighters, but the total volume of cargo is very limited. Coastal shippingtypically operates into several ports on the same voyage be it around theisland or on either the west or the east coast. Cargo handling rates in

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the ports are generally low, partly reflecting the constraints inherent tolighterage operations. Many of the ships are old and poorly maintained.Weather and sea conditions increase the difficulties and further decreaseship utilization. Due to geogr6phic and demographic constraints, coastalshipping will continue to play an important role in the foreseeable future.

2.04 Poor infrastructure and equipment conditions in several portsaffect coastal shipping adversely. Coastal shipping patterns have changedto overcome some of these constraints; examples of change are the use ofsmall beachable roll-on/roll-off ships (Landing Craft, LCT's) to certainports and the changed use of Mahajanga, where traffic is already largelyhandled by small shallow-draft vessels or by lighterage. The proposedproject has been designed to take these trends as well as possible futurechanges into account. Examples of possible future shipping alternativesare the use of LCT's to Morondava and Maroantsetra and shallow-draftmotorized barges at Morondava. Small LCT's could also serve some of thecommunities now served only by sailing craft.

C. Shipping Fleet

2.05 As indicated in Annex 2.3, the major part of the Malagasy coastalshipping fleet is very old and in poor condition because ship owners havehad little incentive to invest and limited opportunity to obtain foreignexchange for vessel replacement and maintenance. The Malagasyinternational fleet, however, is relatively modern. SMTM and CMN eachoperate two modern ships. SMTM's two newest ships are part of the linerconference to Europe (para 2.01), while a third one is used for regionaland inter-island trading. In addition to smaller vessels, CMN operates two5,300 DWT ships serving domestic and regional trade between Southern Africaand the Indian Ocean Islands. Some private ship operators occasionallyalso operate in inter-island trade. In addition to the ships listed inAnnex 2.3, about 110 schooners and 140 dhows serve small communitieswithout port installations. Although these sailboats carry only about 3% ofcoastal traffic, some isolated communities along the coast depend entirelyon these traditional craft.

D. The Ports

Physical Description

2.06 In spite of the vital role which it must perform, since 1975 theports subsector has been affected by inadequate maintenance, overdueequipment replacement, institutional problems, and declining traffic.Though there are numerous small ports (Annex 2.4), served occasionally bysmall private motor or sail vessels, about 97% of the total traffic isconcentrated in 10 ports, which are the only ones included in the proposedproject. A description of these ports is given in Annex 2.5.

2.07 Sea conditions are quite different on the east and west coasts:The east coast is exposed to the wave action and swells of the IndianOcean, while the west coast, which faces the Mozambique Channel, is fairlywell protected. This difference affects both the type of vessels that canoperate safely, and the type and productivity of port operations.

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2.08 The east coast is roted for its inhospitable shores, subject tostrong SE winds and heavy swell from April to October. From November toMarch rain squalls are frequent and cyclones may occur. Two devastatingcyclones have hit the northern regions, including Toamasina, in the lastthree years. There are no good storm shelters to be found on the eastcoast. Toamasina, the most important port of Madagascar, and Antairananaat the northern tip, are its only deep water ports. These, together withVohemar are the only ports along the east coast which do not requirelighterage. The rest of the ports along the east coast, the most importantof which are Manakara and Tolagnaro, are built in unprotected sites, andrely on lighterage operation4.

2.09 Because it is protected from the trade winds, the west coast, fromAntairanans to Cape St. Marie, is more sheltered than the east coast. Thenorth-wer4 coast from Antsiranana to Mahajanga is served by Port St Louis,Hell-Ville on the island of Nosy Be and Mahajariga, the second port of thecountry. From Mahajanga to Cape St. Marie, the west coast is sparselypopulated, with few ports: Morondava and Tollara are the most significantones. The west coast's only relatively deep water port, at 8 meters waterdepth, is Toliara. All other ports depend on lighterage operations,assisted by a tidal range of almost 3 meters.

2.10 Functionally, the ports of Madagascar are classified in thefollowing groups:

- Main ocean goina vessels: open to long distance internationalshipping, as well as local coastal vessels; Toamasina is theonly port in this category; it is organized through anindependent port authority (SEPT).

- Secondary ocean going vessels: open to all ships except somespecifically indicated by Government regulationls, as well ascoastal ships; includes Antsiranana, Mahajanga, and Toliara;their operations are supervised by a Port Director, assisted bya local committee.

- Main coastal vessels: open to all coastal vessels; includes 8ports, six of which--Manakara, Morondava, Nosy Be, Port-Saint-Louis, Tolagnaro, and Vohemar--are included in the project;their operations are supervised by a Port Agent.

- Secondary coastal vessels: only open to non-internationalcoastal shipping; these ports are not included in the projectdue to their low level of traffic, about 3% of the total.

Port Problems

2.11 The infrastructure problems are deterioration and advanced age ofmany wharves, buildings, and pavements to such an extent that unless promptrepairs are carried out the investments required will be much larger due tototal loss. The poor condition of rolling surfaces, coupled with a chroniclack of spare parts and of preventive maintenance, have also resulted in acritical equipment situation. Additionally, some of the equipment recentlyacquired through bilateral aid has not been very well suited to the

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specific needs, and has in fact added a burden to the respective operatingfirms. In summary, the ports need rehabilitation and replacement ofequipment, with only a very small amount of new items, mainly pavedsurfaces. It is also necessary to establish an institutional framework toensure that there will be no recurrence of past neglect of maintenanceactivities, both for equipment and for civil works.

DredRina

2.12 Except at Manakara, hardly any dredging has been done in the lastten years. Yet the impact on port activities and on shipping has not beendramatic, because lighterage operations have continued, and the demand formaritime trensportation has decreased, although this may be partly due tothe high cost and low productivity of these services. Initial proposals toreturn to the dredging patterns of the 1960's have been carefully evaluatedand found uneconomical at current traffic levels. At appraisal, Governmentagreed to a much reduced dredging program. Regular dredging under MTRTsupervision would continue at Manakara, while a bottom cleaning operationwould be conducted in Mahajanga (once only), and minor dredging would becarried out sporadically with small equipment by private stevedoring andlighterage companies in Toliara and Tolagnaro.

Navigation Aids

2.13 During the last decade, Government has not carried out adequatemaintenance of lighthouses, markers, and buoys, nor has it carried outregularly charting and hydrographic surveys. As a result, considerablecapital investment is required to catch up with deferred maintenance. Thelogistic problem of supplying remote lighthouses and the degree ofdeterioration of the existing equipment make it adv-.sable to replace some21 lights with solar powered units. In general, hoever, much of theexisting old equipment is highly regarded and can be rehabilitated.Operators are well trained and, given a reasonable supply of spare partsand management encouragement, can continue to service the old equipmentwell. Other important needs are provision of buoys, rehabilitation ofstructures, a vessel to service the installations, and improvements inmanagement and technical assistance.

Port Institutions

2.14 In recent years, the most difficult problems facing the Madagascarports subsector have been institutional weaknesses. The 1983 study (para1.21) indicated that the administration of the port subsector was carriedout by three ministries, MTRT, MTP, and the Ministry of Finance, and thatthe attributions and responsibilities of the two former ones was quiteunclear, with resulting gaps as well as overlaps in the discharge of theirfunctions. While the infrastructure was under the supervision of MTP, theadministration of the ports was under the supervision of MTRT. Though MTRTwas supposedly in charge of planning new investments, MTP was responsiblefor their execution. While the navigation aids were under MTP, the meansof transport to the lighthouses and buoys were provided by MTRT. Thedredges were procured by MTP, but their operation and maintenance was doneby MTRT. There was little coordination between the two ministries, andfunds were insufficient. The work indeed suffered, the ports deteriorated,and productivity declined.

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2.15 The consultants recommended the incorporation of dredging,hydrography and navigation aids under a single division of MTRT, to begiven sole responsibility for the administration, planning and maintenanceof the ports, with the proviso that MTP would continue to provideassistance in the execution of new works and certain maintenanceactivities, when requested to do so by MTRT. This was done by Governmentdecree of February 1985, giving full attributions to MTRT, under theDirector of Civil Aviation, Merchant Marine, Meteorology and Ports (DAC),which is now fully in charge of all ports, except Toamasina, and ofmaritime transport. This institutional setup is satisfactory and shouldremain in effect because it is conducive to a more efficient allocation ofscarce resources and adequate maintenance of infrastructure and equipment.

2.16 The new (March, 1986) organization, Chart shown on Annex 2.6, isan improvement from the previous one shown on Annex 2.7. It followsclosely the recommendations of the 1983 study as well as new ones made byconsultants financed under a PPF advance resulting in an enhancedinstitutional framework. DAC has now four port oriented departments:Mi) Seaways; (ii) Merchant Marine; (iii) Port Services, and (iv) ProvincialServices. In addition to the above, there is at each port a representationof the Port Services Department, which at Antsiranana, Mahajanga, andToliara is carried by the local head of the Provincial Services Department.The Port Services department controls activities at all ports, except atToamasina, where the stevedoring, cargo handling, and port authorityfunctions are delegated to the Societe d'Exploitation du Port de Toamasina(SEPT). Decentralization of headquarters authority has been implemented bythe creation of the provincial departments responsible for coordinatingactivities in each coastal region. The main objectives of thisreorganization are: (i) reinforcement of local port administrations; (ii)clear definition of operational objectives; (iii) clear definition of linesof authority; and (i'J) giving each port the means and support it needs toachieve its objectives.

OrRanization of the Ports

2.17 DAC's staff working on port oriented activities consists of 72 atAntananarivo, and 132 at the various ports. While the central staff isadequate and needs only upgrading, the field staff is quite underutilizeddue to lack of means to carry out the work, a situation which should changein the near future. For example, 39 dredging workers are essentially idle;even under the new dredging plan, most will continue to be redundant, andwill be reassigned.

2.18 Seaways Department is in charge of maritime accesses, includingnavigation aids, hydrography, dredging and civil works. For navigationaids it has a buoys maintenance yard, repair shop and training center atAntsiranana, but it cannot discharge its duties due to lack of a buoytender. Currently it cannot discharge its dredging functions either,because practically all the dredges are out of service. Nor can it carryout any hydrogrephic work because it does not have a single appropriatevessel.

2.19 Dredging constitutes a unique situation because, until 1985, theservice depended on MTP, and the dredging staff was charged to the budget,

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when in fact no dredging at all was being done, except at Manakara.

2.20 Herchant Marine Degartment supervises Malagasy shipping lines(traffic studies, tariffs, conference agreements, etc), and compliance withmaritime regulations.

2.21 Port Services Deiartment establishes the operational budget andsupervises operations and administration of the ports, including theissuance of financial statistics, negotiation of concession agreements, andsetting of tariffs.

2.22 Provincial Services Department is at present only in charge oflocal merchant marine matters but will soon include local representationfor all the central services described above.

2.23 At each port stevedoring and cargo handling activities arecontracted to a single private enterprise or to a consortium underconcession agreements. Contractors handle cargo on their own behalf and onbehalf of others. The firms having concessions are, by port:

- SEPT at Toamasina.

- Toliara Lighterage, organized by the local chamber of commerce.

- Tolagnaro Lighterage, an affiliate of SOMACODIS, a parsstataltrading Company.

- Manakara Lighterage, organized by the local chamber ofcomerce.

- Nosy Be Lighterage, organized by the local chamber of commerce.

- Vohemar Stevedoring, subsidiary of a large trading firm.

- CMDH, a private company at Mahajanga and Antsiranana.

- SECIAM, the meat trading company, and Sociote Dublois atMorondava.

2.24 The situation of the cargo handling and lighterage firms is quitepoor, due to the double disadvantage of too much personnel and insufficienttariffs to recover costs. Equipment in their possession is usually lackingin maintenance, and the infrastructure in which they operate is notmaintained at all. They are, however, the only entities which at the locallevel have demonstrated capability to operate, and who have means to carryout operations, in contrast with harbor masters and port captains who donot have offices or vessels to carry out their duties.

Societe d'Exploitation du Port de Toamasina (SEPT)

2.25 SEPT is responsible for services to ships such as piloting, tugservices, line handling, stevedoring, cargo handling, warehouses, storageyards, port infrastructure, shops, maintenance, and police at Toamasina andother non - port related commercial activities. It is autonomous butsubject to the supervision of MTRT and Ministry of Finance, administered by

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a 12 member board, in which there is Government, unions, and ship owners'representation. The Chairman of the Board is appointed by the Council ofMinisters.

2.26 Though piloting, line handling, and tug services provided by SEPTdo not present in general difficult problems, stevedoring and cargohandling do. The symptoms of the problem have been poor productivity, lowlevel of security, and damage to cargo, to such an extent that shippingrates to Madagascar are considerably higher than to similarly located portson the same route. The causes of the problems are complex, but cangenerally be reduced to: (i) lack of competition; (ii) job tenure resultingin disincentive for work; (iii) strong union pressure on management; (iv)absence of motivation; (v) inadequate equipment, due to poor maintenanceand operating practices, and (vi) lack of certain specific qualificationsat the highest management positions. There are some highly qualifled staffwho have been ineffective because they lacked authority or managementsupport. Toamasina's situation contrasts sharply with that of some smallports, such as Manakara and Vohemar, where there is a reasonably efficientoperation.

2.27 A new General Manager was appointed in April 1986, with strongbacking by the highest Government levels, and a clear mandate to turn SEPTaround. Since his appointment, the new General Manager activelyparticipated in the preparation of SEPT's Action Plan (Annex 2.8 and paras5.06-5.08) and is committed to its implementation. The Action Planconsists of a series of measures aimed at improving SEPT's performanceduring the first two years of project implementation. Improvements at theport were noticeable only few weeks after the arrival of the new GeneralManager: tighter discipline, enforcement of simple house-keeping measures,and improved staff morale. For example, the port appeared much cleaner, athird shift was instituted for handling certain commodities, working hoursare beginning to be respected, and overtime has been reduced by more thanhalf.

2.28 The highlights of the Action Plan are divestiture of non-portrelated activities, strengthening of the entire upper management, trainingand development of staff at all levels, reduction of number of staff, newtariff system, new budgeting system, establishment and pursuit of overallobjectives clearly defined, speeding of invoicing and collectingprocedures, improved house-keeping practices, improved maintenance ofstorage yards, improvement of ship loading and unloading rates, completeoverhaul of maintenance methods, facilities and personnel, and developmentor a system of incentives to motivate stevedores.

2.29 Management improvements would be complemented by a program ofphysical rehabilitation. The deep water berth (Pier C) is damaged and islosing fill material; rolling surfaces and container handling yards arerough; maintenance sheds are in poor condition; and the electric, water,and drainage networks are out of order. Container traffic has increasedsteeply over the last years, and represents a good opportunity tc improveproductivity and reduce shipping costs for the country. The port needssome equipment to handle containers more efficiently, as well asappropriate surfaces for the operation of the equipment. Theseinvestments, together with technical assistance and training, would providethe necessary means to improve performance.

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2.30 The cyclone that struck Toamasina in March 1986 (Honorinina)caused serious damage to the breakwater and to Pier C. The breakwaterrepairs have been included in the Supplemental Credit to the CycloneRehabilitation Project (Cr. 1526-HAG), approved by the Board in August1986. The Pier C repairs match well the objectives of the proposedProject, and have thus been included.

Role of the Private Sector

2.31 Private firms play a limited though important role in Madagascarshipping and port sectors. At Toliara, Manakara, and Nosy Be cargohandling functions are carried out by firms organized by and dependent onthe local chambers of commerce, which are controlled by the private sector.At Vohemar and Morondava cargo handling is done by private firms, for whomthese ports represent a trade link. At Mahajanga and Antsirananastevedoring is done by private companies. At Port St. Louis and Tolagnarocargo handling is done by mixed companies. At Tosmasina, where there is anindependent port authority, there are opportunities for privatization ofcargo handling, and these will be pursued during the life of the project.

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III. THE PROJECT

A. Protect Objectives

3.01 The proposed project aims to rehabilitate the physicalinfrastructure, including equipment, in selected ports, primarily to reduceoverall transport costs to the users of shipping services. These portsaccount for about 97X of port traffic in 1984. Secondly, the project aimsto develop the institutional capacity to manage, operate, and maintain at areasonable level of efficiency the ports subsector and its restored assets.Thirdly, it aims to eliminate delays and safety hazards to navigation.These objectives are consistent with the Bank's sector strategy formulatedin the 1983 Transport Sector Memorandum and the 1985 Selected TransportIssues paper. The project represents a logical extens .on to the portssubsector of efforts underway in the road iubsector (Sixth HighwayProject), and in the railway subsector (Third Railway Project) to promotepolicy reform and rehabilitate infrastructure. A seventh highway projectis presently being prepared.

B. Prolect Scope

3.02 The proposed project includes the ports of Toamasina, Manakara,Tolagnaro, Toliara, Vohemar, Morondava, Mahajanga, Nosy Be, Antsiranpna,and Port Saint Louis; it will consist of the following components whichwould be phased over 6 years, beginning in 1987:

(a) Rehabilitation and enhancement of ports infrastructure.Rehabilitation, repair and minor new construction of quays,slipways, yards, buildings, and utilities.

(b) Modifications and Improvements to cargo handling.Procurement of new cargo handling equipment, floating craft,spare parts, and materials.

(c) Services to shipaing. Dredging at Manakara, Tolagnaro,Toliara, and Mahajanga; navigation aids and hydrographicsurveys capability covering the entire island; and spareparts for the international and coastal shipping fleet.

(d) Institutional development. Technical support to develop andstrengthen technical skills, improve management, cargohandling operations, maintenance, navigation aids, anddredging. This support would be made available to MTRT andto SEPT. Training, including a training specialist,scholarships, training materials, and appropriate trainingfor about 500 staff of MTRT, SEPT, and local stevedoring andlighterage firms.

3.03 A summary of project components for each port is shown on Table3.1 on the following page:

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Table 3.1 Sumary of components at each port

MAHA MORO TOLI TOLA MANA TONA VOHE ANTS NOBE STLO

A) Infrastructure

(a) Quays, slipways X X X X X X X X(b) Yards X X x X X X X 'X(c) Buildings X X(d) Utilities X X X X X

B) Cargo handling I

(a) Equipment X X X X X X X X X X(b) Floating craft X X X X X X X X X(c) Spare parts X X X X X X X X X X

and materials

C) Ship Services

(a) Dredging X X X(b) Navigation aids X X X X X X X X X X(c) Spare parts for X X X X X X X X X X

coastal shipping

D) Institutional Development

(a) Technical support X X x X X X X X X X(b) Training X X X X X X X X X X

C. Proiect Description

(a) Rehabilitation and enhancement of ports infrastructure

3.04 Quays, slipwavs and trestles. With the exception of Antsirananaand Tolagnaro, all the ports included in the project need urgent repairs tothe waterfront structures, such as concrete encasement of sheetpile walls,sealing of fill behind concrete blocks, replacement of pier beams,installation of fenders, and repairs to the pier and trestle surfaces. Anew quay and earthfill would be the most economic solution at Vohemar, toimprove productivity and to allow continuity of operations during repairs.A new slipway is required at Manakara to maintain the lighterage flest, anda new passenger ramp at Mahajanga to replace the old one, no longeroperational.

3.05 Yards. In all the ports, with the exception of Nosy Be and PortSaint Louis, cargo handling operations are seriously affected by the poorcondition of storage yards, circulation and access areas, a situation whichcauses equipment damage, and lowers productivity. Thus the projectincludes preparation and paving of approximately 140,000 m2 in eight ports,as well as some truck loading and unloading ramps.

3.06 Buildings. Generally, the ports buildings are sufficient and in

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acceptable condition, so the project includes only an administrationbuilding at Toliara, and maintenance sheds at Toamasina.

3.07 Utilities. The project includes badly needed lighting, drainage,and water and electric distribution at Toamasina, Toliara and Tolagnaro.

(b) Modifications and improvements to cargo handling

3.08 Equipment. Generally, due to aging, poor maintenance, bad rollingsurfaces, and chronic lack of spare parts, cargo handling equipment in allports under consideration is in very poor condition, idle, or completelyout of service. The project includes the provision of unsophisticatedequipment for all the ports except Saint Louis, consisting primarily of:(i) four tire-mounted 30-ton container cranes; (ii) 22 25-ton chassis;(iii) four 90 HP tractors; (iv) two small mobile cranes; and (v) one 25-tonand 13 5-ton forklifts. Additionally, the project includes thereconstruction of the chromite ore conveyor system at Toamasina and a four-wheel drive vehicle for Toamasina.

3.09 Floating craft. Of the ten ports included in the project, sevenrequire lighterage, and all require pilot launches and line boats. Withthe exception of some work boats recently acquired under bilateral aid, thegeneral condition of the floating craft is very poor, and many cann-t berehabilitated. The project provides 14 barges ranging from 80 to 150 ton,two 160 HP tugs, two 60-ton landing craft, and one line handling boat.

3.10 Spare parts and materials. Supply of spare parts and materialsand tools has been a serious and chronic problem in the entire port sectorof Madagascar. The project provides parts and materials for about fouryears of operations. Most of the lot is allocated to Toamasina, which isconsistent with the distribution of tonnages handled, and the appraisedneeds. Also included are 3,000 pallets badly needed at various ports.

(c) Services to shippinR

3.11 Dredging. Siltation has been a major problem in Mahajanga andManakara, and, to a lesser degree, in Toliara and Tolagnaro. The projectprovides for bottom cleaning in Mahajanga using a barge mounted clamshellexcavator and a split bottom barge, a small suction pump to be mounted on apontoon for use in Toliara and Tolagnaro, and the rehabilitation of theexisting dredge at Manakara. The solution retained in the projectrepresents the least cost solution taking into account the cost ofdredging, the cost of cargo handling and lighterage, and the cost ofshipping. It also considers the poor track record of the public sector inmaintaining the dredges operating. In essence the approach was toeliminate dredging to the extent to which it was possible and economic todo so.

3.12 Navitation aids and hydrographic equipment. Madagascar's lights,lighthouses, buoys, beacons and marks have been seriously neglected, to theextent of endangering the security of coastal and international shipping,neglecting compliance with international regulations and agreements.Similarly, charting, hydrographic surveys, notices to mariners, and weatherservice have been disregarded. The project provides new buoys, solarpowered lights, repairs to lighthouses, spare parts, a mobile repair shop,

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workshop, radio and telephone communication system. Also included is acombination navigation aids-tender-hydrographic surveys launch.

3.13 Spare parts for the coastal shipping fleet. The project providesspare parts and their installation, as appropriate, for the largely privatecoastal shipping vessels, which have suffered from lack of foreignexchange. Private owners who operate a small but potentially importantfleet are expected to benefit substantially from this provision.

(d) Institutional development and reform.

3.14 Technical support. The project provides 274 staff-months oftechnical support in the following areas: (i) a ports advisor, fortechnical matters, coordination, and project implementation assistance,during five years (60 staff-months); (ii) mainterance and cargo handlingexperts, during five years, to assist the governmetut with projectimplementation and improvements to the efficiency *.- the port sector ingeneral (60 staff-months); (iii) one-year assistance by a dredging expert,to assure continued operation and development of dredging personnel (12staff-months); (iv) one to two-year missions by experts in accounting,administration, hydrography and navigation aids (118 staff-months); and(v) miscellaneous saort duration missions, of less than six months inspecific assignments such as follow-up of the implementation of SEPT'sAction Plan and training in procurement procedures (24 staff-months). Thebreakdown is shown in Annex 3.1.

3.15 Training. The project will include the followiag comprehensivetraining programs (i) a training specialist for two years; (ii)scholarships and overseas training for about 60 upper and middle levelstaff; (iii) training materials such as projectors, books, furniture; and(iv) training of 500 staff covering MTRT, SEPT and cargo-handling companiesin port operations, dredging, navigation aids, and hydrographic surveys.Details of the training program are given in Annex 3.2.

D. Cost Estimates

3.16 The total project cost is estimated at FMG 26,542 million (US$42.1million), including contingencies and local taxes. The loreign exchangecost is estimated at FMG 18,005 million (US$28.6 million), or about 682 oftotal project costs. The project cost, net of taxes and duties, is FMG21,918 million (US$34.8 million). Detailed cost estimates are presented inAnnex 3.1 and the project cost summary is shown on Table 3.2, on thefollowing page.

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Table 8.2 Project Cast S,immr

LOCAL TAX A FOIRI4 TOTAL TOTAL LOCAL TAX A SMIf TOTAL TOTAanr S To OvY EX TTD

--- ILL -- -- -- N W

2. PM$TS DVnASIWJC

A. SYS, sLNY MD OmTRom. 441 815 63 1.,. 1,184 o. 0.5 1.1 2.8 1.8

U. YAM 441 815 6 1,8 1,071 0.7 0.8 1.0 2.2 1.7

C. JIlDSN 68 0 68 la 16 0.1 0.0 0.1 0.2 0.2

D. VJ=LT1 18 126 815 S0 804 0.8 0.2 0.8 1.0 0.8

JWfOTAL PORTS V*lA8 JCE 1,184 76 1,701 8,591 2,83 1.8 1.2 2.7 6.7 4.8

ZS. CAIWO WNCLDIO

A. EJW9T 252 56? 1,575 2,394 1,827 0.4 0.9 2.5 8.8 2.9

-. ROATIO CPAFT 169 19 S6 1,006 819 0.8 0.8 1.0 1.6 1.8

C. SPANS PAT AN DATNUALS 18 1,006 0,894 8,891 2,8k 0.8 1.6 8.8 8.7 4.1

SUOTAL CARGO K8SUM 68 1,764 4,599 6, 8.29 1.0 2.6 7.8 11.1 8.8

ZUt. 6190

A. ORWa 19 252 680 1.071 819 0.8 0.4 1.0 1.? 1.8

6. NMVTTSN AM 262 282 1,00 1,512 1,26O 0.4 0.4 1.e 2.4 2.0

C. VSARN PARTWS PM COATAL SWIPPINO as 189 04 756 57 0.1 0.8 0.8 1.2 0.9

.WOTAL SHIPPDO 804 N8 2.142 3,8 2,64 0.8 1.1 8.4 5.8 4.2

Iv. DINSTUTIWEAL O 0YUJPII

A. T#ICAL SWPUN1 16 0 1,575 1,701 1,701 0.2 0.0 2.5 2.7 2.7

S. TRADIO 252 n3 1,4e 1,764 1.701 0.4 0.1 2.8 2.0 2.7

UTOTAL NSTIUTIONAL OV.DW 8as 6s 8,024 8,4U 8,402 0.6 0.1 4.0 5.5 5.4

V. 8ODERSN, 81D DOASn AND MS WIPSY 1i 90 1,JSO 1,483 1,44 0.2 .0 2.1 2.8 2.8

TOTAL BAEuLK COSTS 2,77S 8,801 12,776 18,686 15,855 4.4 8.2 20.8 29.0 24.7~ omm mmp=aa man~tmem -=xmmm m==

PFSCAL CPINS00CY 270 5A0 1.W 1,868 l,8 0.4 0.5 2.0 8.0 2.5

PrImC CWIanAcy SW 998 8,951 8,800 4.607 1.4 1.6 6.8 9.2 7.6

TOTAL PROJEIT COStS 8M9U 4,624 10,006 29,542 21,918 8.2 7.8 28.6 42.1 84.0

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39'-17, Cost estimates were prepared by engineering consultants, financedby IDA under a PPP advance, reviewed by the appraisal mission, and revisedas appropriate to reflect known costs for similar items at mid-1986 prices.Local taxes and duties, included in the estimates, amount to about FMG 4.6billion (US$7.3 million). Physical contingencies were calculated at 10% ofbase costs. Price escalation for foreign and local costs is based onprojected increases in international US dollar prices of 7.2% p.a. in 1986,6.8X p.a. in 1987 and 1988, 7.0% p.a. in 1989, 7.1% p.a. in 1990, and 4.0%p.a. thereafter. The international rates have also been used for localcost *esc4etion assuming that the difference between domestic andinteenational price inflation will be offset by adjustments in the foreignexchange rate, in accordance with Government policy.

3.18 Cost estimates have been derived as follows: (i) for equipment,spare parts, materials and supplies, defined at final engineering level,they are based on engineers' estimates and are supported by informalquotationst witch is acceptable since most project items are standard,"off-the-shelfa components; (ii) for civil works, where applicable,estimates are based on preliminary engineering for the quantities and oncurrent contracts for the unit prices; (iii) for technical assistance andengineering ser4ices, the estimates were based on actual costs for similarservices rendered under other projects in Madagascar. Detailed engineeringfor civil works has been substantially completed. About US$ 1.3 millionout of the estimated US$ 2.3 million for engineering, bid documents andsupervision, has been spent with financing from France, UK, and the PPFadvance.

E. Financing

3.19 Project ;xpenditures net of taxes and duties (US$ 34.8 millionequivalent) would be financed by Caisse Centrale pour la CooperationEconomique (CCCE) and Ponds d' Aide et Cooperation (FAC) of France, KfW ofthe Federal Republic of Germany, IDA, and local sources, includinglovernment, cargo handling companies, and SEPT. The UK provided a grant toassist in project preparation. The Project financing plan is shown onTable 3.3 below:

Table 3.3: Prolect Financing Plan

Source Local Foreign Total----- US$ million ------

IDA 2.4 13.6 16.0GCCE 0.0 10.0 10.0KfW 0.0 2.6 2.6FAC 0.0 2.3 2.3ODA 0.0 0.1 0.1Local Sources 3.8 0.0 3.8

Total 6.2 28.6 34.8

3.20 ProJect items to be financed by IDA are shown in Table 3.4,Procurement Arrangements. The proposed IDA Credit of US$16.0 million wouldfinance 46% of total project expenditures net of taxes and duties. The1US$1.0 million PPF advance would be refinanced by the IDA Credit. Thefinancing plan for this project was negotiated between Government and the

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donors, including the Bank, on the basis of this report's cost estimates.The exchange rate prevailing in mid-1986 was used in the report. When theIMF's Sixth Stand-by program was initiated, a 20X step devaluationoccurred. In November 1986, the exchange rate was US$1 - FMG 750. Nounderfunding of the foreign exchange costs of the project, estimated atabout 82X of total project expenditures, is expected to result from thischange in the parity of the FMG. Significant overfunding of the localcosts of the project is also unlikely because the effect of thedepreciation of the FMG is expected to be suostantially offset over theproject period by local inflation (para 3.17).

3.21 The Government would onlen4 atout US$2.7.mil.ion equivalent toSEPT on the following terms ond conditions: (i) final mat rity of 20 years;(ii) six years grace; (iii) interest rate of 9.1% p.a.; (iv) commitmentfee of 0.75% on the undisbursed portion of the loan; and (v) borrower toassume the foreign exchange risk. Execution of a subsidiary loan agreementsatisfactory to the Bank would be a condition of credit effectiveness.Financing of all ports except Toamasina will be allocated to the PortsBudget (para 5.14). The Treasury will recover the cost of the investmentsincluding a reasonable capital charge through the Ports Budget over thelife of the assets. It will recover its investment costs from port usersthrough tariffs and from private beneficiaries such as cargo handlingcompanies through concession agreements acceptable to IDA for the use ofGovernment property.

F. Proiect Implementation and Monitorint

3.22 The project would be implemented by MTRT, which would be the mainexecuting agency, and by SEPT, which would be responsible for allinvestments in Toamasina. To this effect, technical assistance for bothMTRT and SEPT will be provided for project implementation. The project isexpected to start in early 1987, and to be completed by September 30, 1992.The implementation schedule shown in Annex 3.3 was discussed and agreedupon during negotiations.

3.23 MTRT's recent reorganization (paras 2.17 - 2.24) provides acoherent structure, which csa serve as framework for the TechnicalAssistance component, as well as a vehicle for developing the capability tocarry out fu4ture projects. SEPT has, in the past, been able to carry outprojects and, with the technical assistance provi4ed under the project andQovernment support of the Action Plan, is expected to develop sufficientinstitutional capability to implement its part of the project.

3.24 It will be critical to follow up on the Port Subsectordevei.opments by moxBitoring performance indicators shown at the end of Annex2.8 for SEPT, and in,Annex 3.4 for the other po;ts. At negotiations,a0suFances.were received that MTRT and SEPT will prepare qu4rterly reportsof the pejfrWaance of the ports based on the agreed upon indicators. Thetargets will be revised nnu4Xly, in consultation with IDA, to reflect theperformance attained during the previous year.

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0. Procurement

3.25 Proposed procurement arrangements are summarized in Table 3.4belows

Table 3.4 - Procurement Arrangement

- Procurement Method -ICB Other N.A. Total

(US$ millions)(a) Civil Works

Quays, slipways, trestles 3.3 3.3Yards 3.1 3.1Buildings 0.2 0.2Utilities 1.5 0.0 0.0 1.5

8.1 0.0 0.0 8.1(5.0) (5.0)

(b) EquipmentPort and cargo handling 1.0 4.3 0.0 5.3

1.0 4.3 0.0 5.3(0.5) (0.5) (1.0)

(c) Floating craftFor lighterage 0.0 2.3 0.0 2.3For dredging 1.0 1.4 0.0 2.4

1.0 3.7 0.0 4.7(0.5) (0.5) (1.0)

(d) Spare parts and materialsFor port equipment 4.0 4.1 0.0 8.1For coastal shipping 0.0 1.6 0.0 1.6

4.0 5.7 0.0 9.7(2.0) (2.0) (4.0)

(e) Navigation aids 3.3 0.0 0.0 3.33.3 0.0 0.0 3.3

(1.0) (1.0)

(f) Consulting servicesTechnical support 0.0 0.0 3.8 3.8Engineering supervision 0.0 0.0 3.3 3.3

0.0 0.0 7.1 7.1(2.0) (2.0)

(g) Training 0.0 0.0 3.8 3.80.0 0.0 3.8 3.8

(2.0) (2.0)

Total 17.4 13.7 10.9 42.0(9.0) (3.0) (4.0) (16.0)

Notet Figures in parenthesis are the respective amounts financed by IDA.

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3.26 Civil works contracts would be awarded following ICB procedures,with appropriate local preferences, if applicable. New equipment, floatingcraft, tools and materials for SEPT and MTRT financed by IDA would beprocured on the basis of ICB, in accordance with Bank Group Guidelines witha separate contract for each type or groups of similar types of goods.Itemo costing no more than US$ 50,000, but not exceeding US$1.0 million inthe aggregate, would be procured by international and local shopping on thebasis of at least three quotations from different suppliers, dealers ormanufacturers. Proprietary spare parts for an amount estimated at US$1.0million would be procured by direct contracting after negotiations. Eachcargo handling entity or ship owner would be responsible for procurement ofits own spare parts and materials (US$1.0 million). MTRT would, with theassistance of consultants, approve the lists of spares with theirrespective quotations. The firms would pay the Central Bank cash in localcurrency equivalent, and these funds would be allocated to MTRT's portsbudget as counterpart funds. Procurement would be made by users on thebasis of international shopping through local representation, if available,or from foreign suppliers using technical assistance which MTRT would makeavailable to prepare the lists of spare parts, to carry out all the importstransactions, to obtain the import licenses and foreign currency. Theconsultants will also ensure that the procurement guidelines are adhered toin the process. Each user would be fully responsible for all thetransactions required for purchase, shipment and receipt of the parts inMadagascar. Total exceptions to ICB would not exceed US$3.0 million. Allcontracts above US$100,000 would be submitted to IDA for prior review.

3.27 All studies and preparation of bid documents will be carried outby MTRT and SEPT with the assistance of consultants as appropriate.Experts and consultants, financed by IDA, would be recruited as needed,under terms and conditions satisfactory to IDA and in accordance with theBank's 'Guidelines for the use of consultants". Training would be providedby specislized institutions selected by Government in accordance with thespecific needs, after evaluating several candidates, and under terms andconditions satisfactory to IDA.

H. Disbursements

3.28 Funds from the IDA Credit would be allocated as follows:

Table 3.5 IDA Credit Allocation

Thousand US$

a) Civil Works:SEPT 1,400Other 3,100 4,500

b) Cargo Handling Equipment,Floating Craft, Spare Parts,Navigation aids, TrainingEquipment, Tools and Materials

SEPT 1,000Other 4,500 5,500

c) Con:ultants' Services 1,000

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t) Training services and scholarships 2,000

.) Refinancing of PPF 1,000

f) Unallocated 2,000

Total 16,000

3.29 IDA credit funds would be disbursed on the following basis:

(i) Civil works: 100X of foreign and 75% of local expenditures;

(ii) cargo handling equipment, navigation aids, floating craft,spare parts, tools and materialst 100% of foreign and 60%of local expenditures;

(iii) consulting services: 100% of foreign and 801 of localexpenditures; and

(iv) training services and fellowships: 1001 of foreign and 601of local expenditures. ,

3.30 All claims would be fully documented, except for claims relatingto any contract, purchase order, or training activity valued at less thanUS$20,000, which would be submitted under statement of expenditures. Thedocumentation for these claims would be kept at MTRT and SEPT and madeavailable for inspection by IDA supervision missions. In order to expediteand facilitate disbursements, MTRT and SEPT would each open a SpecialAccount in foreign currency at a commercial bank on terms and conditionsacceptable to IDA. IDA would deposit into M!RT's Account US$600,000equivalent and into SEPT's Account US$400,000 equivalent. The Accountswould be replenished on the basis of withdrawal applications. Theseapplications would also comprise a statement of account movements since thelast application, and a reconciliation showing that the balance representsthe original amount deposited in the account less payments for which theapplication is submitted.

3.31 The estimated schedule of disbursements of IDA funds is shown inTable 3.6. It is about 5% faster than the standard disbursement profile toreflect disbursement of the PPF advance. The closing date for the Creditwould be March 31, 1993.

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Table 3.6 Estimated disbursement schedule of IDA credit

Disbursement Cumulative CumulativeIDA fiscal Year During Disbursement at Disbursementand Quarter Quarter end of Quarter As Z of total

-US$ million-

1987March 31,1987 1.0 1/ 1.0 6.3%June 30, 1987 0.6 1.6 10.0%

1988Sept.30, 1987 0.6 2.2 13.8%Dec.31, 1987 0.7 2.9 18.1%March 31,1988 0.8 3.7 23.1%June 30,1988 0.8 4.5 28.12

1989Sep.30,1988 0.8 5.3 33.1%Dec.3111988 0.8 6.1 38.1%March 31,1989 0.8 6.9 43.1%June 30,1989 0.8 7.7 48.1%

1990Sep.30,1989 0.8 8.5 53.1%Dec.31,1989 0.8 9.3 58.1%March 31,1990 0.8 10.1 63.12June 30,1990 0.7 10.8 67.5%

1991Sep.30,1990 0.7 11.5 71.9%Dec.31,1990 0.7 12.2 76.3%March 31,1991 0.6 12.8 80.0%June 30,1991 0.6 13.4 83.8%

1992Sep.30,1991 10.6 14.0 87.5%Dec.31,1991 0.5 14.5 90.6%March 31,1992 0.5 15.0 93.8%June 30,1992 0.4 15.4 96.3%

1993Sep.30,1992 0.3 15.7 98.1%Dec.31,1992 0.3 16.0 100.0%

NOTE _1/s This amount is repayment of the PPF.

November 10, 1986

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I. Environmental Aspects

3.32 None of the proposed works will affect adversely the ecology ofMadagascars maintenance dredging of less than 20,000 m3lyear will be muchless than what was done through the 1960's. Initial dredging will be lessthan 50,000 m3; annual dredging, a lower amount. Dredging spoils will bedisposed of at landfill sites at all locations. The civil works envisagedconsist mainly of paving of work areas and repairs to old piers. Therewill be no changes in the demographic distribution as a consequence of theproject, nor will there be pollutant discharges into the sea.

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IV. ECONOMIC EVALUATION

A. General Oblectives

4.01 As discussed in Chapter II, international and coastal shipping playan important role in Madagascar's transport sector. Virtually the entireforeign trade by volume is carried by sea while coastal shipping accountsfor about 202, or some 245 million ton-km, of the total domestic merchandisetraffic. Shipping, however, suffers from several constraints at many of thenation's ports. The Government's subsector investment program, of whichthis project is a major part, will attempt to alleviate the most importantconstraints tv efficient port operation, and thus complement majorrehabilitation efforts in other subsectors.

4.02 The proposed project aims to reduce the cost of shipping primarycommodities such as rice, sugar, salt, cement and petroleum products, and tofAcilitate exports through improved cargo handling. The main quantifieddirect result of port improvements would be improved ship utilization.Proposed investments will lower the cost of exports of coffee and clovesfrom Vohemar and Manakarat sisal from Tolagnero, textiles from Mahajangaand meat from Morondava. By 1990, some 85,000 tons of these exports areexpected to have significantly lower handling costs. Improved cargohandling in Toamasina will reduce the cost of imports and exports. Safetyand ship utilization will be greatly improved by rehabilitation oflighthouses, buoys and other navigation aids. Cargo losses will also bereduced by better cargo handling techniques. Costly reconstruction offacilities will be kept to a minimum.

4.03 Wherever possible alternative investment proposals were evaluatedand the least cost solution adopted. For example: no dredging versusdredging at Morondava, embankment versus pier on piles for the new pier atVohemar, and repairs versus new sheetpile wall at Mahajanga.

4.04 While the basic infrastructure at Toamasina is generally adequate,the coastal shipping ports need limited dredging, rebuilding or repairing ofquays, and some new cargo handling equipment. Navigation is unsafe anddelays are .acurred because navigational aids are not in working order dueto corrosion and decay. The Government has been unable to allocatesufficient resources to the maintenance of equipment and infrastructure.Resource constraints dictate a selective approach to capital investments tobe included in this project. However, the institutional developmentcomponents of the project will address the resource management needs of thesector globally. An important aim of this project is to provide Madagascarwith the capacity to prevent the recurrence of these past problems.

4.05 Because of the difficult terrain and lack of adequateinfrastructure, it has been said that Madagascar is an archipelago, ratherthan an island. For example, some freight traffic between Antsiranana inthe north and Antsirabe, or between Toliara in the south west andAntananarivo is shipped to Toamasina and is then trans-shipped by railway tothe central highlands (Mip IBRD #19595). The priority ports included in theproject are vital nodal points of domestic traffic linking Madagascar'scoastal regions to each other as though they were islands.

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B. Forecqst of Future Traffic

4.06 ' As for other transport modes, port traffic levels depend to a largeextentlon the condition of and projected growth for the overall economy.This has been particularly evident for imports of petroleum to Toamasina,whereas coastal shipping has been less affected by variations in theeconomic conditions, as indicated in Annexes 2.1 and 2.2. A forecast ofcargo traffic by port is shown in Annex 4.1. Dry cargo traffic is projectedto grow at about 12 p.a.; oil products traffic at 3.6% p.a. through 1995,for the main ports of Madagascar.

4.07 MTRT, with the assistance of consultants financed under the PPF,prepared traffic forecasts under different economic growth and developmentassumptions. The most conservative of these forecasts has been adopted forthe economic evaluation of the proposed project. The proposed portinvestients have been designed to complement the ongoing program of roadrehabilitation, taking into account the comparative cost advantage ofcoastal shipping in the long haul of relatively low value commodities.Because of planned road development and the difficult and costly nature ofport operations in Morondava, on the west coast, traffic in that port isexpected to decline.

4.08 Current economic trends support a GNP growth rate projection ofabout 3% p.a. through 1990, about equal to the projected rate of populationgrowth. Since 1979, imports of oil products have been declining, partlybecauie of substitution by hydroelectric power (Andekaleka power-stationfinan_ed in part by Credit 817-MAG), partly because of declining exports,mostly because of economic stagnation. This has affected the overall porttraffic volume significantly. With resumed economic growth, a rate ofgrowth of oil imports slightly higher than that for GDP is likely.Similarly, dry cargo imports will also increase though at a lower rate thanoil imports. Export promotion programs supported by the Bank group andother donors are expected to achieve positive results. Traffic forecastshave been established commodity by commodity after dividing the country intoeconomic zones for each port and under different growth scenarios.

4.09 In addition to the main agricultural exports such as coffee,cloves, sisal, fish and cacao, the traffic forecasts take into accountprojected domestic consumption of staples such as sugar, beans, bananas,salt and corn. Exports of chrome, graphite and mica, and petroleum tradehave all been projected separately. The forecast of dry cargo traffic issummarized below:

1990 1995

Dry cargo exports 306,000 tons 362,000 tonsDry cargo imports 447,000 tons 465,000 tonsCoastal shipping 236,000 tons 286,000 tons

4.10 As explained above, these traffic forecasts assume a low rate ofeconomic growth. Less conservative, but plausible projections of economicgrowth would yield a forecast of 466,000 tons of dry cargo imports by 1990,growing to 554,000 tons by 1995. Very low levels of rice imports have beenassumed to reflect higher domestic production which is expected to resultfrom the implementation of policy reforms supported by the Agricultural

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Sector Adjustment Credit (Cr.(1691-MAG). It was assumed that some of thecement imports will be replac4d by coal imports for the new cement plant atIbity, south of Antairabe. Oil product traffic has been forecasted, but itis nbt expected to have a significant effect on port requirements sinceloading or unloading installations in most ports are specialized, areadequately operated by SOLIMA, the national oil company, and do not requireimprovements.

l

4.11 Traffic growth prospects for the seven ports excluded from theproject are limited. They are: Sambava, Antalaha and Maroantsetra in theNortheast, Mananjary, eventually to be connected by the Pangalanes Canal onthe Southeast Coast, Morombe, Analalava and Antsohihy on the West Coast.Total traffic in these ports in 1985 was only 46,300 tons. The traffic ofSambava, Antalaha and Morombe is expected to shift to other ports withbetter facilities and land access. Among the project ports, Vohemar andManakara show good prospects for coffee exports, whereas sugar ports such asNosy-be and Port St. Louis are likely to experience declining traffic.Toamasina, Antsiranana and Mahajanga, which are recovering from the ravagesof the 1984 and 1985 cyclones, are expected to show moderate trafficincreases in the early 1990's as the economy improves.

4.12 In 1984, only about 44,800 tons, mainly general cargo imports andcoffee exports, was moved in containers in Toamasina. RNCFM, SEPT andshipping agents are actively promoting this traffic with through bills oflading. Containerization is expected to increase in several ports. Thepace at which this will happen is difficult to forecast but, judging fromother experiences with similar types of cargo, the proportion of exports andimports likely to be shipped in containers will grow to about one third ofdry cargo traffic. By 1990, containerized imports to Toamasina, Tolagnaroand Mahajanga are projected to grow to 153,000 tons and exports to 108,000tons. By 1995, they could increase to 184,000 tons and 123,000 tonsrespectively. In addition, about 55,000 tons coastal shipping traffic atAntsiranana, Manakara and Vohemar can be expected to move in containersafter 1990.

C Navigation Aids and Shipping

4.13 The condition of the shipping fleet and lighthouses, buoys andother navigation aids is very poor because of age and lack of maintenancefunds, particularly foreign exchange. Hydrographic surveys have not beencarried out for some time. To avoid the risk of ship loss or damage,prudent shippers have been reluctant to sail at night or during poorvisibility with the result of increasing voyage time and therefore costs.Despite precautions, accidents have occurred: a number of ships have sunkor have -un aground because lights were off, shoal markings were destroyedby storms, and ships were poorly maintained. Losses of small passengercarriers have occurred and some operators have found the cost of insurancecoverage to be prohibitive. Expected savings from the avoidance of lossesof human lives and ships have nQt been quantified. However, these lossesare of such a magnitude that the investment in rehabilitation of lighthousesand buoys and the provision of spares for the coastal shipping fleet couldbe fully justified on those grounds alone.

4.14 The only benefits which have been quantified for this projectcomponent are those related to improved ship utilization. The benefits

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expected to derive from improved safety of navigation, though substantial,have not been quantified. Ship utilisation will improve mainly becauseships aill take less time than now to enter ports and they will be able towork at night at lighterage ports. Savings for large ships, nearly allMalagasy flag vessels, have been calculated on the basis of an average dailycost of US$4,800 (FMG 2.9 million); for small vessels, US$840 (FMG 0.5million) per day.

D. Cargo Handling Imlrovements and Dredging

4.15 The anticipated economic benefit of this component, the project'slargest, is a reduction in the transport costs to the users. In addition tofreight, transport costs include other expenditures such as insurance,interest for capital tied up in goods while in transit, delays and cargolosses. Many of these are very important but difficult to quantify indirect relation to the conditions prevailing in each particular port. Forexample, insurance rates in Madagascar, while very high, differentiate onlybetween ports with direct access from ship to shore and ports served bylighterage operations. The direct beneficiaries would be exporters andimporters, freight forwarders and ship owners (para 4.19).

4.16 Cargo tariffs established by MTRT for coastal shipping only give apartial indication of relative costs of different ports. Furthermore, ascustomary, these tariffs do not apply to the use of chartered vessels. Overthe longer term, actual tariffs paid to ship owners do reflect the relativecosts of port handling, espe'cially since, due to the low productivity ofmost ports, Malagasy ships spend a disproportionate amount of time in portrather than at sea.

4.17 The best indicator of port productivity is vessel turnaround time.If the rate is low, the vessel must wait in port longer than it would ifcargo moved at a faster rate. Ship's waiting time affects the voyageturnaround time and, because ships are expensive, the longer this time, thehigher the cost of shipping which must be recovered by the shipper through ahigher freight rate. As shown in Annex 4.2, current cargo handling rates atmost ports are low. The itprovements in productivity of cargo handlingexpected to result from project investments in each port have been estimatedand are also presented in Annex 4.2. The savings in ship waiting time whichwould derive from these productivity improvements as well as from dredging,where applicable, provide a measure of projected economic benefits. Annualbenefits after project completion were calculated at about US$5.5 million,equivalent to the annual cost of two typical deep-sea vessels and threecoastal vessels. This saving is unlikely to lead to a surplus of ships,because many ships need to be phased out of service due to their old age andpoor condition.

4.18 All factors affecting ship time have been taken into account inthis analysis. Each port has been evaluated as a separate sub-project. Allproject costs have been included in the analysis except training and theindirect cost of technical assistance. In total about 861 of total projectcosts have been separately evaluated. The costs and benefits calculationsfor the individual sub-projects are presented in Annex 4.3. Details of themethodology for the estimates are given in Annex 4.4 and a surnary for eachsub-project in Annex 4.5.

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4.19 Financial costs, excluding taxes and duties, have been used as thebasis for the economic cost calculations at price levels prevailing in mid-1986. Costs for Malagasy flag ships in port or at anchorage are given inAnneo 4.2,. One half of the typical demurrage rate, or some US$3,500 perday has been used for all other flag vessels to estimate freight savingsimporters and exporters are expected to make as a result of reductions inship waiting time. An FOB value of US$2.50 per kg has been used tocalculate savings in transit time for coffee. These assumptions areconsistent with international costs for similar ships. Ship time savingswill be monitored against the operational targets presented in Annex 2.8 forToamasina and in Annex 3.4 for other ports. A reduction in anticipateddamages and cargo losses of 12 of the cargo value has been used to calculatethe economic benefits of switching from lighterage to direct ship-to-shorecargo handling operations. Current cargo insurance rates are as high as 4-51 of the value of the goods.

4.20 Benefits which have not been quantified include institutional andtechnological improvements this project is expected to help bring about. Inaddition to promoting stronger and more effective institutions, the projectwould facilitate the process of containerization already underway.Equipment will be provided for handling 20-foot containers. This equipmentwould enable exporters to ship high value commodities such as coffee bycontainers from the port of origin through Toamasina where the containersmust now be stuffed. The use of LCT's on the west coast will be encouraged,in addition to a general improvement of cargo handling. This will also makeit worth-while for ship owners to introduce more efficient vessels to takefurther advantage of improved port productivity.

E. Economic Rate of Return

4.21 The project's overall economic rate of return has been calculatedat 292. The economic rate of return for the navigation aids and shippinginvestments was calculated at 26S. Returns for individual ports werecalculated at rates ranging from 19% for Port St. Louis to 531 for Nosy Be.Details are shown in Annex 4.5. The sensitivity of the economic rate ofreturn to changes in the level of costs and benefits was tested for eachproject component. Annex 4.6 shows the results of this analysis and a testof first year returns assuming an economic cost of capital of 121. If theproject's economic benefits were 201 lower than estimated, the project'soverall economic rate of return would still be satisfactory at ;2%.Virtually all these tests yielded rates of return above the economic cost ofcapital. In conclusion, even under the conservative traffic assumptionsadopted and taking into account only part of the expected economic benefits,the project would be economically justified over a period of less than tenyears.

F. Risks

4.22 The main project risks are underestimation of costs and quantitiesof project components and overestimation of the possibility of achievingmeaningful institutional reform. The first group of risks (costs andquantities) is mitigated by several factors; civil works are limited inscope and in most cases are not critical for the performance of otherproject components; the equipment includes rather standard units for whichquotations are accurate, and if *Ete need should arise, adjustments could be

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made in the quantities to be procured. The institutional risk is higher,but nevertheless worth taking, because Government has already shown tangiblesigns of its commitment to change: it has agreed to an excellent Action Planfor SEPT, it has accepted the provision of technical assistance for projectimplementation and for day to day ,perations. Restrictive covenantscovering all of the above are recommended. The port of Toamasina with itspowerful unions and low productivity presents an additional risk, which isaddressed by the Action Plan discussed in para. 2.27, and by the changesalready introduced by its new management.

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V. FItUANCIAL EVALUATION

A. Societe d'Exploitation du Port de Toamasina (SEPT)

1. Past Performance

5.01 SEPT's Income Statements for 1980-85 are shown in Annex 5.1;Balance Sheets, in Annex 5.2; Funds Statementa, in Annex 5.3; and RatioAnalysis in Annex 5.4. Table 5.1, below, shows SEPT's FinancialHighlights.

Table 5.1s SEPT's Financial Hixhlights

1981 1982 1983 1984 1985---------uneudited-------- audited

(million FMG*s)

Port Revenues 4,400 3.671 4,985 4,391 4,954Other Income 136 155 368 368 344Working Expenses 3,642 3,984 4,167 4,947 5,531Net Income 115 (807) (196) (2,791) (2,091),

Working Capital 3,559 2,889 3,638 1,335 (941)Net Fixed Assets 6,229 6,011 5,677 4,502 4,364Total Assets 18,075 17,199 17,707 13,051 13,350Equity Capital 6,852 6,115 6,753 4,097 2,630

Traffic (thousand tons) 570 627 513 597 600Working Ratio 83% 1092 842 1132 1122Receivables (days) 806 906 718 371 327

5.02 The above table shows that SEPT's operating performancedeteriorated significantly from a net income of FMG 115 million reported in1981 (1980, FMG 805 million) to losses of FMG 2,791 million in 1984 and FMG2,091 million in 1985 (Annex 5.1). While revenues were rather stable,salaries, paid to a work force averaging 4,500, increased 39% from FMG2,713 in 1981 to FMG 3,759 in 1985, largely accounting for the risinglosses. In additiorn to port and cargo handling services, SEPT ope-ates theToamasina city buses, a forestry product division, and transport serviceson the Pangalanes canal. A1l of these activities are operated at a loss.The accounting firm that carried out the 1984 and 1985 external audits, thefirst ones in SEPT's recent history, recommended extraordinary charges toearnings of FMG 1,487 million in 1984 and FMG 766 million in 1985 toreflect physical asset valuations, write-downs and loss provisions.Adjustments to the 1985 financial statements may also be recommended oncethe draft financial restructuring plan for SEPT is agreed betweenGovernment and the donors. Final approval of such plan would be acondition of Credit effectiveness.

5.03 The recent gradual erosion in SEPT's earning power has adverselyaffected its financial condition, squeezed liquidity, and eroded its

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capital base.. The current ratio has fallen from 1.5:1 in 1981 to O.9:1 in1985; in 1985, SEPT had a negative working capital of FMG 941 million(Annex 5.4). Though the amount of long term debt outstanding is relativelylow, the operating losses have created a need for a fresh infusion ofequity funds into SEPT's capital in 1986/7. The need is estimated at aboutFMG 2.0 billion (US$2.7 million), pending finalization of the financialrestructuring plan.

5.04 Furthermore, during the period under review, SEPT's plant hasdeteriorated and collection of receivables has been slow, which in turn hasforced SEPT to delay payments to suppliers. Despite stagnant traffic andin the absence of significant tariff increases, revenue turnover increasedfrom 71% in 1981 to 114% in 1985 (Annex 5.4), reflecting a drop in the boosvalue of net fixed assets from FMG 6,229 million in 1981 to FMG 4,364million in 1985. This drop was the combined result of deferred maintenanceand lack of financial resources for equipment replacement.

5.05 Under pressure from the Minister of Transport, who is also SEPTBoard Chairman, SEPT's old management attempted to improve the rate ofreceivable collection but the results were unsatisfactorys at the end of1983, SEPT was carrying nearly two years - 718 days - of uncollectedrevenues on its books; in 1984, 522 days; and, in 1985, an estimated 630days. During the recent audit, receivables were written down to 371 daysfor 1984 and 327 days for 1985. tack of financial controls, billingdelays, and lack of customer follow-up were part of the explanation, butweak management appears to be the root cause of SEPT's poor financialperformance in this as well as other areas.

2. SEPT's Action Plan

5.06 At appraisal, the Government accepted that Bank support of theproposed project be conditional on a satisfactory Action Plan for SEPT.In November 1985, the Minister of Transport appointed an ipterministerialcommittee with a clear mandate to prepare a comprehensive recovery plan forSEPT by the end of March 1986. At the Government's request, IDA providedfinancing for two consultants to the committee under a PPF advance. Thedraft recovery plan was reviewed by an IDA mission in April 1986,discussed, modified, and approved by the Council of Ministers in October1986.

5.07 An Action Plan, essentially a summary of the recovery planprepared by the committee, waslagreed upon with SEPT's new General Managerand is presented in Annex 2.8. The Action Plan includes specific targetssuch as performance indicators, staffing requirements, and financialprovisions. More specifically, the initial Action Plan contains a list ofactions to be undertaken by SEPT in 1986, 1987 and 1988, sone of which arelinked to decisions to be taken by other Government agencies and by donors.

5.08 In addition, the Action Plan contains annual OperationalPerformance Targets agreed upon with SEPT. These performance targets wouldbe reviewed and revised annually in consultation with the Bank. Atnegotiations, implementation of the Action Plan was reviewed, its contentdiscussed and modified, .and assuran- as received that the Action Plan agreedupon will be carried out as part of the project.

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3. SEPT's Financial Projections

5.09 The major assumption used for projecting the financial statementsof SEPT is the implementation of the Action Plan presented in Annex 2.8.In particular, it was assumed that SEPT will phase out its non-portactivities, improve staff productivity, and sensibly increase the rate ofreceivable collection. In addition to the tariff increase approved by theboard in October 1986 (para 5.13), it was assumed that SEPT's tariffs wouldfurther increase by 20% in real terms in 1987.

5.10 Traffic demand projections for general cargo and oil are presentedin Annex 4.1. and the projected rate of inflation is the same as that usedfor estimating price contingencies on project costs (para 3.17). Projectinvestments were added to SEPT's assets. New and existing fixed assetswere revalued each year and the added value credited to equity capital.Debt drawdown, amortization, inteest and fees reflect the projectfinancing plan (para 3.19) and proposed onlending terms (para 3.21).Details are shown in Annex 5.5.

5.11 SEPT's pro-forms Income Statements for 1986-95 are set out inAnnex 5.6; Balance Sheets, in Annex 5.7; Funds Statements, in Annex 5.8;and Ratio Analysis, in Annex 5.9. Table 5.2, below, shows a summary ofSEPT's financial projections.

Table 5.2: SEPT's Summary Financial Projections

1986 1987 1988 1989 1990-p-------------D rojected------------------

(million FMG's)

Revenues 4,796 5,905 7,292 7,692 8,120Working Expenses 5,153 5,388 5,632 5,895 6,174Depreciation 526 668 810 892 993Net Result (883) (151) 850 905 953

Working Capital 1,549 2,002 2,714 2,514 2,404Net Fixed Assets 5,045 7,876 10,440 10,977 11,805Total Assets 12,764 15,178 17,525 17,768 18,333Equity Capital 2,538 3,136 3,498 3,672 3,789

Traffic (thousand tons) 590 580 570 560 550@ 1986 FMG/ton 5,600 6,720 8,064 8,064 8,064

Annual increase 7% 20% 20% - -Working Ratio 107% 91% 77% 77% 76%Receivables turnover

(days) 415 323 252 197 153Current Ratio 1.3 1.4 1.6 1.6 1.7

5.12 Table 5.2 shows that SEPT would need to charge customers realtariff increases in order to gradually restore profitability and generatesufficient cash to meet operating expenditures, to service its debt, andfund its share of project investments. This goal is attainables it wouldrepresent a sustainable burden to port users who have benefited from anerosion in real terms of SEPT's average unit tariffs since 1980 (para

- 37 -

5.04). Users would willingly pay more than they now do for better portservice and savings in ship waiting time.

5.13 In order to enable SEPT to comply with the revenue covenantproposed below (para 5.27) and to ensure a smooth tutrnaround in SEPT'sprofitability, on October 31, 1986, SEPT.s board agreed to increase tariffsby 502 (about 202 in real terms after accounting for local inflation andcurrency depreciation as explained in para 3.20).

B4 The Ports Budget

1. Financial Condition

5.14 With the exception of Tosmasina, the Malagasy ports do not followcommercial accounting practices, and do not issue income statements andbalance sheets. The Ports Department of MTRT in Antananarivo prepares anannual budget of operating expenditures, investments and receipts of 17main ports known as 'The Ports Budget'. This budget is prepared on a cashbasis and does not account for depreciation of fixed assets. Consultantsfinanced under a PPF advance have valued the ports' assets and revised the1984 Ports Budget to include depreciation charges and other accruals. Therevised 1984 Ports Budget is presented in Annex 5.10. An explanation ofthe main accounts is given in Annex 5.11.

5.15 Annex 5.10 shows that, in 1984* five of the 17 ports included inthe budget, Antsiranana, Mahajanga, Morondava, Port St. Louis and Nosy Bereported operating receipts in excess of working expenditures, while onlythree, Mahajanga, Port St. Louis and Nosy Be had sufficient income to coverestimated depreciation charges. Because the profitable ports are the oneswith most traffic, the consolidated Ports Budget shows a cash surplus ofFMG 40 million or about 122 of gross receipts, after charging total workingexpenditures. To cover depreciation charges, estimated at FMG 230 million,receipts should have been 692 higher than they were. Revenue increasesre4uired in each port to balance the budget vary widelys in 1984,Manakara, for instance, recovered only 302 of operating costs excludingdepreciation, while Antsiranana had a surplus of nearly 602.

2. Financial Prospects

5.16 A five-year financial projection of the Ports Budget is presentedin Annex 5.12. The assumptions adopted for the projection are given inAnnex 5.13. Essentially, the key assumptions are that (i) the PortsBudget's revenues will equal total expenses; (it) staff will be reduced by10%; (iii) the maintenance budget will increase threefold; and (iv) projectinvestments will be depreciated over their estimated useful life.Individual financial projections of the six largest ports, Antsiranana,Mahajanga, Hanakara, Nosy Be, Tolagnaro and Toliara, and aggregatefinancial projections of eleven small ports are in the project file.

5.17 The financial projection of the Ports Budget shows that it will bepossible to achieve full cost recovery of the ports sector includingadequate depreciation charges for new and existing assets, a financialcharge for the use of Treasury funds, and adequate funds to catch up withdeferred maintenance, provided that tariffs are gradually increased in realterms between 1986 and 1990.

- 38 -

C. The Cargo Handling Companies

5.18 The Government grants the exclusive right to handle cargo to aprivate company in each port. In Mahajanga, however, it is estimated thatabout one third of the total traffic is handled by others, wostly shipowners. The financial statements of five of these companies have beenreviewed and filed. The analysis has shown operating losses andinsufficient liquidity, resulting from inadequate tariffs and plethoricstaff.

5.19 As was the case for the ports, the analysis revealed greatdisparities in cost recovery rates among the various companies. However,unlike the ports, where the case could be made for attaining cost recoveryglobally, each company must be financially viable for the obvious reasonthat one investor cannot offset his losses against another investor'sprofits. It is the Government's policy to ensure that investors incompanies that perform a vital role in the economy of the country, as thesecompanies do, earn an adequate return on their investment.

5.20 To implement its policy, the Government must take concretemeasures, including the setting of new rates for cargo handling andlighterage, that would enable each company to pay MTRT adequate concessionfees (currently the source of about 50% of total receipts of the PortsBudget), meet operating expenditures, and have a sufficient incentive tocontinue investing in their operation so as to reduce to a minimum thefinancial burden of the ports to the Treasury. At negotiations,assurances were received that Government, with the assistance ofconsultants financed under the project, will review the level and structureof all port related rates and will revise them, in consultation with IDA.While it is understood that the required revisions may be taken in steps,the target date of June 30, 1988 was agreed for the rate revisions tobecome fully effective (para 5.27).

D. Financial Objectives

5.21 The main financial objective of the proposed project is toreestablish full cost recovery for the port sector. Regarding the port ofToamasina, implementation of the agreed SEPT's Action Plan (para 5.07) isexpected to ensure the achievement of this objective.

5.22 Regarding the ports budget, Government's objective is to set porttariffs at a level that would ensure the recovery of all costs, includingdepreciation, and the generation of a profit to finance working capital anddebt service requirements. Ideally, these objectives should be achievedfor each port as well as for the consolidated Ports Budget. However, inview of the great diversity of local operating conditions, the low volumeof traffic of the small ports and their vital role in providing what isoften the only outlet to the rest of the country for small isolatedcommunities, it appears reasonable to pursue the priority objective of fullcost recovery individually for the six largest ports. These ports areAntsiranana, Mahajanga, Manakara, Nosy Be, Tolagnaro and Toliara.Together, they account for over 80S of traffic at the ports under MTRT'sadministration. In order to balance the consolidated Ports Budget, the six

- 39 -

largest ports need only generate a small extra profit to offset the lossesof the small ports. !

5.23 Finally, regarding the cargo handling companies, the objective isto enable the private investors to earn a reasonable after tax return ontheir investment. Because the six companies in the largest ports belong tofive different groups of investors, the tariff adjustments must be madeindividually for each of those ports taking into account the differences ineach local situations, the type of operation, the facilities and equipmentcurrently available and individual investment plans.

5.24 It is expected that it will take about three years to bring aboutthe overall level of rates required to ensure full cost recovery for theports sector. Therefore, this process, which started in December 1985 whenthe Government approved substantial rate increases in most ports, should beconcluded in 1988. As further evidence of Government's commitment tosector reform, and to ensure that the right signals are sent to privateinvestors, ship owners and traders, as well as public sector entrepreneurs,the Government undertook a second round of rate increases in October 1986,before negotiations of the proposed Credit.

5.25 The new rate increases were as follows:

Table 5.3: Rate Increases

Port: Port dues Cargo Rates

Antsiranana 40X 402Mahajanga 45% 452Manakara 302 302Nosy Be 02 752Tolagnaro 30X 302Toliara 432 432Other Ports 02 02

5.26 The above rate increases are warranted by the analysis of theexisting situation and the projections presented in this chapter. Theincrease approved for cargo handling rates at Nosy Be is higher than thatfor other ports because the local cargo handling company has experiencedfalling traffic and a four-year rate freeze. By contrast, port dues atNosy Be were increased by over 1002 in 1985 and were not revised in 1986.

E. Financial Covenants

5.27 In order to assist the povernment and the Bank monitor financialperformance and the achievement of the project financial objectivesoutlined above, the following protective covenants were agreed:

(i) SEPT and Government will take all steps necessary to ensurethat, beginning in 1988, SEPT's operating revenue will be nolower than the sum of total operating expenses, including adepreciation charge calculated on revalued assets, interestand amortization on all borrowed moneys as they may beadjusted following currency fluctuations, and dividends andother retributions on capital if any;

- 40 -

(i4) SEPT will not undertake any investments larger thanUS$300,000, other than those included in this and otherongoing development projects revimeed by the Bank without theexplicit consent of the Bank;

(iii) Government will not undertake investments estimated to costthe equivalent of US$50,000 or more in the ports subsector,other than those described in the project, without priorconsultation with the Bank;

(iv) Government will take all steps necessary to ensure that,beginning in 1988, the Ports Budget's operating revenue willbe no lower than the sum total of operating expenses,including a depreciation charge calculated on revalued assets,and a capital charge of at least 102 calculated on the valueof net fixed assets in use by the 17 ports included in thePorts Budget;

(v) by December 31, 1987, Government will complete a review of thestructure and level of port tariffs, cargo handling chargesand concession fees, and consult with the Bank on the outcomeof such review; and

(vi) by June 30, 1988, Government will revise the level andstructure of all port related charges after taking intoaccount the Bank's coaments.

5.28 Within six months of the end of each fiscal year, SEPT will submitto the Bank its financial statements, including statement of expenditures(para. 3.30), audited by independent accountants acceptable to the Bank.The Government will also submit to the Bank audited consolidatingstatements for the Ports Budget. The auditors will be required to attach areport of compliance with financial covenants to the audit reports.Finally, within six months of the closing date of the Credit, theGovernment and SEPT will prepare and submit to IDA a completion report forthe project.

_ 41 -

VI. AGREEMENTS REACHED AND RECOMMENDATION

6.01 Before negotiations, the Government approved port tariff increasessubstantially in the amounts presented in para 5.25.

6.02 IAt negotiations, the following matters were discussed andagreement reacheds

(i) Project Implementation Schedule (para 3.22);

(ii) Ports performance indicators (para 3.24);

(iii) SFPT's Action Plan (para 5.08); and

(iv) Proposed financial covenants (paras 5.27- 5.28)

6.03 Execution of a Subsidiary Loan Agreement and submission of aFinancial Restructuring Plan for SEPT satisfactory to the Bank would beconditions of Credit effectiveness (paras 3.20 and 5.02).

6.04 Subject to the above conditions, the Project would be suitable fora Credit to Madagascar of US$16.0 million equivalent on standard IDA terms.

November 14, 1986

- 42 -

Annex 1.1Psac 1 of 1

MADAGASCAR

PORTS REHABILITATION PROJECT

Public Invesetent Plans for the Transuort Sector

1984 - 87 1986 - 90

FMG billions FMG billionsForoin Local Total Foreign Local Total

HiahwayInfrastructueRehabilitation 88.146 53.061 141.207 113.245 59.161 172.406Workshop, equipment, 2.782 2.951 5.733and studies 4.423 610 5.033

90.928 56.012 146.940 117.668 59.771 177.435

Rail Trgns2ortRehabilitation 6.076 2.552 8.628 16.9S7 10.105 27.062New Works -- 1.000 1.000 3.800 3.800Studies & Tech. Asst. 2.502 711 3.213

6.076 3.552 9.628 19.459 14.616 34.075

Air TransportRehabilitation -- 7.566 7.566 5.507 3.634 9.141New Works - 168 168Studies & Techn. Asst. 300 300

-- 7.734 7.734 5.807 3.634 9.44k

Maritime TransportRehabilitation 8.073 819 8.892 8.129 2.776 10.905New Projects 714 2.427 3.141Studies & Techn. Asst. - - 1.759 42Z 2.181

8.787 3.246 12.033 9.888 3.198 13.086

River and Canal TransportRehabilitation 13.310 1.490 14.800 19.976 2.219 22.195(Canal of Pangalanes)

Studies - 755 160 91513.310 1.490 14.800 20.731 2.379 23.110

National Transport Plan 782 40 822 806 567 1.373

TOTAL 119.883 72.074 191.957 174.359 84.165 258.524

Sources MTRT

March 1986

- 43 -

Annex 2.1Page 1 of 1

MADAGASCAR

PORTS REHABILItATION PROJECTDevelopment of Port Traffic 1977-85

(000) tons

1977 1978 1979 1980 1981 1982 1983 1984 1985

Antsiranana 112.9 205.1 157.0 226.5 186.5 191.9 119.1 93.4 117.5

Vohemar 12.0 14.9 17.6 22.2 25.1 29.2 30.6 27.5 27.9Sambavall 8.1 8.8 6.5 8.7 3.1 2.8 - - -Antalahal/ 9.3 4.7 5.2 5.0 6.4 4.6 5.1 3.4 10.0

Maroantsetral/ 11.2 14.7 13.6 13.3 11.9 8.1 6.9 6.1 9.5

Toamasina 1,363.4 1,148.5 1,252.7 1,429.9 1,167.6 1,222.7 954.5 921.8 1,194.0

Manakara 61.1 88.2 74.6 61.6 60.8 56.8 50.5 65.0 56.9Mananjaryl/ 16.9 9.9 15.5 28.9 33.1 24.5 15.2 13.4 11.0

Tolagtaro 43.8 38.3 39.2 36.4 41.5 35.3 35.0 32.5 24.6

Nosybe-PortSt. Louis 150.7 156.8 130.9 175.2 117.0 172.5 234.3 236.9 123.7

Analalava- 11IAntsohihyl/ 24.0 42.5 60.7 57.2 36.8 29.8 12.4 27.9 9.4

Mahajanga 351.5 386.0 423.0 385.6 307.0 319.6 243.3 197.9 183.7Morondava 16.4 16.5 17.3 22.9 20.8 15.2 15.7 34.9 55.3

Toliara 93.4 92.4 78.4 96.9 97.8 97.6 76.0 66.9 66.5Morombel/ 13.6 16.4 9.1 8.3 5.2 5.0 9.2 10.4 6.4

2,288.3 2,243.7 2,301.3 2,578.6 2,120.6 2,215.6 1,807.8 1,738.0 1,896.4

Source: Service des Douanes

May 1986

/1 Not a project port.

- 44 -

ML8X 2.MADAGASCAR

PORTS REHABILITATION PROJECT

Develoomnt of Toamasina traffic 1978-84

a 7.L 1 71 1980 9fi 1982 1983 1984

cargo (000) tonsImportsRice 86.7 91.0 122.4 134.2 232.8 150.2 100.5Other dry cargo 205.0 241.1 251.3 153.3 153.7 151.1 199.9

Exports 175.3 193.9 175.1 150.5 151.4 124.4 189.2

Cabotage 69.4 118.8 118.1 129.8 88.8 87.1 107.3

Total 536.4 644.8 666.9 567.8 626.7 512.8 596.9

Petroleum products612.1 607.9 763.0 597.8 596.0 441.7 324.9

Total traffic 1,148.5 1,252.7 1,429.9 1,167.6 1,222.7 954.5 921.8

Source: S.E.P.T.

January 1985

- 45 -

Annex28

MADAGASCAR

PORTS RNASILITATION PROECT

CobotOeo Fleet as tf Novgemr 19865

DraftComrnny Shi OW -- T e Current Rout

CMN Onib SW0? 6.6 a. 197w OC Toes.lna4oAfr-Comors-O Iego-TossOntlaby 6827 8.6 1979 CC maheJenlo-Mozem-mahaJangsSe,iboks 100 7.5 1962 QC Toam-SoAfr-Colomb.-Slngapore-

Reunlon-Mouritius-Toe.V.deMsnnknre 1550 4.0 19"1 C Toua-Mnakera-Toe.Vetay 1460 4.6 1957 CC TowamD Ie"o-Nosy Be-Uhmi anga-To lIars-

Menkeara-ToamVat.y 4 ' 1014 2.9 1960 LCT Tonm-To Iare-Morondava-Tollara-ToesVatty 8 1014 2.9 1979 LCT Tim chartered for drilling supportVatay 2 2C0 2.1 1979 LCT Toem-M roanteetra-ToamJ. Ream 1t0 1.8 1977 LCT Tollare-Morondava-Tollara

Trans 7 Vole 120 3.0 (ost) 1969 CC (1) Toa.-Voh.ar-Dl.go-MahaJ nga-Toam(2) Tom-Manakakre-Toe.

Baby 106n 8.0 (set) 1972 CC Tomn-TToliara-NahaJsng*-Manakara-Toam

Kait Kartal 1400 3.5 (..t) 1964 QC

Soliu Tlsirero 68S0 7.2 1978 Butan-/Oll Toam-Round IslandBemeolng 4060 6.0 1962 Oil 'Tolsisnraka 28S0 4.8 1987 Oil ' tCap d'Ambro 206 1.9 1906 Oil Local delivery from MahajangaTongatetpa 10 2.0 1970 OilIsle de France 106 2.0 1970 Oi l 5

Socotrat Ce.. Pau 250 2.6 1919 QC West Cost serviceHoded 250 2.2 1910 CC *Yealy Raded 10 1.9 19.r PL Local service ftro MahajangaSofia 120 1.2 197W PL ' SMountaxar 90 2.2 1970 PL * 3 SMareebitey 90 1.0 1940 PL a 5 U r

Eric Express No. 1 860 2.6 (set) 1945 LCT West Coast service

Tawakal Ravinala 60 1.t 1964 PL Local service from Mahajanga(ox Fiama) Hereul gO 1.5 N/A PL * I

Vitaforns 120 2.8 PL ^ * a

Lewis Upton Msjungais 20 2.6 1987 Cc West Coast serviceWubbind 210 2.2 1980 cC * a *

Transmed St. Louis 06 2.2 (set) N/A PL Local service West CoastNo. 2 69 (ent) 1.5 (*et) N/A PL

- 46 -

Annex 2.8Pose 2 of 2

DraftCompany Ship tW- G;;d Built TYD Current Route

Foul Bay Cheelanol 100 1 2 (st) N/A 8 Loeal eirvice West CoastNafoia 3o 2.0 ("ot) N/A T/C ' r *No. a S (eat) 1.5 (set) N/A PL Port servicte i Mahajasna

Sto Trans- Pangalans U1 N/A, 1062 CC East Cost Serviceports Marl-timse Cot.Est

Caroi Premier so 2.0 (set) N/A ac Nose Be-Ambanjn

CIC N/A 1 (ett) 2.6 (set) N/A QC Local service from Mahajanga

Aximar Fast 1 8 .8 1984 LCT Oil tiold servico from Merondava

Legend:OC - Coneral Cargo Vessel PL - Powored LighterLCT - Beach Landing Vossel B -SC rgeOil - Tankor T/C - Tug with cargo capacity

Sourco: MTRT, tonsultantsFebruary 1988

- 47 -

PTS R BILUTAIN FJCT

Port 1Iatllatla9n

Po"t _dLJ ubdirn, ;i.LIiM 2t11akLn

ANTSIRANANA WelI Eoy Dir.ct 801 8.50 1.4o 18,000 9,000protected to 4uay 62 4.50 Good 15 000 9,00081 2.00 GootdVOHS"IR Veol I a. DiOect 80 8.20 0.98 diuo B00protected to Quay

SAM4AVA Estuary Badly LiGhterage wood 0.98 modius Little 8.000 700cited dock improved beachAN-ALAMA Eapo.d Difficult Lightersge wood do1ck 0.98 medium 2,000 563MAROANTSETRA Calm Peor Lighterego 20 wood 0.70 medium Bosch 800S away 450TOASIN Good EASY Dir ct 259 8.80 0.70 0ood 80,000 67,000to Quay 1oo 6.80

1I0 9.00171.8 12.00192 3.8041 10.00

354.8 10.00190 3.80200 8.80

MANANJARY Exposed Poor Lighteruo 3 x S0 0.80 (actual) 0.80 Nsd)ua 6,S00 3,400Siltod 30 1.40(in theory)MANAKARA Expo.ad Poor Lighttor 1Jo00 4.50 0.80 Needs re- S21pey 7.800 2,000Suited 88 1920 3 t.so contutt6o5

1833216O

TOLAO4AR Expoaed Exposed Lightersge 48 0.80 0.30 Good Slupwa;O 8,800 3.00071. 1.00 (actual) Cron* 08.80(,n theory)

TOLIARY Eel lay Direct to 120 7.80 (actual) 2.10 Good 7.800 2.100sheltered Quay and 90 *8:0(,n theory)

lighteraes 2 x 32 2.00 (actual) Meadium 8.5002 x 82 2.50(Cn theory)

EORBE Sheltered Easy Lighterage 1S 0.00 2.70 - -MORW.VAVA Expoa.d Difficult Lighterage 50 2.80 2.40 fedius beaching by 13,425 2.575Si ltitxg AMOCOMHAAJANCA Sheltered Difficult Lighterage 183 Dry at low tide 2.90 ledium S chnpcy OIC 88,000 17.800Silting 184 Port Schneider

109 1.00164 1.00IS0 1.00

ANTSOHIHY River Difficult Quay aem l00 8.0 3.00 Good Beaching 11.000 1,000Coastere 100

NOSY-BE SheItered Esey Lighterage 160 1.80 2.80 Hediuo Ports of: 20.000 3,380as 2.00 SOLIMA 50m100 0.00 PEOE jettySLICR8IE 100.

PORT SAINT Exposed at hi,h- Lighterage 100 1.00 2.20 2 -lipwaya 2,000 s9.000;LOUIS atoor,ng tide SO 0.00 crane of Ist

Source: Consultants

F*bruary 1986

- 48 -

Annex 2.5Page 1 of 4

Hadagascar

Ports Rehabilitation Project

Physical description of the port sector

East coast

1. Antsiranana. The main activity of the city in which the port islocated is the SECREN shipyard, even though the port does serve as anevacuation point for local produce (mainly salt), reception point for localconsumption, and in a reduced role as transshipment point for export. Theport has 414 m of piers, generally in good condition, of which 301 m have8.5 m water depth, and the rest is used for coastal shipping, and smallcraft. The port is located in an excellent site, with good depth, easyaccess, and year around shelter. However the productivity is very low dueto limited port handling equipment, particularly cranes, tractors andchassis and due to poor condition of the pavement and rolling surfaces,which worsens the cargo handling equipment situation, by accelerating itswear and tear. During 1984 cyclone Kamisy produced damages to theinfrast;ucture, which have now been repaired through an IDA EmergencyCredit.

2. Vohemar. The main acti'tity of the port has been export of coffeefor transshipment at Toamasina, Its role will be increased due to a recentGovernment decision to re-route port traffic from SambavL and Antalaha toVohemar. The port is located in a shaltered bay, with a rather limitedaccess, but sufficient for the largest coastal ships operating aroundMadagascar. The port's only pier is a T-shaped installation, with a 50 mlong pier, connected to land by a 37 m trestle. The pier needs repairs dueto a collision with a ship, a complete reconstruction of its fenderingsystem, and possibly reconstruetion of the superstructure and additionalpiles. There are very limited storage yards and a small warehouse in thevicinity of the pier. The productivity of the port is limited due to thecondition of the pier, to the difficult operation resulting from a narrowtrestle connection to an equally narrow pier, to the lack of nearby yardsand warehouses, and to the lack of suitable equipment: chassis, forklift,and a crane which would permit the shipment of coffee directly incontainers. Also indispensable are a line handling workboet and woodpallets.

3. Toamasina. The ma..n port of Madagascar, located in a ratherexceptional site on the east coast, Toamasina is naturally sheltered byreefs and the coastline configuration, and has excellent natural waterdepth. Toamasina has been developed by stages, the latest of which(extension of pier C and prolongation of the breakwater) was completed in1975. Like the rest of the ea3t coast, the port is vulnerable to IndianOcean cyclones, and was setiously damaSed by Honorinina in March, 1986. Theport has relatively good access, but large ships require tug assistance.Though litoral drift may cause some siltation problems in the future, it isnot at present a serious problem.

I - 49-

Annex 2.5Pasge 2 of 4

4. The port, with 1300 m of piers and depths ranging from S to 12 m,can accommodate simultaneously four ships, one tanker, three coastalshipping vessels, and a number of small craft. The available yard surfaceis about 80,000 m2, and the combined surface of sheds and warehouses isabout 60,000 m2. In addition, there are specialized handling and storagefacilities for bulk, grains, and liquids, as well as refrigerated storage.The general condition of the infrastructure is satisfactory, except for theyards and tolling surfaces which arp in very poor condition, the inadequatedrainage and electric and water distribution networks, and the loss of fillmaterial being experienced at Mole C, where the newest and deepest piersare located. Moreover, there is need for improvements to the maintenanceshops and for lighting of some storage areas. The equipment existing at theport though generally sufficient in quantity, is in very poor state ofconservation due to very poor maintenance; much of it needs replacement.Additionally, there is the major problem of the inadequacy of the chromeore handling system, which needs to be reconstructed to be able to takelarge lumps. The damages to the breakwater, caused by Honorinina, areextensive and need to be repaired urgently, which will be carried out underthe Supplemental Credit for Emergency Cyclone Repairs.

5. Toamasina, in spite of having sufficient physical plant as well asreasonable cargo handling equipmen,t and facilities, has an extremely lowproductivity, one of the world's lowest for a similarly equipped port. Theport's poor performance can be attributed primarily to management and laborproblems, and to a lesser extent to lack of access to foreign exchange forprocurement of spare parts, and an almost incessant rainy season, whichinterferes with daily stevedoring operations. As illustration of how lowproductivity really is, the port of Mahajanga using lighterage and evenpoorer working conditions, has consistently had better productivity thanToamasina. The problem is institutional. In April 1986, SEPT initiated amajor plan to improve the situation, which was considered acceptable by aBank mission, and which is covered in more detail in Annex 2.8

6. Manakara. The main coffee exit point for Madagascar, and servingthe hinterlands of Parafangana and Fianarantsoa, Manakara is an importantlighterage port, oqapable of receiving coastal steamers, provided they areequipped with gear to carry out lighterage operations. The port is locatedat the estuary of the river Manakara, fully sheltered against the seas; ithas about 250 m of shallow piers, part of which are in urgent need ofrepairs; the yards behind the piers are in very poor condition, in need ofrepairs and paving. There is also need to provide lighting in order tocommence loading of barges before daylight. The equipment is quite suitableto the needs, and only a forklift and an additional barge are required, asreplacement of very old units which are about to be decommissioned.

7. The main problem of this port is to keep the 'pass" or accesschannel open to the lighters, a task which requires periodic dredging. Theexisting dredge has done a satisfactory job, but requires spare parts, aswell as some major repairs; also there is a need for a new slipway torepair small craft, as the old is completely silted, and it would be moreexpensive to repair it than to build a new one.

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Annex 2.5Page 3 of 4

8. Tolagnaro. Taking advantage of a natural bay, but having limitedprotection against the seas, reduced at present to about 2.5m water depth,Tolagnaro is a lighterage port serving the area of the some name. Thephysical infrastructure consists of about 100 m of piers, a ratherrestricted storage area, a silted slipway and a barge maintenance area witha heavy lift. Generally the condition of the installation is reasonablygood, except for the yards and rolling surfaces, which badly need repairs.Also the port has no security enclosure, and the electric distributionsystem needs to be worked over. The lifting equipment is very old and spareparts are no longer available for some of it. The barges used in lighterageoperations are in terrible condition, and it is not practical to continuerebuilding them periodically.

West Coast

9. Toliara. A sheltered port, built on an reef and connected to theshore by a trestle, provides 8.5 m depth berth side mooring, as well aslighterage possibility for larger vessels. Though it is generally in goodcondition, repairs are required for tht access trestle, the pier, and theyards. Lack of area lighting prevents night operations. A small amount ofdredging is required periodically, and because it has not been done theavailable depth at pier side has been reduced considerably. Some of theequipment is very old and needs to be replaced; there is currently no tugavailable for the lighterage operationa; and given the distance between theport and warehouses in the town, it is indispensable to acquire somechassis to complete the existing fleet.

10. Morondava. The port is currently the only available means ofcommunication between the area and the rest of the country, but thissituation will shortly change as a new road will be open towards theplateau region. Port Bebe is situated on a canal accessible via the mouthof the Morondava river through a "pass" subject to continuous siltation anderosion. Dredging was carried out periodically until about 10 years ago,and it has not been done since. Even though the pass is dry at low water,there is always a 2.Om tide which allows lighterage vessels to enter orexit in a narrow but well defined time window. Oil exploration has beenbeen very active, based on Morondava, and the firms carrying it out haveused LCT vessels, which can be "beached" directly, without need to accessthe canal and Port Bebe. This approach was studied by the consultants asthe normal operation of the port, and discarded as impractical; instead therecommendation is to use shallow draft, beaching type motorized barges, inconjunction with a "beach" inside the pass, next to Port Bebe. Thisapproach, though a still lighterage operation, would render dredgingunnecessary. Also required would be resurfacing of the yards, lighting anddrainage works, and replacements for aged equipment, tractor, chassis, andforklifts.

11. Hahajanga. A lighterage port, located in the estuary of theBetsiboka river, it has been the second port of Madagascar, and in the pasthas competed with Toamasina. There has been significant changes of theestuary configuration due to the siltation produced by the river sediments,but these have not yet seriously affected the port operations. In spite ofthe absence of dredging, smaller coastal vessels (150 dwt or less) cancontinue to berth alongside. The larger ones (over lOOOdwt). were never able

- 51 -

Annex 2.5Page 4 of 4

to anter the harbor. The productivity of the port Is comparable to that ofToamasina, which is an achievement considering that it requires lighterage.Damage produced by the 1984 cyclone (Kamisy) is largely repaired and somenew equipment is already in operation. However, repairs to very old piersare needed to prevent their complete destruction, and the yards need to bepaved to reduce damage to cargo handling equipment. Efficiency would beenhanced if the port's very l4mited capability for handling of containerswould be increased. Some of the lighterage barges are no longer suitable tobe repaired, and thus new ones should be acquired. In addition to the abovea hclearing' of rip-rap which was displaced Is urgently required to preventdamage to the vessel's bottom, as "bottoming" occurs at every low tide.

12. Nosy-Be. The public facility at Hellville is an importantlighterage port. In addition there are private facilities operated bysugar, fishing and oil interests, which permit direct access to coastalvessels and lighterage for deepse4 vessels. The public pier, a very oldstructure, is in need of repairs, and it also requires some paving toincrease its efficiency and reduce damage to the equipment; the lighteragecraft is in extremely poor condition, and replacement barges and a smalltug are urgently needed.

13. Port Saint Louis. A private concession to SIRAMA a sugar andmolasses export company, it is lo9ated at the estuary of the river Mahebo.It is a tidal lighterage operation, in which the barges sit in the bottomat every low tide, and exit or return only during the high tide periods.Dredging was carried out continuously until 1981, but it is not certainthat it should be re-started, as the costs do not seem justified by thebenefits, and the exports can in fact continue by lighterage at hign tide.The pier is very old and needs repairs.

- 52

ANNEX 2.6Pag. 1 of 1

MADAGASCAR

PORTS REHA ILITATION PROJECT

NEW ORGANIZATION

I CIVIL AVIATIONSERVICES

FINANCES

X METEOROLOGYNAVIGATION AIDS SERVICESDIVISION_

INFRASTRUCTURE _ SEAWAYSSERVICES_

DIVISION MERCHANT MARINE

1 RR. ~~SERV2CES i.FDREDOING DIVISION |-__ _A

LOCAL PROVINCIAL 1REPRESENTATION SERVICES

OPERATIONS [ PORT4 1 SERVICES J

ADMINISTRATION

FINANC

TARIFFS ANDSTATISTICS_

ELUP-

-53-ANNEX 2.7

Page I of I

PORTS REHABILITATION PROJECT

ORGLNIZATION CHART - SEPTEMBER 1985

CIVIL AVIATION|SERVICE_

METEOROLOGY

| SERVICES

xAVIGATION ArDS MERCHANT MARtINEDIVISION _SERVICES _

. DREDGING MARITIME j DIVISION __ SERVICES _

HYDROGiAPHY _ Coj DIVISION _ 0

I z

PORT EXTERNAL MARINE | AUTHORITY SERVICES _o

OPERATIONS _DIVISION _

INVOICING.OFFICE_

TREWASURY

DISBURSEMENTS __OFFICE

| SUPPLIES ACCOUNTING PORT

I OFFICE r | DIVISION SERVICES

PERSONNEL |_OFFICE|

| PROCUREMENT -OFFICE

STUDIESDIVISION

June 1986

- 54 -

Fe-g I of 4MADAGASCAR--PORTS REHMSIUTATION PROJECT

SEPT ACTION PLAN

(tNt oaone: this schedule Indicates the proposeddate for vorious meaours. Actual dates would

depend on certain external fatorsdescrlbed herein as constraints)

Coementa orNr. C A T E 0 0 R Y DATE Constraint* Explanation

A. ORGANIZATION

Rolinguiehing subsidiary activities

la stop bus operations and l1y-off Spt,. 1980 donestaff

lb divestiture of municipal bus-lines DOc/S1/W ye To be taken over by a munieipaltransport authority

20 stop forostry operations and lay- end 1908of f staff

2b divestiture of forestry operations 1937 y Agreement wIth a firs yet tobe Identified

3a Stop Inland water transport service nd 1993

3b divestiture of the Pangalanoe Canal 1"7 Yes To be negotiated wlth IMITransport Authority

- Internal reoranization

4 New management team Jan. 1987

6 reorganization Jan 1937 With the help of consultantsfinanced under PPF

e training of new managers

a) In general managment July 1937 In conjunction with the uni-versity and project trainingcomponent

b) in port management 1938

Reduction of personnel:

7 Introduction of early retirment program

8 Divestiture of subsidiary activities project

period

*Actions by Institutions other then SEPT.

- 55 -

Annex 2Pae 2 of 4

Nr. C A T E 0 0 R Y DATE Constraint Coements orExplanation

9_ SOlective analysis of 658 fi%ed-termcontracts

10 Abolition of automatic confirmation ofdaily workers Moy I988 done

11 Introduction of uniform conditions of pro1act yes Study Included In the projeet*mployment poriod

12 Creation of a Dmaortment of HumanRolatlona: Sop 198B done

13 M"sures rogarding punctuality and Sep 1986attendonce done

14 Restoration of tho administrativebuildings of SEPT May 198

15 Development and Introduction of new project ye. Study Included In the projeetEDP system poriod

B FINANCES

18 First modification of tariffs Jul 198 yes Approval of Ministry of Flaonces--done

17 1988 budgot review Oct 1988 done

18 Preparation of 1987 budget Nov 1988 done

19 Introduction of manageont informationsystem; monthly follow-up on budget Feb 1987

20 Monthly cash-budgeting system Fob 198?

21 Analytical aecounting system projectperiod

22,23 Instant billing July 1988 done

24 New procedure for preparing budget July 1988 done

25 Procedure for purchase of spare parts: Approval ot Ministry of Finance-- EPI ACCOUNT June 1988 yes VERY IMPORTANT STEP--done

28 New tariff structure 1989 yes Must follow the introductionof analytical accounting systemTechnical Assistance to beprovided under the project

27 Roconciling or rescheduling of credits July 1988and debt.

28 Auditing of 1985 accounts Sep 1986 done

29 Introduction of a system of debt Irecovery with aceptable dolays Apr 1907

- 56 -

Abmx 2

Nr. C A T E 4 0 R Y bATE Constralnt Explanation

- C EXPLoITAiON. OERATIONS. PRODucTiVIY

30 Clean up of port fscillties2 *crap end 19sI Pon

81 Paving of terrain and access roads:tilling of potholes end less

32 flushing of gutters Oct low done

83 Lighting Jan. log? ye Depends on JIRAM

34 Security against ptifering Projectperiod

36 Sectorization Apr 1987 To be folloed up

38 Unloading of rice In bulk end 19BW yoe Depends on politicaldecisions; purchase of twopices of mtahinery of theVigan or Vacuvttor type;typo; oval labilIty of pares--done

87 Continuous loading of chrome ore Apr 1mW yes sIgning of concession agreemntwith KRASMA; fInancing ofmdfications to conveyorbeIt (CCCE)

B8 Construction of 2 container terminals end 18 Ye finaneing of 2 PPM typ cranes andspreae (se 89)go Purchase of 2 PPM or selotti cranes end sW yefunds *val abilly; pving of

0 MAINTENANCE

40 Inventory of machinery on hand end 1989 yes technical assostnce

4i. List of needed spare part end iWO yoe techalcal asistnce

42 Repalrs to fork-lifts id-1987 yes MOST URGENT On condition externalfunds for spare parts are madeoval table,

43 Rehabilitation of workshop end 190f ye If funds available for reassemblyof hanp r and A.?44 System of mnagemnt of stocks Feb 1m7 Yes finanein of otudies, mtril(and computer)

45 System of supplies (procurement center) Apr 1N7 yts follow up on Nr. 44

48 Purchase of five S-ton to'kilfts end 1908 yoe fi"nancin

47 Manufacture of large paddles 19W6 (andafter)

46 Purchase of fIve 25 ton trailers end 1907 y f inancing

49 Rehabiltation of tractors end 1Wt? yes financing for Spare part

so Construction of line-handling boat end 1a80 yes purchan of 100 hp motor

PRmDUCTIVITY

51 ProfIt-sharing by longshoreon end 1987 Contractual poliCy

62 Introduction of a third shift, on May 1984 dneas neded basis

MADAGASCAR - PORTS REHAILITATI0k PROJECT

SEPT ACTION PLAN - PERFORMANCE INDICATORS

iTEII UN4IT 1/1/S6 1/1/Bt 1/1/66 1/1/89 1/1/90 1/l/9 1/1/92 1/1/95 1/1/94 1/1/95Tehnical

Employes Nller 4200 31S60 no $61 3440 837? 33ff 830 a m30 0 5;fContainera: TEU/gang/hour-Fu II cont. ship 4 6 1 10 10 1i s 10 19 1-sime tship 4 6 a 8 8 9 a 9 1 Rice bags Ton/shift/ship 1ff 140 10 2f 210 220' 229 220 220 229

Chrom ore Ton/day 7f0 710 209 20 f 2009 29ff 2000 20 223Barrel* Ton/shift/ship 70 s0 119 lO ll 1ts 11i l1 l1 1iGeneral cargo Ton/shift/gang 26 86 79 7i 70 70 79 79 70 79Borth Occupancy U -7* - 6S So sio 6S0 so W 5C

Ratiqwaitg time to 38 230 1O 1O 1O 1i 19 10 is 195Xtt co tim x

Ti Watin Days/ship 2 1.6 1 1 1 1 1 1 1 1Mean port time: Hours/shiplose then LOA 196 199 1SO 120 120 120 120 120 120 129

-mers then ISO LOA 142 1SO l1 90 99 s9 96 90 90 96Financial

Current ratio 1.2 1.2 1.C 1.6 1.5 1.5 1.5 1.6 1.5 1.5Recoivables Turover 709 Sf 403 Bff 260 1i9 1S 159 159 1SOWorking ratio 1 l1 96 S0 so s0 76 75 75 7C 7i

Operating Ratio X 126 119 95 96 9 99 es eS eS asReturn fixd assets X 6 6 6 9 9 9 9 9

0XD.btto oqsity 1 42 as es 09 SO 80 09 56 69 45 t;

- 58 -

ANN*t 8.1

MADAGASCAR Pag 1 of 8

PORTS REHABILITATION PROJECT

DETAILED PROJECT COSTS - MID 1908 PRUCES

REHAULTATION AtC) ENHANCEMENT OP PORTS IVPRASIRUCTUB

PORT LOCAL TAX & FOREIGN TOTAL TOTALDUTY EX.T.& 0.

----- MILLION FMG ----------811 22% 47% 1991 79X

A. qUAYS, SLIPWAYS AND TRESTLES

A.1 Repair* to quay Coste MAHA P4 69 129 272 212A.2 Forry access ramp MAHA 26 19 41 66 67A.) Motorized Barge accos rap MORO 17 12 25 65 48A.4 No Quay So a long VONE of 68 146 262 223A.5 Embankmnt Whind pier VOHE 46 8 69 140 116A.* Repairs to access; enbnkment TOLU s 26 57 121 95A.? Rpire to quay TOU 4 8 6 13 9A.6 Repirs to sheetpile quay MAMA 1s 11 23 48 as

A.9 NW Slipway MAMA 19 14 28 61 47A.19 Repair8 to quay CS TOMA of 42 99 193 l15A.11 Repairs to quay STLO 46 82 66 145 118A.12 Reptirs to quay NOBE 7 5 12 25 20

SUBTOTAL qUAYS, ... 441 815 898 1,449 1,14

B. YARDS

6.1 20,009 m2 prop. and paving MAMA 168 111 192 490 8478.2 60690 .2 prep. and paving MORO s9 22 47 100 78H.8 4,900 .2 prop. and paving tOLI 1 11 28 46 388.4 4,909 *2 prop. and paving TOLA 16 11 28 46 388.6 Extension of crane yard TOLA 7 6 12 24 198.o #,NO m2 prep, and paving MAMA 21 1i 32 67 S8B.7 Loading platforms MANA 4 8 7 16 12B.8 56,9900 2 quay C pavments TOMA 195 76 159 389 2648.9 18,000 m2 quay 8 pavements TOMA so 26 66 116 9g8.10 2,09f .2 prep. and paving STLO 12 6 17 37 268.11 18,669 .2 yard repairs ANTS 41 29 08 188 194

SUBTOTAL YARDS 441 816 i 88 1,366 1,071

C. WUILODVGS

C.2 Administration building TOLI 2 0 8 8 aC.8 Maintenance sheds L.S. TOMA 61 9 89 120 120

SUBTOTAL BUILDINGS 68 0 68 126 126

0. UTILITIES

0.1 Lighting quays' area TOLI 22 18 84 72 570.2 Electric distribution TOLA 8 2 5 12 9D03 Fence around port TOLA 7 6 12 24 19D.4 Lighting quay's area MANA 4 a 7 16 120.6 Lighting container park TOMA 38 26 67 121 960.6 Drainage older area TOMA 22 16 34 72 570.7 Water and eloctric distrib. TOMA 64 52 161 264 2310.8 Lighting, drainage, sewage MORO 9 6 15 89 24

SUBTOTAL UTILITIES 169 126 815 69 504

TOTAL INFRASTRUCtURE 1,184 758 1,791 3,691 2,68m - -_

- 59 -

ANNEX 8.1

MAOAOASCAR Pag 2 of 6

PORTS ASITATION POECT

OLTAILED PROJECT COSTS - MID 19 PRICES

MOOIFICATIu AN rwRyEMETS TO ;AQ0 HANDLONG

POIRT LOCAL TAX OEI4N TOTAL TOTALDMTY EX.T.& 0.

----- ILLIGON _MQ_-----

A. EqIuvmENT

A.1 Mobile ra" f at S MAIA 18 72 290 209 217A.2 i Two 25t chassis MAHA 2 a 14 22 16A.3 OneP s MP tretor MAMA 2 3 11 16 13A.4 OneofMPtractor MORO 2 8 11 16 18A.$ Two 25t chassis MORO 2 6 14 22 16A.6 Two St forklift MORO 5 14 S9 s8 44A.? Mobile crano 2t at go VOHE 13 42 126 181 139A.$ On. St forklift VOQE 3 6 20 29 23A.9 Thre 25t chnssl VONE a 9 21 84 24A.10 Four St forklifts TOLa 11 27 76 1l6 68A.11 Five 25t chassls TO" 5 16 36 55 40A.12' Two mobile cranes 4t at o TOLA 8 29 64 122 92A.13 One St forklift MAMA S 6 20 29 23A.14 Two mobile creae. 3t at Sm TOMA 36 146 399 580 435A.1S Reconstruction of conveyors TOMA 114 121 820 653 438A. 16 One 25t forkiIft ANTS 14 J9 113 166 127A.17 Two 25t chasses ANTS 2 6 14 22 16A.1S One soP tct.or ANTS 2 8 11 16 13A.19 One St forklift NOSE 8 6 26 29 28A.20 Oneof HP tractor NOSE 2 8 11 16 13A.21 Two 26t chessis NOSE 2 6 14 22 16

SUBTOTAL EQUDIPMENT 262 567 1,576 2,894 1,827

S. FLOATING CRAFT

8.1 Four 160t barge MAMA 34 46 105 165 1399.2 Two 60t landing craft MORO 1S 32 106 161 1268.3 One 76 H line launch VOHE 14 13 68 84 718.4 One 16O HP tug TOLI 11 17 62 109 928.5 Four Oft baree TOLA 84 16 97 162 1363.6 Two Oft bersee MANA 23 16 34 72 578.7 One 160 HP tug NOSE 11 17 82 109 928.6 Thre 8ft bargeo NOSE 36 24 so 109 858.9 One Ot barge ANTS 12 8 17 37 28

SUBTOTAL FLOATING CRAFT 169 189 630 1,08 819

C. SPARE PARTS AND MATERIALS

C.1 3,000 pallets 37 5 0 42 37C.2 Stoel plate and electrode. 0 1i 38 63 38C.3 Spars, tool., shop rehabilitation 131 709 1,936 2,866 2,067

and equipment replacemnt Toameasins_l/C.4 Sparo parts and tools, other porto 21 189 426 630 441

SUBTOTAL SPARES A MATLS. 189 1,966 2,894 3,591 2,583

TOTAL CARGO HANDLING .30 1,764 4,609 6,098 6,229

NOTES: 1. To includo five St foeklifts, fl4o 25t chassis, and one 4x4 vehicle.

- 60 -

ANNEX 3.1

MADAGASCAR Page a of 6

POM RAITATION PROJECT

DETAILED POJECT COS"S - MID 106 PIRICES__

ENANCMtS TO INTERNATIONL AD COASTAL SHPING

PORT LOCAL TAX & FOREIGN TOTAL TOTALDUTY EX.T.& D.

eM--MILLION fMG e ..

A . DREDGING

A.1 Bar ounted buckt dredg MAMA 42 126 857 626 899End Ip lt botttoe barA.2 Suction pump on a barge and TOLI 37 74 164 274 261

490 I.*. of flexible duetA.8 Rehabilitation of existing MAmA Ili 52 10D 272 219

Hydroland type dredge

SUBTOTAL DREDGING 19 262 on 1,571 619

B. NAVIGATION AIDS

5.1 Combined navigation side/ 26 862 484 a96hydrographic surveys lounch

3.2 Supply of buoys, reconstruc- 26B 216 C6 1,076 662tion of lighthouse, rpairof lights, spores, shops andrediocaumunIcation

SUBTOTAL NAVIGATION AIDS 2C2 262 1,666 1,612 1,280

C. SPARE PARTS FOR THE COASTAL SHIPPIN SECTOR

C.1 Spar perts for Mto coastal 68 169 544 76C 6shipping sctor - ---

TOTAL ENHANCEMENTS TO SHIPPING 64 698 2,142 $,8$8 2,646-----

- 61 -

ANNEX 8.1

Page 4 of 6 MADAGASCAR

'PORTS REIHAIUTATION PROJECT

OETAILED PROJECT COSTS - MID 19O PRICES

INSTIIUTIONAL DEVELOPMN AND REFORM

MAN LOCAL TAX FOREIGN TOTAL TOTALMONTH DUTY EX.T.& 0.

A. TECNICAL SUPPORT

A.1 Ministry odvisor 6s 81 9 862 891 891A.2 Accounting 24 11 0 186 147 147A.$ Administration 10 4 0 5? 61 01A.4 Dredging 12 S 6 es 78 78A.S Maintenances Tamatavo 40 18 0 227 245 245

Other ports 20 9 0 118 128 123A.6 Navgatlon aide 12 5 O 66 78 78A.7 Cargo handling: Tamatave 40 18 0 227 246 245

Other port 20 9 0 118 12$ 128A.8 Hydrography 12 6 9 66 78 78A.9 Misce llneoua aesietnc. 24 11 0 186 147 147

SUBTOTAL TECONICAL SUPORT 274 126 0 1,57S 1,791 1,791

S. TRAININ

0.1 Training specialist 24 14 9 186O I1 Is8.2 Traning materials - 16 10 16 16 17s.8 Scholarships - 454 464 464B.4 Training of 99 staff - 222 47 791 971 924

SUBTOTAL TRAININ 262 68 1,449 1,704 1,701

TOTAL NST. DEV. AND REFORM 878 683 ,024 8,406 8,402I aaa inu ame

- 62 -

ANO4EX 3.1eeee

MDA"" Pap t of G

PORTS RE3ABIUTATION PROJECT

COST ESTIMATE - iD6 186 PRICES

LOCAL TAX A FOREIGN TOTAL TOTALDUTY EX TI

-- ------ ILLION FM0 e

S. PORTS INFRAS7RUCTURE

A. QUAYS, SLKPWAYS AND TRSES 441 315 09 1,449 1,134

S. YARDS 441 315 63 1,866 1,571

C. BUILDNGS 68 a 63 120 120

0. UTILITIES 139 126 316 688 W64

SUBTOTAL PORTS INFRAST CTURE 1,134 750 1m1 3,591 2,B3

1I. CARGO HANDLING

A. EqJIPWEI 252 507 1,575 2,894 1,627

B. FLOATIN CRAFT 100 139 630 1,55 B10

C. PARE PARTS AND MATEtIALS 19 1,m 2,394 3,591 2,663

SUBTOTAL CARG HANDLING 6U 1,764 4,999 0,993 5,229

IlI. SHIPPIN

A. DREDGIM 1t9 262 63 1,571 819

B. NAVIGATION AIDS 252 252 1,553 1,612 1,269

C. SPARE PARTS FOR COASTAL SHIPPIMG 68 160 6" 750 667

SUBTOTAL SHIPPING 604 093 2,142 3,339 2,646

IV. INSTITUTIONAL DEVELOPMENT

A. TECHNICAL SUPPORT 126 6 1,S76 1,701 1,761

B. TRAINING 252 63 1,449 1,764 1,701

SUBTOTAL INSTITUThTNAL DrVELOPMENT 873 68 3,024 3,405 3,402

V. ENGINEERING, BID DOCUMENTS ANM SUPERVISION 132 25 1,810 1,406 1,443

TOTAL BASELINE COSTS 2,778 3,301 12,776 18,865 15,565=~ wnausas rn= zuau

PHYSICAL CONTINGENCY 278 U30 1,278 1,38I 1,656

PRICE CONTINGENCY 066 998 3,951 5,855 4,86?ssa - _ n

TOTAL PROJECT COSTS 3,912 4,624 13,005 28,642 21,010

C' I

- 63 -

ANMN 8.1

MADA"SCAR Pae. 6 qt 6

PORTS RAtUTATION PROJECT

COST ESTIMATE - MID lo6 PRICES

LOCAL TAX A FOREIGN TOTAL TOTALcm EX TAD

- nasLLION FMG ------ -

I. PORTS tNVRASTRUCTURE

A. qUAYS, SLIPWAYS AND TRESTUS 621 441 977 2,640 1,698B. YARDS 621 441 988 1,981 1,609

C. BUILDINGS 89 0 so 177 178

D. UTILITIES 2" 176 444 867 710

SUBTOTAL PORTS INRASTRUCTURE ' 1,9 1,O96 2,897 6,065 8,9zx. CAOO HANDLING

A. EUIPUENT 8U5 794 2,220 8,870 2,574

B. FLOATING CRAFT 266 26 888 1,419 1,154

C. SPARE PARTS AND MATERIALS 266 1,412 8,874 5,656 8,04

SUBTOTAL CARGO HANDLNG 887 2,471 6,461 9,48 7,88

III. SHIPPING

A. DREDGING 266 858 688 1,566 1,164

S. NAVIGTtON AIDS 866 85$ 1,421 2,128 1,775

C. SPARE PARTS FOR COASTAL SHIPPING 69 28 710 1,084 799

SUBTOTAL SHIPfIN 710 971 3,019 4,7a 8,76

IV. INSTITUTIONAL DEVELOPMENT

A. TECHNICAL SUPPORT 177 0 2,220 2,394 2,397

B. TRAINING 855 88 2,942 2,488 2,897

SUBTOTAL INSTITUTIONAL DEVELOPMENT 682 88 4,262 4,977 4,794

V. ENGINEERING, BID DOCUMENTS AND SUPERVISION 186 85 1,646 2,086 2,088

TOTAL COSTS (IncludTn contTng.ncleu) 8,912 4,624 10,085 26,642 21,918

*Small discrepancies are due to riunding of figures.

- 64 -

Annex 3.2page 1 of 11

MADAGASCAR

PORTS RF.RAMILITATInN PROJECT

A. Training Program: MTRT

1. This Annex deals with project training arrangements forthe ports MTRT supervises, which are listed in Annex 2.4.

2. This Annex is comprised of the following sections:

General considerations concerning the organizationalstructure and personnel of the headquarters departmentsresponsible for managing the secondary ports.

- Personnel situation of the iey divisions responsible formanaging the secondary ports.

- Situation of the provincial departments responsible formanaging the secondary port*.

- General situation of the lighterage companies and assessmentof, their training needs.

- Training needs of the headquarters departments and thesecondary ports.

- Training resources

- 65 -

Annex 3,2.page 2. of '11

General considerations concerning the organizational structure and Personnelof the headQuarters deoartments resoonsible for managing the secondary ports

3. In accordance with a recent decision by the Malagasy authorities,the Seaways Department (Service des Voies Maritimes) and the Ports Department(Service des Ports) have been radically reorganized. Henceforth the SeawaysDepartment will comprise the following divisions: Lighthouses and Beacons,Hydrography, Dredging, Infrastructure, and Administrative and FinancialAffairs. The divisions of the Ports Department will be: Port Operations,Tariffs and Statistics, Port Equipment, Port Administration, and FinancialAffairs.

4. Decentralization of headquarters authority has become a reality withthe creation of a Department at the level of each Province (Toamasina,Antsiranana, Mahajanga and Toliary). Each department is responsible forcoordinating activities in its province in all three aveas: Seaways, PortsManagement, and Merchant Marine. As will be mentioned later on, this newstructure meets a real need for efficiency in management but has not beeninstalled without numerous difficulties, both human and physical.

S. The new departments are in process of organization. They still needtime to define their relationships with other the other headquarters andprovince departments and also to draw up distributions and definitions oftasks for the staff of their component divisions and sections. The directorshave good university training and substantial field experience (above 15 yearsservice). However, most of the section chiefs have only a baccalaureat (highschool) education and have difficulty in conducting technical studies or inefficiently performing the management tasks of a maritime administration(tariff studies, statistics processing, spare parts inventory forecasting,study of labor and service contracts, and so on). Personnel age structuresare, overall, still good and do not pose succession problems for the moment.

6. The staff have civil service status. Basically, account is taken ofthe diplomas they hold, not of the posts they actually occupy. To changegrade, a staff member must in principle obtain a diploma giving access to thehigher grade. A disadvantage of this system of grading by diploma level isthat it fails to take account of skill levels acquired through basic,refresher and advanced professional training. That is a fundamental obstacleto the training efforts recommended by the Project. Moreover, the salarysystem compares very untavorably to that of the lighterage companies. Forexample, a division chief has almonthly salary in the range FMG 74-107,000,whereas a mechanical workshop cAief of a lighterage company can earn FMG110,000 a month -- just over twice as much as a mechanic in a technicaldepartment of the Administration at the end of his career.

-*66 Annex 3.2

page,3 of 11

Personnel situation of the key diviiions resgonsible for managing the

7. The personnel situations of the key divisions of the Seaways and thePorts Departments have been studied to define their training needs precisely.These divisions are: Lighthouses and Beacons, Hydrography, Dredging,Infrastructure, Port Operations, Tariffs and Statistics, Port Equipment, andPort Administration.

- The Lighthouses and beacons Division comprises S specialists withsecondary-level education diplomas. Two of them have received12 months of additional training in a technical training center atSt.-Nasaire. Taking into account the country's corps of 44lighthouse masters and keepers, the Division has a notinconsiderable manpower potential. According to Crown -- a firm ofconsultants commissioned to do a study of M1adagascar's lighthousesand beacons -- many of these staff members are adequately qualifiedto perform maintenance of the existing equipment. All that isneeded is to ensure an adequate supply of spare parts and tomotivate the personnel through a more appropriate bonus system.However, they will need refresher training in electricity andmaintenance engineering.. As regards the new type of equipment to befurnished under the Project (21 solar energy lights and 14 solarenergy buoys), Crown proposes to train 2 engineers and 8 techniciansin this specialized field. The training program would be drawn upby the supplier, in agreement with the technical departmentsconcerned. It would also be necessary, in the province departments,to build or renovate stores and maintenance workshops and to providebasic or refresher training for the mechanics and storekeepers whoare to operate them. The number of mechanics to be given basic orrefresiier training would total 12 (3 for each province).

The Hydrography Division still lacks a division chief. At themoment it comprises 3 secondary-level technicians. Two of them havetaken a 12-month course at the School of Hydrography in Brest. Thethird is specialized in shipping maneuvers. They are all formerstaff members of the Cartography Division. The Division is awaitingthe arrival, expected soon, of a French cooperation expert, a highlyqualified engineer. He will assist the Division to draw up aprogram of activities for the next few years and to define thephysical and human resources required to carry it out. The orderingof a 300-hp hydrography motor boat, provided for under the Project,will affect the training program, which will take into account thetype of equipment imported. It is planned to assign the motor-boatto the west coast and to equip it with radiolocation and soundinggear. In the initial stage (12-18 months), it would be desirablethat, the supplier, in addition to ensuring the installation, entryinto service and operation of Chis new equipment, also concernhimself with training of the Malagasy team. In the second phase,the team will take over entire responsibility, with the supplierproviding support, targeted to specific problems, every b months forA period of 2 years.

- 67 -

Annex 3.2page 4 of 11

The Dreduing Division Is the one most short of personnel. rt does*pt yet have a division chief. Its staff is limited to a Studies'Section chief with e technical secondary school education. ThisDivision, too, will receive technical support from the Frenchcooperation expert mentioned above. The dredging program providedfor in the Project will in fact be carried out by privatecompanies. It would nevertheless be desirable to include a trainingcomponent in the dredging contracts concluded with these companies.That would allow the Malagasy personnel to familiarize thenselveswith the technique under real working conditions. At the managementlevel, the Division needs to be strengthened by 2 public worksengineers, who will receive 12 months supplemental specialisttraining abroad in dredging.

The tnfrastructure Division comprises a Division Chief (engineer), atechnician who doubles as chief of the New Works 3anagement andDevelopment Section and chief of the Maintenance Section, 3technicians and a 6-man maintenance squad (masons, carpenters,etc.). While the Division is adequately staffed to prepare thetechnical documentation for maintdnance work of secondary importanceand to supervise and monitor its execution, it is not totallyequipped to perform the technical studies for major port works.This situation is not critic*l, since preparation of thedocumentation for major works will be entrusted to privateconsultants. rn the future, however, it will be important tostrengthen the Division's technical capacity so that it can monitor,supervise and control the consultants' work.

The Port Operations Division has a staff of three. The DivisionChief holds a university diploma and has in addition received 12months training in Antwerp. However, it is absolutely necessarythat the Division be strengthened by the addition of a contractingspecialist. This need is all the more urgent in that the existingcontracts have not been reviewed for a very long time, they are nolonger suited to the current situation, and many of them haveexpired.

The Tariffs and Statistics Division consists of a Division chiefwith a higher-level diploma in management, a Statistics Sectionchief with a secondary education, and two secretaries. None ofthese people have received statistics training.

The Port Equipment Division has a staff of 15. The Division Chiefis an engineer. The chief of the Lighterage Equipment section is aformer harbormaster and a former director of a private lighteragecompany. He appears to have appropriate experience. However, thechief of the Service Equipment Section appears to have very littleexperience in that field. Both appear to need training incontracting procedures since, while it is planned to haveconsultants draw up the technical specifications for the equipmentto be purcnased under the Project, neither really has any trainingin the arganization oe public contracts.

-68-Annex 3.2page-5 of I1

The Port Administration Division is responsible for managing the,port personnel covered by the appended budget. Only the DivisionClief is a university graduate. None of the Division's IS staff hasbeen trained in personnel management.

Situation of the 2roviAcial departments

8. At the province level, the now structures are still in the embryonicstage, whereas the heavy work will have to be done there: compilation oftraffic statistics, billing, managemeit and operation of the ports, safetycontrol, loading control, mzintenance of lighthouses, beacons, equipment andport infrastructure, and so on. rt is noteworthy that a number of contractswith concession- or license-holders have expired. These need to be revised tospell out the rights and obligations of each party and prescribe a formulaand/or provisions for periodical adjustment of tariffs in light of economicindicators and tonnages actuaily handled. The presence of an ever growingnumber of permit-holders also poies an urgent problem.

9. Moreover, a number of concepts are very imprecisely defined and varyfrom one province to another: definition of tasks within each department,manner of performance of those tasks, work procedures tailored to specificcases. and limits of legal competence vis-a-vis concession-holders. rt wouldbe helpful if training and coordination seminars could be organized, with theassistance of a Le Havre expert, during the second project preparationfinancing period, The purposes of these seminars would be (M) to define thefunctions ann responsibilities of the province department, its organizationand its relations with the headquarters departments; (ii) to identify the mosturgent problems common to the provincp departments, and (iii) to work outsolutions to the problems identified or recommendations for more detailedstudies.

10. The provincial port administrations suffer from a very seriousshortage of human and physical resources. By way of example, at Antsiranana,apart from the department chief and the harbormaster, all the staff (10) areof the execution grade; none has received accounting training. Means ofcommunication with the lighthouse facilities are lacking -- the department isnot informed of a lighthouse breakdown until a week after it has happened.Supply of these stations with gasoline or gas-oil is very difficult, for lackof meana of transportation from depot to quay. Moreover, supervision of theconcession-holders' work is little more than symbolic. rhe traffic statisticsare based essentially on these companies' own statements.

General situation of the lighterage companies and assessmentof their training needs

11. Generally speaking, the performance of the lighterage companies isgood - particularly that of the Compagnie Malgache de Manutention (CDt).Tonnage loaded and unloaded at Mahajanga totaled 73,710 tons in 1985, against96,031 tons in 1984; that handled by the Company at Antsiranana totaled 84,653tons in 1985, against 77,215 tons in 1984. The CODM's potential has not beenfully exploited because traffic throughout the country has been fallingsharpLy for a number of years for economic reasons. MDM's personnel atMahajanga totals 249, including 5 mechanics and 3 mechanic's mates responsibe

- 69 -Annex 3.2page 6 of 11

for thb mechanical maintenance repair workshop. Its Antairanana staff totals210, inclt4ing 6 mechanics. The equipment is well maintained and the workshopwell organised. The personnel are well qualified to maintain and repair theCompany's equipment properly, much of which is fairly old and has been indepartment for about 20 years. There are no major imediate training needs,except for training in hydraulic Sear and refresher training for craneoperators. With respect to management triining, CMDM officials have expressedthe wish to participate in visits to ports abroad to observe the organizationand also the evolution of handling e4uipmant. The CMDM moreover spent FMC 85million in 1985 on the purchase of spare parts and some new equipment for its.¶ahajanga branch.

Trainins needs of the headquarters departments and of the secondary ports

12. A preliminary study has been done of the headquarters and provincialdepartment structures to identify the most urgent training needs for the nextfour years. This program will comprise local training of: 3 provincialdepartment chiefs, 11 aeputy harbormasters (I for each secondary ocean-goingshipping port and each principal coastal shipping port), 20 bookkeepers (forthe headquarters and province departments), 30 general maintenance mechanics,30 diesel and gasoline engine mechanics, 20 electricians and refrigerationmechanics, 8 lighthouse masters and 50 lighthouse keepers. This program doesnot include training of hydrographers; this will be defined in detail later,4n light of the type of equipment (radiolocation, echo-sounding, hydrographicdata processing) that comes with the hydrographic motor-boat to be suppliedunder the Project.

3. Apart from this, the emphasis would be on seminars on workorganization and management, communication techniques, statistics, planning,tariff-setting, contracting procedures, and human resource forward planning.These seminars would be organized for headquarters and province departmentmanagement staffs by Local training institutions, such as CFC/Antsirabc,CFCJTana and IMATEP, with the assistance of the Project consultants.

14. Finally, provision would be included for training fellowshipsabroad, as follows: (i) seven observation fellowships in African and Europeanports for headquarters and province department chiefs; (ii) five fellowshipsfor instructors (I in the organization and planning of in-house training, I inelectrical machinery, I in automated equipment, 1 in hydropneumatics, and I indata processing); (iii) two in hydrography, and (iv) two in dredging. Theduration of the observation courses would be 6 weeks. The other fellowshipscould vary from 6 to 9 months. Details of training in radio-navigation andhydrographic data processing would be firmedi up later by the equipmentsupplier,

Training organization and resources

15. A DAC.IMM official will have to be appointed as trainingcoordinator. He will be the assistant to the Human Resources Officer. Hisfunctions will be (i) to identify the qualitative and quantitative trainingneeds; (ii) to update the training plan and draw tip a timetable of trainingactivities; (iii) to draw up the training programs, with the assistance oe :;etraining centers and proressional groups: (iv) to rnoni:or -rnd superv:se cae

- 70 -

Annex 3.2page 8 of 11

MADAGASCAR

PORTS REHABILITATION PROJECT

B, Training Program: SEPT

Backtround

1. In January 1986, SEPT had a staff of 4200. The educational levelof the personnel is very low: less than 2% have the Baccalaureat (highschool diploma) or equivalent. The age distribution is good. From nowuntil 1991, those who will be 55 years old number 398. If dockers are notincluded, 66% of employees are less than 50 years of age.

2. SEPT is facing several difficult problems which are common to mostpublic enterprises in Madagascar, namely: (i) too many unproductiveemployees, (ii) too few skilled personnel for an enterprise that is seekingto modernize its equipment and introduce new operating techniques, and(iii) a state of organizational desarray that makes adaptation to theefficiency standards targeted by new management problematic.

Staffing situation

3. In January 1986, the Operations Division had the largest staff,2360 in number, of which 1300 are dockers. According to port operationsspecialists, it is advisable to maintain the number of dockers in the rangefrom 1000 to 1100. Discipline needs to bh strengthened, in particular withregard to work quality and employee attendance. It is important to notethat some measures of control have already been introduced by the newManagement and as a consequence, overtime has fallen by 15% to 20%.

4 A unit was also created by the new Director General to study howto reduce staff, whose number has increased by about 1000 since 1982.Several solutions are being studied s (i) lowering the retirement age to55: this would reduce the total number of staff by 389; if adopted, thissolution would cost SEPT 745 million FMG for compensation payments toearly retirees, but SEPT would save about 433 million FMg on overtime,allowances and benefits; (ii) appeal to voluntary termination in return forcompensation payment equivalent to 12-18 months' salary; (iii) systematicuse of disciplinary measures against undisciplined staff (theft, repeatedabsence without permission ...); (4v) reduction of staff on the basis ofSEPT's real needs.

5. The rehabilitation plan for SEPT could not reasonably succeedwithout accompagnying measures to reduce the size of its staff; but in thesocial and economic context of Tamatave, the problem has become verydelicate. Moreover, to establish a personnel reduction plan, severalpreparatory measures would be necessary :(i) raising staff awareness ofnecessary measures for increasing productivity, (ii) inventorying of SEPT

Annex 3.2page 7 of 11

training, and (v) to evaluate the training activities. It would also bedesirable ,. set up aTraining Coordination Comittee, composed of thedepartment chiefs, the luman Resources Officer and the Training Coordinator,to express opinions on the training plans and programs and on the quality ofthe training imparted, particularly the match between training and job.

16. As regards training resources, maximum advantage should be taken ofthe training capacity of the centers in Madagascar itself. rn particular, theNational. Maritime Instruction Institute (Institut National des EnseignementsMaritimes -- INEM) will be used to train harbormasters and deputies, generalmechanics, engine mechanics, electricians and refrigeration technicians. Tothat end, financing will be provided under the Project to strengthen theteaching equipment of the electrical machinery testing laboratory, the.%ca-Auto workshop, the automated equipment laboratory and the hydropneumaticworkshop. In addition, a pilot data, processing program for tahajanga trafficstatistics (vessel type and tonnage, nature and tonnage of goods loaded andunloaded) will be installed at INE! (at very little cost, since IYE?M alreadypossesses a data processing unit). The lighthouses and beacons trainingcenter at Antsiranana will be reopened under a new system. It will betransferred to the lighthouse maintenance and repair workshop, to facilitateorganization of the practical work and also to reduce the capital cost. Thebasic electronics training for lighthouse masters could be given at Mahajangaat INEM, while the specific training will be organized at Antsiranana.

-.72 -Annex 3.2page 9 of 11

human resources with analysis of its current labor force in terms ofnumber, qualifications, and distribution by units, (iii) collectinginformation on the short and medium-term needs expressed by divisions andunits; (iv) identifying those sectors or specialities where overstaffingexists.

Personnel manaRement

6. SEPT has for the moment 7 categories of personnel statutes. Twocategories are directly governed by SEPT personnel policies; they include1912 employees, administered under a labor-management agreement (ConventionCollective) signed in 1969, and 533 on fixed-term contracts, that aresystematically renewed without any consideration of Individual performance.The five others include staff detached from other agencies. The system ofpersonnel management is srill embryonic. There is no clear jobclassification. Data on personnel situations, which are often incomplete,have hampered Management decisions in personnel matters. Recruitment,promotion, and assignment procedures have yet to be worked out. Inaddition, without professional specifications and job descriptions, thelinks between staff assignments and skills are poorly defined. The newManagement has put an end to a number of bad practices that SEPT inheritedfrom past administrations: (i) laxity in checking overtime and staffattendance, (ii) automatic promotion to positions of responsibility forunion leaders at the end of their assignments on the sole basis of theirunions activities, (iii) counting regular night shift as overtime.

Salary tructure

7. SEPT staff are, in general, reasonably well paid compared withother public sector employees in Madagascar. However, dockers' wages arerelatively low, in spite of their pqor working conditions. It may be notedthat monetary compensation accounts for an average f 58% of totalcompensation; 42% accounts for social benefits, allowances and thethirteenth month salary. As the thirteenth month salary has become anentitlement and there is laxity in checking overtime, the harmfulconsequences of this situation are quite obvious. In several cases, thereare reports of lack of motivation, a relaxation in discipline and carelesshandling of production equipment, high rate of absenteism. Management isfully aware of this situation, butS EPT has limited leverage in terms ofwage policy. Motivation for high productivity cannot be matched bymonetary increases as long as the'social benefits and non work-relatedallowances constitute the bulk of total pay.

Improvement In personnel manage_ent

8. Under the new organization of SEPT, the structure of the Directionof Personnel is adequate and includes 4 divisions: Personnel Management,Training, Human Resources Development and Social Affairs.

Recommendations. The new Direction of Personnel shouldinclude among its tasks: (i) establishment and updating ofjob descriptions; (ii) establisment and updating ofindividual records (human resources inventory); (iii)

73 Annex 3.2page 10 of 11

collection of information on the short- and medium-termstaff needs as expressed by various divisions and services;(iv) analysis of these needs in relation to the number andqualifieqtions of existing staff in each specialized area;(v) preparation of a personnel forecasting plan with theassistance of a consultant provided under the proposedproject; (vi) the formulation of personnel managementprocedures that define the conditions for selection,recruitment, promotion and appointment.

Trainiks

9. The organizat:',n of the Training Division is still embryonic. Itsstaff is limited to two employees. Although both seem dynamic andcooperative, neither has any real experience in vocational training. Thisis a major handicap for SEPT since it needs experienced staff who can beproductive immediately.

Recommendations. A training program should be prepared forthe staff of the Training Division. This could comprise of:(i) a visit to nat4onal training centers in Madagascar(INPF, CFC/Ansirabe' CFC/Tananarivo), to study theirorganization and to look into any possibilities for futurecooperation in implementing SEPT training plan; (ii) in-house training that could be handled by the technicalassistants of the proposed Project; and (iii) additionaloverseas training over a three to six-month period inorganization, in-service training methodology, and theplanning and evaluation of training.

The role and function of the Training Unit should be definedand understood by all personnel, and in particular bysupervisory staff and consultants. The approach would be fortraining to be provided to staff by a specialized unit andalso as part of theit daily jobs. Based on this conception,sipervisory staff and consultants should be prepared fortheir role as trainers. The function of the Training Unitwould be : (i) to identify training needs, both qualitativeand quantitative, in accordance with the needs of each unitand SEPT personnel development plan; (ii) to participate inthe drafting of job descriptions; (iii) to propose atraining program and a schedule of training activities; (iv)to draw up the training programs with the participation ofprofessional associations or training centers, and todetermine the material, human, and financial means requiredto implement these programs; (v) to propose suitablemeasures to associate supervisory staff closely withtraining activities; (vi) to provide for monitoring andcontrol of training; (vii) to evaluate training actions;(viii) to assist the,Himan Resources Division inestablishing the qualifications required for eachoccupational category and setting up carreer planning forpersonnel. I

- 74'-Annex 3.2page 11 of 11

1987-90 Training Plan

10. The detailed training plan will be developed by a consultantfinanced under PPF2, tbdsed on the analysis of existing personnel preparAdby SEPT. The general objective of the training plan is: (a) to improve thecompetencies of staff who can benefit from further training; (b) to trainnew staff to either replace Shose who will retire or increase the staffinglevel in accordance with SEPT's development plan for the concerned period;and (c) to improve the management and organization skills of managers andsupervisors.

11. This plan will involve the training of about 350 staff members inseveral technical areas: general mechanics, auto-mechanics, diesel engines,radio equipment, electronics, electromechanics, electrical machines, heavyequipment maintenance and operation, hydropneumatics, accounting, generalmanagement, inventory control, training and personnel management, etc. Inaddition, overseas training will be proposed for 30 senior staff inmanagement and technical areas for which group training of one or twopeople would no longer be economical.

Recomendation. Heads of divisions and services should work-closely with the Direction of Personnel, to identify theirown skills, to evaluate their staff and to anticipateupcoming retirements, promotions and reassignments. Thequality of the training plan will depend essentially ontheir contribution. To this end, seminars to raiseawareness and introduce personnel management and planningconcepts should be organized with the assistance ofspecialists from local firms and the from consultant intraining planning and organization.

With a view to increasing the Training Division'seffectiveness, SEPT should encourage its best staff toparticipate as part-time instructors through an appropriatesystem of incentives.

November 1986

- 75 -

Annex 3.3page 1 of 1

PORTS REHABILITATION PROJECT

D_WU SaWME

1986 1987 1988 1989 1990 1991 1992 1993

1 21314 1121 _46 112 314 1 21 4 1121 4 1121314 1 2 3 4 1 234

mmr~r frPMSTWJCf I

A. Iretio of ,erl, speifti_a-tiou andbid dooumatts

B. Mvertisirg, receivigc bids, eI a_i_and awid

C. Q,nstrution

II.CA O HAMG BUIEPA. Preperatimn of spafiainsad

bid dOAAuattSB. Adverisirg, receivirW bids,

ealuation and samad ---c. Ioliwey, instullation or comnnssiIm

of equiipmetD. tolvery and cowIssion of floatng_

craftE. Deivery of spare parts and mterials |

IIt.SHEPPINQA. Drsi apupme parts & mterials

Ao.l Prepwration of specifications andbid s 0Oxits

A.2 A rtisii, receivirg 1evaluatimn and siarda

.k3 Delivery, installati or o__md __ion

B. Navigtion aidsB.1 Pblration of ccation d

bid &oWnmnts3.2 Advrtislg, receiving bids,

evabdatimn ad a-mrdB.3 Delivery and cud.siotn of

oarapradc airve lamch3.4 Dalivery, IZutallation and con-

truction of navgation aids, shop,

C~~~ -MttW at 1- -- ---- -I I I I I - -__1A. Teu m Of nfersne for 96pportand training

B. Invite mWibusso, alalye, mard

June 1986

-76-Annex 3.4page 1 of 1

MADAGASCAR

PORTS RF.HAIT.ITATION PRnO.FCT

Other ports performance indicators

Dry carso tons varshi. Per day

tort 1U1986 1990 1992

Antacraaan Intl. 2S0 300 350 400Cabot.

tohr Cabot.- 170 200 250 300

Manakara Cabot. 160 200 240 260

Tolagnaro Intl. 300 350 380 400Cabot. 200 240 260 280

Toliary Intl. 270 300 350 400Cabot. 170 200 230 260

Morondava Cabot. 90 120 140 160

Mahajanga Intl. 210 240 270 300cWt. 200 230 260 280

Nosy Be Intl. 160 200 250 300Cabot* 100 130 160 200

St. Louis Intl. 450 450 450 500Cabot. 170 170 170 190

June 1986

- 77 -

Annex 4.1PaM 1 of 1

Kg&GASCAR

PORTS RERABILITATION PROJECT

Forecast of Port Traffic 1990 - 1995(000) tons

1984 1990 1995Actual Forecast Forecast

Dry Cargo Oil Dry Carao Oil Dry Carao Oil

Antsiranana 74.0 19.4 132.4 36.8 147.1 41.1

Vohemar 22.1 5.4 25.7 8.0 27.9 9.0

Antalahal/ 3.4 -- 4.3 -- 5.2 --

Maroantsetral/ 5.5 0.6 5.3 1.1 5.8 1.1

TosmasinasInternational 489.6 248.0 450.0 } 450.0 483.2 1 600.0Cabotage 107.3 76.9 102.9 1 115.9 }

Manakara 52.7 12.3 57.2 20.0 62.6 25.9

Mananjaryl/ 11.7 1.7 13.6 4.0 14.6 4.5

Tolagnaro 26.0 6.5 33.9 9.0 44.5 10.1

Nosy Be 120.6 116.3 } 34.7 23.0 37.2 26.2Port St. Louis } 40.8 9.0 53.4 10.1

Mahajanga 148.5 49.4 184.6 61.6 191.9 73.2

Morondava 29.1 5.8 126.0 10.0 31.0 10.0Toliara 51.9 15.0 *69.6 14.5 65.5 16.3Morombel/ 8.8 1.6 9.8 2.5 14.6 2.9

Total: 1151.2 558.9 1210.8 649.5 1300.4 830.4

Source: Consultants, MTRT

May 1986

1/ Not a project port.

- 78 -

Annex 4.2Page 1 of 1

MADAGASCAR

PORTS REHABILITATION PROJECT

Ship Loading/Unloading Rates

Ship Cost Loading/Unloading Rates Ton/Day Ship DaysFHG/DaU Actual 1985 Without Prolect With Project Saved 1990

Mahajl MaDeepsea 3.9 213 293 78Coasters 1.7 180 180 220 121

Morondava 1.65 53 90 160 126

ToliaraDeepsea 3.9 270 400 33Coasters 1.56 233 170 260 53

TolagnaroDeepsea 3.9 300 400 19Coasters 1.56 153 200 275 16

VohemarCoasters 1.38 133 170 300 } 168Petroleum 1.38 260 260 }

ToamasinaDeepsea 3.9 450(1984/85) 400 500 367Coasters 1.7 137-143 140 200 316

Nosy BeDeepsea 3.9 160 300 41Coasters 1.4 99 100 200 46

AntsirananaDeepsea 3.9 184 250 350 43

St. LouisDeepsea 3.9 450 500 9Coasters 1.4 155 171 190 11

Manakara 1.56 258 160 260 102

Shipdayst 590 deepsea + 959 coasters - 1549 days

Source: Consultants, mission estimates

May 1986

I - 79 -

MDAOAGSCAS Annex 4.3PORTS REHABILITATION PROJECT page 1 of 1

Suws.y of coo and boneft.e

Year Neveid. Mahajanga Morondava Toilers Tolagnaro Voher To_*lna Nosy-be St.Lou.s Anteirenana Manakers Total

COSTS: FU 1 millions1987 127 164 268 701 128819a8 496 8a3 162 178 S 440 206 247119S9 651 sF. 9 110 175 220 1gb 205 29741990 714 87 178 296 138 1204 Is$ 34 2819.1991 888 ?8 61 151 1us 8 s82 59 860 28621992 522 8S5 23B 230 47 1691

BENEFITS: FUG maillions1988 0 01989 336 240 241 8l81990 670 491 209 212 97 232 681 80 28521991 870 494 216 218 102 264 1722 162 38331992 679 422 224 199 90 218 1722 202 52 162 185 42061993 870 426 232 201 96 8904 1691 207 s6 162 156 41881994 870 428 240 202 102 382 1691 212 so 181 158 424819, 870 482 246 204 106 883 1691 216 s6 170 16l 43161 670 452 248 24 106 363 1691 224 W6 170 le 43211997 679 482 246 204 109 363 1091 280 s6 170 181 43271998 670 432 246 204 106 888 1891 289 s6 170 6s 4234199 670 299 246 204 108 188 1691 230 SO 170 o 3?37

RATE OFRETURN: X 28 22 41 29 26 26 82 53 19 88 26 29

Source: Consultants, Mission estimates

May 1988

- 80 -

MADAGASCAR Annex 4.4

PORTS REHABILITATION PROJECT

Details of economic benefit calculations

WITHOUT PROJECT WITH PROJECT BENEFITSANTSIRANANA SHIPDAYS Cost/day SAVINGSHandling rates SAVED FMG FMG/year

Deepsea vessels 250 tons/day 350 tons/day millions millions

Shipdays needed for loading or unloading1990 37400 tons 149.6 days 106.8 days 42.8 3.9 166.91995 46600 tons 186.4 days 133.1 days 53.3 3.9 207.9

MANAKARAHandling rates

Coasters 160 tons/day 260 tons/day

Shipdays needed for loading or unloading1990 42500 tons 265.6 days 163.5 days 102.1 1.56 159.31995 46300 tons 289.4 days 178.1 days 111.3 1.56 173.6

MAHAJANGAHandling rates

Deepsea vessels 213 tons/day 293 tons/dayLarge coasters 213 tons/day 293 tons/daySmall coasters 180 tons/day 220 tons/day

Shipdays needed for loading or unloading1990 tonsDeepsea vessels 61000 286.4 days 208.2 days 78.2 3.9 305Large coasters 75000 352.1 days 256 days 96.1 1.7 163.4Small coasters 24600 136.7 days 111.8 days 24.9 0.9 22.4

490.81995 tonsDeepsea vessels 61000 286.4 days , 208.2 days 78.2 3.9 305Large coasters 82400 386.8 days 281.2 days 105.6 1.7 179.5Small coasters 24600 136.7 days 111.8 days 24.9 0.9 22.4

506.9MORONDAVAHandling rates

Coasters 90 tons/day 160 tons/day

Shipdays needed for loading or unloading1990 26000 tons 288.9 days 162.5 days 126.4 1.65 208.61995 31000 tons 344.4 days 193.8 days 150.6 1.65 248.5

- 81 -

WITHOUT PROJECT WITH PROJECT BENEFITSNOSY-BE SHIPDAYS Cost/day SAVINGSHandling rates SAVED FMG FMG

Deepsea vessels 160,tons/a. 300 tons/day millions millionsCoasters 100 tons/id 200 tons/day

Shipdays needed for loading or unloading1990 tonsDeepsea vessels 14100 88.1 days 47 days 41.1 3.9 160.3Coasters 9100 91 days 45.5 days 45.5 1.4 63.71995 tons 224Deepsea vessels 15800 98.7 days 52.7 days 46 3.9 179.4Coasters 10400 104 days 52 days 52 1.4 72.8

252.2

ST.LOUISHandling rates

Deepsea vessels 450 tons/day 500 tons/dayCoasters 171 tons/day 190 tons/day

Shipdays needed for loading or unloading1990 tonsDeepsea vessel 41500 92.2 days 83 days 9.2 3.9 35.9Coasters 19300 112.9 days 101.6 days 11.3 1.4 15.8

51.7

TOAMASINA Vessel savingsHandling rates

Deepsea vessels 400 tons/day 500 tons/dayCoasters 140 tons/day 200 tons/day

Shipdays needed for loading or unloading1990 tonsDeepsea vessel 450000 1125 days 900 daysCoasters 103000 735.7 days 515 days

Total days needed at berth 1860.7 days 1415 daysBerth utilization 0.73 0.55

Days waiting for berthDeepsea vessel s 168.7 days 27 daysCoasters 110.4 days 15 days

Waiting time/Service time 0.15 0.03

Total days in portDeepsea Malagasy flag 362.2 0.28 259.6 days 102.6 3.9 400.1Deepsea Foreign flag 931.5 0.72 667.4 days 264.1 2.1 554.6Coasters 846.1 530 days 316.1 1.7 537.4

1492.1Cargo savings

Coffee can move through the port in an average of two weeks less time

40000 tons x 1.5 millions FMG x 14 days x 0.1 230.1365 interest

Total savings in 1990 Vessel time savings 1492.1 FMG millionsCargo savings 230.1

1722.2

- 82 -

WITHOUT PROJECT WITH PROJECT BENEFITSSHIPDAYS Cost/day SAVINGS

f SAVED FMO IWOTOLAGIARO milliono millionsHandling rates

Deepsea vessels 300 tons/day 400 tons/dayCoasters 200 tonsiday 275 tons/day

Shipdays needed for loading or unloading1990 tonsDeepsea vessel 22500 75 days 56.3 days 18.7 3.9 72.9Coaoters 11400 57 days 41.5 days 15.5 1.56 24.21995 tons 97 1Deepsea vessel 27700 92.3 days 69.3 days 23 3.9 89.7Coasters 16800 84 days 61.1 days 22.9 1.56 35.7

125.4TOLIARA

Deepsea vessels 270 tons/day 400 tons/dayCoasters 170 tons/day 260 tons/day

Shipdays needed for loading or unloading1990 tonsDeepsea vessel 27600 101.2 days 69 days 33.2 3.9 129.5Coasters 26000 152.9 dayd 100 days 52.9 1.56 82.51995 tons 212Deepsea vessel 28600 105.9 days 71.5 days 34.4 3.9 134.2Coasters 26800 157.6 days 103.1 days 54.5 1.56 85

219.2VOHEMAR Vessel savingsHandling rates

Coasters dry cargo 170 tons/day 300 tons/dayCoasters petroleum 260 tons/day 260 tons/day

Shipdays needed for dry cargo1990 27900 tons 164.1 days 93 days 71.1 1.378 97.81995 30500 tons 179.4 days 101.7 days 77.7 1.378 107.1

Shipdays needed for petroleum1990 8000 tons 30.8 days 30.8 days1995 9000 tons 34.6 days 34.6 days

Total days needed at berth1990 [utilization] 194.9 (.53] 123.8 1.3411995 (utilization] 214 t.591 136.3 (.3?1

Days waiting for berth1990 146.2 days 49.5 days 96.7 1.378 133.21995 241.8 days 61.3 days 180.5 1.378 248.7

Waiting time/Service time1990 0.75 0.41995 1.13 0.45

- 83 -

VOHEMAR Cargo savings SAVINGSCargo transforred from Antalaha FHG

Road transport (19%41 2200 tons x 22800 FMGIton Road cost millipnoless lighterage lobas FMG million1 percent of cargo value 1.5 PMG mill. 15000 TMG/ton1990 2200 tons x 7800 a 17.21995 2600 tons x 7800 - 20.3

Ship handling rates Antalaha Vohemar45 tons/day 170 tons/day Shipdays Cost/day

Shipdays needed for loading or unloading saved FMG millions1990 2200 tons 48.9 days 12.9 days 36 1.38 49.61995 2600 tons 57.8 days 15.3 days 42.5 1.?8 58.6

Total savings FMG millions 1990 1995Ship working time 97.8 107.1Ship waiting time 133.2 248.7Cargo savings 49.6 58.6less cargo costs (17.2] (20.31

263.4 394.1

NAVIQATION AIDS AND SHIPPING ASSISTANCE SAVINGSFMG

Savings in entering ports vesselst savings per/shipeall: FMG millions millionsDeepsea vessels 0.33 250 ten hours 3.9 135.1Coasters 0.33 1350 ten hours 1.5 281

Savings in night operationsDeepsea vessels 75 one day 3.9 292.5Coasters 450 one half day 1.5 337.5

1046.1

Source: Annex 4.1 and 4.2

:,ay 1986

- 84 -

MADAGAC Annex 4.5PTS REHILITATION PRO.JECT Page 1 of 2

Suiry tfor eah projec

Ant eanns Morenava

Year costs befit. not r cots befits not

1986 0 1 64 196 0 01987 6 6 1907 6 01988 0 0 6 low 162 0 -1621989 0 6' 6 1009 99 0 -91990 18 0 -188 19o 17 209 881991 59 0 -9 1991 1 216 181992 286 102 -40 1992 1 224 1981993 so 1to 152 1998 81 282 2011994 88 199 161 199 81 240 2"1995 so 200 170 199F 81 248 2171996 8U 208 170 1996 81 240 2171997 as 209 176 1997 $1 248 2171998 8s 208 170 199 81 248 2171999 88 208 170 19" 81 240 217

rate of rourn 881 rate of return 41%

Manakaer Nosy-be

Year cost be1fts net Year coot benetits net

198 0 0 10 0 01987 0 6 1i97 0 O1988 6 6 a 18" o a 01989 206 0 -265 1909 0 0 O19 84 80 46 1990 a a 01991 85O 162 -19 1991 882 0 -8021m 4 1in 110 1092 22 224 2021093 18 19 1S5 199" 22 229 207194 18 171 150 1994 22 284 2121995 18 174 161 1995 22 240 2181996 18 174 161 190 22 246 2241997 18 174 161 "19? 22 252 280198 18 07 74 109 22 252 2801999 18 18 1 19" 22 252 286

rate of return 26% rate of return 681

Mahajanga St.Louis

Year cost. benefits net Year costs benefits not

1986 0 a 190 6 01987 154 -154 1997 0 01986 888 -888 1900 0 6 01989 551 246 -811 1909 6 a1990 67 491 424 1996 6 0 61991 76 494 416 1991 a 0 0192 75 S 425 1992 288 52 -1841998 75 08 420 1908 2 52 Sa1994 75 WI 482 1994 2 52 ca

1993 75 U 482 1995 2 52 so1990 75 67 482 1096 2 52 601"9 75 56 482 1997 2 52 s6199$ 76 607 482 10" 2 52 s619" 6 200 26 199" 2 52 so

rote of return 221 rate of return 195

- 85 -

IMAOASCAR Annex 4.CPORTS REILIUTATIN PROJECT Page 2 of 2

Toams I no Vohmar

Year costs bentfit. not Year costa beofitt not1988 9 9 1908 9 01987 701 -701 1987 268 -2981988 288 0 -2980 188 440 0 -4401989 1is" 9 -1683 1999 220 241 211968 1264 s61 -498 1ow 81 268 2321991 868 1722 659 1991 81 236 2549m 926 1722 1o" 1992 81 889 2781998 81 1722 1691 1988 81 8S5 8941994 81 172 1891 1994 81 868 8821995 81 172 1891 1995 81 394 8681996 81 1722 1691 1998 81 894 8e81997 81 1722 1691 1997 31 894 s681998 81 1722 1691 198 81 894 8681999 81 1722 1691 1999 81 197 160

rota of roturn 825 rata of return 265

Tolagnaro Shipping and novelds

Year costa benefit not Year costs benefits netlea. op.cost1988 0 0 1966 9 9

1987 9 a 1987 127 -1271988 80 0 -89 198 495 0 -4951989 175 o -17t 199 651 836 -2161990 188 97 -86 19" 714 670 -441991 17 102 85 1991 898 707 -18im 17 lo7 68 1m 522 679 1481998 17 118 96 1998 0 679 8791994 17 119 102 1994 a 670 6701995 17 125 1q 1995 9 679 O671996 17 125 1 1998 9 679 6791997 1725 1997 0 6e 8791998 17 125 198 1m 9 679 6761999 17 125 198 1199 a 679 676

rata of return 26X rata of return 26%

Toli ra Total portproject

Yoer costs benefits net Year costs benofits netlesa op.cost1986 o 9 1988 9 9

1987 9 o L987 1266 -12681988 173 0 -178 1988 2471 0 -24711989 li1 0 -110 1980 2974 61e -21581999 296 212 -66 1990 2819 2852 331991 151 218 62 1991 2862 3888 11811992 15 214 19 1992 1891 4206 25161993 16 216 291 1998 0 4168 41831994 15 217 242 1994 0 4246 42481996 15 219 294 1995 0 4816 48161996 15 219 20b 1996 0 4321 48211997 15 219 294 1997 0 4327 43271998 1S 219 204 1986 0 4234 42341999 1S 219 294 1999 0 3737 3737

rota of return 29i rata of return 29%

- 86 -

M&DAGABCAR Annex 4.6

PORTS REHABILITATION PROJECT

Economic returns and sensitivity tests

Sub-project Best Benefits Costs Benefits-10 First yearestimate less 20% plus 10 Costs+102 returns

Antsiranana 38 25 33 27 2 35 %

Mahajanga 22 15 19 16 2 24 %

Manakara 25 16 22 17 X 20 X

Morondava 41 31 36 32 Z 37 2

Nosy-be 53 40 47 42 % 48 %

St.Louis 19 10 15 11 2 19 %

Toamasina 32 25 29 26 % 30 2

Tolagnaro 28 19 24 20 % 26 Z

Toliara 29 21 25 21 % 27 %

Vohemar 26 19 23 19 2 22 1

Navigation aidsand Shipping 26 17 22 18 2 21 2

Total project 29 22 26 23 % 23 %

Source: Mission estimates

June 1986

- 87 -

MADAGASCAR - PORTS REHABILITATION PRMJECT Annegx 5.1

S E P T

Income Statemntsfor tho yers ended December 81st

(millon FMO)

1930 1981 192 INS 1984 1is6----------unudtd ------- audited

Port Revenue:Port dues: - on cargo 126 128 123 126 1a1 628

- on ships 898 88 86 446 416 444Cargo handling 1,844 1,004 1,787 1,440 2,159 2,479Storage and Rentals 1,951 662 829 2,877 946 1,142Other 584 1,116 622 597 787 875

4,898 4,400 8,671 4,996 4,891 4,964

Other Income 584 186 155 868 a88 844

Working Expenses:Salaries 2,864 2,718 2,947 B,087 1,481 8,759Materials 924 727 616 619 869 1,156Other 840 22 421 481 597 61U

3,626 3,642 3,984 4,107 4,947 5,681

Operating Result 1,854 694 (158) 1,186 (188) (238)Depreciation 410 642 610 1,254 957 944

Not Operating Result 944 252 (668) (86) (1,145) (1,177)Interest Expense 139 137 139 128 1S9 148.Extraordinary Iteos(net) (1,487) (768)

Net Income (Loss) 805 115 (8907) (196) (2,791) (2,091)

November 196

- 88 -

MADAGCR - PORTS REHBILITATION PROJECT Annex 6.2

S E P T

Bl once Sheets at Dacember 81st

(mIllIon FMG)

1980 1981 1902 1988 1964 1905----- unaudited---- - audited

ASSETS

Cash 839 179 147 168 1,439 1,714Accounts Receivable 8,249 9,068 9,238 9,988 4,622 4,50OInventories 688 667 711 704 692 1,99

Current Assets 9,26 19,722 10,9,4 10,828 6,852 7,397

Fixed Asst. 6,471 6,229 6,911 5,677 13,616 14,147Accumulated Depreciation 9,114 9,?78

.Net Fixed Asets 8,471 6,229 6,911 6,677 4,592 4,864Deforred Charge 14 4Other Assets 1,311 1,124 1,094 1,207 1,638 1,675

Total Asset 17,847 10,075 17,199 17,7M7 18,061 13,859mon - ----- ------ m

LIABILITIES

Current Liabilities 5,780 7,163 7,205 7,1865 6,517 6,240

Long Term Debt 8,249 8,089 2,829 2,619 2,487 2,171Provisions 1,621 1,021 1,960 1,159 8C1Pald In Capitol 8,761 8,761 3,761 8,781 6,710 6,798Reserves 2,428 2,976 8,161 8,188 170 (1,962)Current Incom" en5 116 (807) (198) (2,791) (2,091)

Totas EquIty 6,909 6,852 6,115 8,758 4,097 2,68

Liablilties and Equity 17,947 10,076 17,199 17,797 18,051 18,859

Novembr 1996

- 89 -

MADAGASCAR - PORTS REAS!LZTATION PROJECt Annex 58

Fund Statent.

(million 1U1'.)

1W0 1931 1002 1038 1904 1065-------unauditd-------- audited

SOURCES OF FUNDS

Net Income 665 115 (667) (190) (2,791) (2,691)Depreciation /_ 41 642 539 1,8S4 (198) 1,245

Fun ftrom Operations 1,216 767 (266) I,I56 (2,064) (6")

Net Borrowings (21) (216) (210) (182) (2")Equity Capital (252) 76 684 18 624

Financing (462) (140) 624 (47) 858

Totol Source8 295 (403) 1,762 (8,981) (466)

USES OF FUNDS

Working Capital 82 (876) 749 (8,868) (1,276)Net Plant and Equipment 4660 292 920 (218) 60Other Inveetamnt (107) (86) 118 490 (18)

Total Ues" 295 (408) 1,762 (8,631) (488)ummus gauss muu musums m

I_ Includes aortization and other non-cash charge.

November 10

- 90 -

MADAGASCAR - PORTS REHABSLSTATION PRWOJECT Annex 5.4

S E P T

Ratio Aaalye1s

180 1981 1982 1988 1984 1985--------unaudited--------- audited

Eff I c Iency:

lovonue Turnover SO-O% 79.6% 61.1% 67.8% 97.6X 118.6%Receivable. Turnover /_ 6'74 6O6 966 718 871 827Inventory Turnover /a 68 s8 64 61 6e 71

Productivity:

Number of staff 4,468 4,681 4,815 4,528 4,480 4,460Rovenue/amploy. /_b 1.11 0.93 0.89 1.18 1.6? 1.20Tons of cargo/employs 149 117 146 118 186 18

Pricing:

Gon'l cargo (thous. ton) 607 576 627 518 597 6nO FUC/ton 6,129 5,226 4,289 7,686 5,420 0,892Number of vessel 411 892 896 878 868 8s0o million FMG/vessel 0.98 0.77 0.91 1.18 1.15 1.28

Prof Itabi I Ity:

Working Ratio 82.6X 82.81 168.51 88.6% 112.7% 111.6%Operating Ratio 91.8% 97.4% 122.4% 100.7% 184.5X 130.7%Return -in Fixed Assets 14.6% 4.6O -10.8X -1.2% -22.5X -26.6%

Liquldity:

Working Capital /c 8,477 3,669 2,889 8,688 336 (941)Curront Ratio 1.60 1.56 1.40 1.51 1.06 0.89Quick Ratio 1.53 1.47 1.38 1.48 0.88 0.68

Capitalization:

Debt to Equity 31.7% 80.7X 81.6% 27.9% 87.3% 45.2XAsset Leverage 69.0% 62.1% 64.4% 61.9% 68.6% X 0.8%

/a Average days on hand/M Million FPU's

M/ MillIon FUG'.

November 1988

- 91 -

MADAGASCAR - PORTS REHABILUTATION PROJECT Annox S.6

S E P T

Financial Forecast

Assumpti ons

198 1 1? 106I 1989 19U9 1991 19 1991 1994 1995

Traffic:

sonlI cargo (thou*. ton) 59o 680 670 S" 8 60 55" 670 o89 S9o s9eNumber of vesselsa 38 856 354 852 850 348 846 844 842 840

Tariffs:

I16 FMU/ton 5,809 8,?20 6,964 6,964 8,064 8,064 0,964 8,964 7,741 7,48219M million FUM/vosset 1.80 1.66 1.87 1.87 1.87 1.67 1.67 1.67 1.80 1.73Annual Increase TX 20# 20%

Exch; ng rate USIFiMC 08g 689 680 689 880 6ss 630 689 689 689Exchange rat. USSlFF 6.80 6.69 S.6O 6.60 S.69 6.89 S.69 8.89 6.68 6.80Inflation 7.2% 6.6X 6.61 7.OX 7.1X 4.9% 4.09 4.O% 4.9x 4.0%

1.009 1.972 1.145 1.223 1.896 1.401 1.457 1.516 1.576 1.839 1.796Total Staff 4,400 4,290 4,189 4,970 83969 3,859 8,749 8,689 8,620 3,413

Interest Rate 9.10% 9.10% 9.19X 9.10X 9.10X 9.109 9.19% 9.19X 9.1G9 9.10%Capital Investments: 997 2,997 2,710 711 1,986 104 97 48 O 9

Cyci. project: 6,999 15C 46% 49%Port project:Equipment: 8,890 5% 29X 29% 29% 85%Civil works: 979 B% 29% 29% 29X 20X 1OX 6X

Depreciable Life (years) 80 s9 80 80 as 3a 89 38 30 30

Technical assistance: 0 0 0 °USM 9

Borrowings 884 2,865 2,921 1,409 2,211 840 170 85 0 0Caisse C'lo:FF 68,000 6X 29% 29% 20% 85X 0% OX O%IDA: 8o% 22X 17X

Port project US$ 2,700 Ss 6X 29% 29% 29% 20% 1x 5%Railway III USS 1,999 15% 45X 49%Cyclono II USS 5,000 15X 46% 40XDebt Amortization 260 260 260 260 502 1,087 1,160 1,150 1,159 1,160Cash: Rovonue 14% 15X 12% 12X 12X 12X 12X 12% 12X 12XRecelvables: Revenue 115X 9OX 79% 55% 48% 83X 26% 29% 29% 261Inventory: Revenue 17% 17% 17X 17% 17X 17X 17% 17% 17% 17%Current Llablts:Expenses 116 98B% 6OX 6X 66% 49X 86X 88%8X 38X 8

November 1988

- 92 -

MADAGUCR - PORTS R4IUTATIOSN PROJECT Anne% 6.6

S E P T

Pro-toem nco e St*at.wtttor the years ended Decmber 81st

(mIllIon FM*)

1966 I"97 1i96 1899 190 1991 19m 1998 1994 190S

Revenue:Cargo related 3,642 4,442 5,620 5,808 6,216 6,601 6,9s8 7,872 7,487 7,062Vesel re lated 499 66 610 862 919 949 982 1,016 1,008 1,000Other 766 on6 81 921 947 1,626 1,0687 1,11 1,165 1,201

4,796 ,9806 7,292 7,692 9,120 8,667 9,616 9,497 9,649 9,803Working Expensoe:

Salaries 8,629 8,997 4,149 4,828 4,606 4,666 4,602 4,646 4,864 4,719Materials 922 972 1,92C 1,688 1,144 1,201 1,260 1,821 1,886 1,454Other 401 429 468 490 526 U68 s67 647 787 641

6,168 6,388 5,682 6,695 6,174 6,J61 6,429 6,618 6,80 7,014

Operating Reoult (387) 517 1,666 1,797 1,94$ 2,266 2,667 2,694 2,841 2,769Deprociation 526 688 616 992 998 1,089 1,084 1,129 1,174 1,221

Not Operating Result (0880) (11i) 6S0 90S 958 1,217 1,608 1,7S6 1,687 1,586Interest Expens 109 261 488 781 O86 992 92 689 742 688

Net Income (Loss) (1,001) (402) 862 174 117 225 576 916 926 930Before Extr'y Its" 3 uan uainin mm. , m mm.. minm

November 1996

- 93 -

MADAGASCAR - PORTS REHADILITATION PROJECT Annex 6.7

S E P t

Pro-form* Balance Shoets at Docember U1ot

(million FAG)

106 1987I 1900 1O9 low9 1001 1M 19 1994 1996

ASSETS

Cash 1,190 688 67t 928 974 1,02? 1,082 1,140 1,168 1,176Accounts Receivable 5,525 5,906 5,111 4,206 3,482 2,848 2,889 1,922 1,968 1,984Inventories 0 992 1,224 1,292 1,U88 1,487 1,614 1,595 1,620 1,048

Current Asets ?7,620 7,184 7,210 8,420 5,799 5,819 4,935 4,057 4,781 4,809

Fixed Assets 15,777 29,061 24,868 28,779 29,768 81,176 82,624 88,875 85,2W0 88,689Accuoulated Deprociation 10,782 12,175 18,818 15,798 17,976 19,778 21,696 23,786 25,909 29,214

Not Fixed Aset. 5,045 7,676 10,440 10,977 11,069 11,896 10,928 10,187 9,322 8,4253t,orred Chargs 8 8 8 a 8 a 8 8 S 3Other Asstet 196 116 (126) 866 726 882 782 1,871 1,961 2,641

--- ------ ------ ---- - -- - -

Total Assets 12,784 15,178 17,525 17,786 18,888 17,348 16,498 16,188 16,017 15,876am uaus m= au.. aam aua aaag

LIABILITIES

Current Liabillties 6,971 6,182 4,498 3,906 3,395 2,676 2,486 2,W65 2,579 2,857

Long Term Debt 2,755 5,360 8,031 9,190 10,809 10,208 9,228 8,156 7,008 6,68Provisions 1,56W 1,500 1,560 1,000 260 250 260Paid In Capital 6,7 W 6,710 6,710 6,710 6,710 8,710 6,710 8,710 6,710 6,710R"erves (1 ,00)Retalned Earnings (3,172) (3,574) (8.212) (8,038) (2,921) (2,896) (2,121) (1,205) (280, B65

Total Equity 2,586 8,136 8,496 8,672 3,789 4,014 4,589 6,505 6,480 7,860

Liabilities and Equity 12,7U4 15,178 17,526 17,766 16,388 17,848 16,496 18,168 16,017 15,9?6maa m aum =am g

November 1966

- 94 -

MADAGASCAR - PORTS REHAILITATION PROJECT Annex 6.8

S£EP T

Pro-forme Funds Statements

(million FMC'a)

1986 1987 1988 1989 1990 1991 199 1993 1994 1995

SOURCES OF FUNDS

Not Income (1,081) (402) 3862 174 11? 226 675 916 925 930Depreciation 528 668 816 892 993 1,039 1,084 1,129 1,174 1,221

Funds from Operatlons (555) 268 1,172 1,066 1,110 1,264 1,869 2,946 2,099 2,151

Not Borrowlngs 584 2,006 2,671 1,159 1,709 (608) (9t0) (1,0B5) (1,10) (1,159)Equlty Csplt.l 989 1,000 0 0 0 0 0 0 0 0

Financing i,573 38605 2,671 1,159 1,709 (6ON) (090) (1,086) (1,159) (1,165)

Total Sources 1,019 8,871 3,848 2,225 2,619 56 679 at 9 949 1,001

USES OF FUNDS

Working Capital 2,499 458 712 (209) (110) 3o 65 (347) 0 (3)Net Plant ond Equipment 1,207 3,499 3,374 1,429 1,621 632 514 438 369 324Other Investments (2,879) (81) (243) 998 1,108 (94) 190 889 590 680

Total Ues 1,018 3,871 3,843 2,225 2,819 588 879 9890 949 1,001

November 1986

- 95 -

MADAGASCAR - PORTS REHABILITATION PROJECT Annex 6.9

S t P T

Pro-form, Ratio Analysis

I988 1997 1900 1989 1't; 1991 1992 198 1994 1995

Efflelncy:

Revenue Turnover 95.1% 75.9X 09.8% 70.1% 08.*X 75.1X 88.8% 98.7X 188.5% 116.4%Receivables Turnover /a 415 828 252 197 1s8 120 98 78 78 78Inventory Tu ...over /_a C 8 s8 78 79 79 82 86 87 8 64Productlvlty /bt 1.02 1.20 1.48 1.44 1.44 1.58 1.59 1.08 1.67 1.69

/;_ 184 185 180 188 189 145 162 189 168 176

Pricing:

d-n'l cargo (thou*. ton) o6o 669 579 5 560 589 670 580 590 8s* FMC/ton 8,098 7,894 9,888 10,56W 11,889 11,752 12,222 12,710 12,690 12,870Number of vessels 868 a85 854 852 360 848 848 844 842 840A million fUG/vessel 1.89 1.79 2.29 2.45 2.62 2.78 2.84 2.96 2.95 2.94

Profitability:

Working Ratio 107X 91X 77% 77% 78% 74X 71X 7?x 71X 72XOperating Ratlo 118X 108X 88X 88X 88X 8tX 88X 82X 88% 84%Return on Fixed Assets -18.5X -2.8x 9.8% 8.6X 8.4% lO.SX 18.5% 18.7% 17.1X 17.7%Not Return (after mnt.) -22.8% -4.2X 4.09 1.8% 1.OX 1.9X 5.2X 8.7% 9.5X 10.5%

Liquidity:

Working Capital /d 1,549 2,892 2,714 2,514 2,404 2,484 2,499 2,152 2,152 2,149Current Ratio 1.8 1..' 1.6 1.8 1.7 1.8 2.0 1.9 1.8 1.8Quick Ratio 1.1 1.2 1.4 1.4 1.4 1.5 1.8 1.4 1.4 1.4

Capitalization:

Debt to Equity 62X t3X 70X 71X 74X 72X 67X se% 52% 44%Asset Leverage 80X 79X 80X 79X 79X 77X 72X seX 69% 54%Self Flnancing /_.e -9X -11X 11% 12X 8% 8t% 112% 209% 258X 287%

/_a Average days on hand/_b 1985 million FMG revenue per employee/Ic Tons of cargo/employ.

Mid lIlion FMG'sN. Not Income : Net Capital Expenditures

November 198B

MADAGASCAR

PORTS REHABILITAXOlh rKUJzCT A- 5 10

1984 lITS MI00

ATSMr- rStEows- mDdT-

AN" K1JA TOL IAY TOLAI4ARO MANM(ARA MAMW OREVA 3tOIeE MSY-GE V0EIM APTM4a SM@AvA TR IR At ETStHINV AALAVA Sr AlUS TFLTAL

PO.t 0Doe 3.907 3.189 2,754 1.344 873 610 439 250 3.416 5St 301 0 53 46 64 60 1,324 19.046S.rth... Foos 4,236 5.142 4,159 4.909 3.258 2.306 5,442 484 3.771 451 4* 0 14 64 340 414 4.3=6 41.363Cargo h" dIlh Foos 7,76M 1.,564 7,036 1,977 2.962 509 5,723 764 20.436 1,427 315 64 32° 0 434 361 a #1.866Passenger 0 12 0 0 0 0 0 0 2 0 0 0 0 0 0 0 0 14P;loot. 3.0646 0 1o414 0 0 0 0 0 0 0 0 0 0 0 0 0 0 o .060Cooc"oto X49,74? 95,220 24,582 0 354 0 3,768 0 16,319 5,735 0 0 0 0 332 0 7,134 204.99

loW.. U.-e..to 69,422 115,335 39.92S 8,230 7,44? 3.225 IS.372 1.690 45,944 0.131 461 64 392 112 seo 835 4 ,7eS4 S2.167

E.pr wi tow,*

Staff 12.221 16,791 14,344 6.l86e 7.7s5 1,639 2,085 822 2,670 3.759 679 739 746 1.974 2,264 0 0 74,s4S,.pp i 2.86s 2.875 2.856 1.133 1,395 739 s1 365 1.294 480 279 130 200 2m9 327 126 SW 16,3434.930 4,930 74.01 4,375 292 1.316 645 48 632 2,631267 2.901 1,361 1.701 1,55 2 A.665 09 S364 42.476e-..rh. 23,846 29.268 29,627 13.925 14,410 4,399 3.824 2.m 7.853 7.29S 4,595 2,655 3,247 4,532 5,092 1,233 907 £5,934

To1.4 Ep,p**" 43,872 53,854 54,506 25.619 26,442 8,093 7.035 4,09S 14,448 13,421 0,4S4 4.,6s b,974 0,338 9,366 2,232 1,669 292.337

Op.e'al.. Result 25.S50 61,2S5 (14.503) (17.389) (18,%") (4.660) 6,337 (2,397) 31,496 (5,290) (7,993) (4,021) (S,562) (8.226) (0.378) (1,397) 13.113 39*,63L.a. Opfrc.atie 67,100 57,100 44,900 6,400 35,000 3,300 16,400 0 24,0D0 4,300 0 2,000 0 3.600 4,000 270,1D0

met 08otpt;"i R It (61,5S0) 4,1SI (S9,483) (23,789) (33,995) (6,168) (10.063) (2,397) 7,496 (9,590) (7,993) (4,821) (1.502) (6,226) (11.978) (1,397) 9.1t5 (20 o270)

R.q.i.ra Tariff so 70 -3 6% 149 0a 209 1 456 60 253.30 6555 141.202 -16.31 117.90 1733.6% 7532.6 1934.25 7344.61 3209.910 167.31 -61.70 693 ltcre...*

June 1986

- 97 -

Annex 5.11Page 1 of 2

MADAGASCAR

PORTS REHABILITATION PROJECT

Ex3lanation of Main Accounts

The sources of revenue of the port authority are:

Entry feos, based on the tonnage of all ships exceeding 50 tonsdeadweight, vary according to port.

Berthing fees, computed by the hour, according to length of vesselmoored alongside quays, or according to displacement tonnage whenat anchorage; these also vary according to port.

Fees for vilotina and tugboat service are parceived in a lump sumwhere the service is mandatory (Antsiranana, Toamasina, Toliara).

Cargo charges are calculated by the gross ton or by head ofcattle, the duties at unloading exceeding the charges at loadingby more than 502. Fees are also collected on each passonger.

All the aforementioned fees havo been last revised in 1979(increase of 302).

Rentals from concessions include:

- a rental by the m2, which,may not be modified during thecontract period,

- a fee based on a certain percentage of the volume of business ofthe contracting party.

In ceztain ports these revenues amount to 50% - 75% of the totalport revenues.

Expenses

Lxpenses are divided ir.to nine budget headings according tofunction, and a single heading for investment.

Function81 Personnel: salaries and entitlements82 Miscellaneous personnel expenses83 Equipment and services84 Materials85 Port maintenance86 Contributions and subventions87 Contingencies88 Transport of personnel

- 98 -Annex 5.11Page 2 of 2

Capital81 Capital and investments

The total budget for expenditures in 1984 amounted to 364 millionFMG, whereas the revenues did not exceed 292 millions PMG.

The figures for the 1984 budget indicate that the gap betweenrevenues and expenses fall mainly under two headings:

1. Perconnel expenses, which were 28X below budget allocationunder the two pertinent headings.

2. Maintenance costs, which were also 28X below the sumsallocated for this purpose. This fact is indicative of theoperational difficulties experienced by the administration,particularly if one considers the unmet requirements ofmaintenance of ports installations and equipment.

- 99 -

MADAGASCAR PORTS REHABILITATION PROJECT Annex 5.12

Pro-forma Ports Budget

(million FMG's)

1986 1987 1988 1989 1990 1991

Revenue 589 747 867- 972 1,088 1,201

Expenses

Working Expenses 319 353 393 '41 500 572

Depreciation

Existing assets 270 259 249 239 229 220Project Assets 0 38 67 115 163 199

270 297 316 354 392 419

589 650 709 795 d92 991

Capital Recovery 97 158 177 196 210(@ 102 factor)

Tariff IncreasesIn real terms 19.6% 9.3% 5.3% 4.9% 3.3%In current terms 26.8% 16.1% 12.1% 11.9% 10.4%

- 100 -

ANNEX 5.13Page 1 of 1

MADAGASCAR

PORTS REHABILITATION PROJECT

Pro-forms Ports buitaetAssumtions

1. Traffic (see Annex 4.3)

2. Inflation (see Annex 5.5)

3. Personnel. From 1986 on, personnel expenses decrease by 4% lessthan the rate of inflation.

4. Other Operatina Expenses. Increase in line with rate ofinflation.

5. Maintenance Expenses. The budget allocation for maintenance willincrease by 2002 over a period of five years in real terms.

6. Capital Recovery Factor. 10% p. a.

7. Depreciation. Straight line over the estimated useful economiclife. All civil works, infrastructural works, and equipment, aredepreciated by the Ports budget.

8. Overhead. Under this category, a share of the cost of operationof the central services in Antananarivo (taking the inflation rate intoaccount) has been included in the operations cost of each port.

9. Revenues. It zas been assumed that the revenues will equalexpenses.

November 1986

I ' IBRD 195951

32- MADAGASCAR 12*

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