Document of The World Bank€¦ · KPT Karachi Port Trust M&E Monitoring and Evaluation MoPS...

Document of

The World Bank FOR OFFICIAL USE ONLY

Report No: ICR00004531

IMPLEMENTATION COMPLETION AND RESULTS REPORT

LOAN NO. 7956-PK

ON A

LOAN

IN THE AMOUNT OF US$115.8 MILLION

TO THE

ISLAMIC REPUBLIC OF PAKISTAN

FOR THE

KARACHI PORT IMPROVEMENT PROJECT

JULY 30, 2018

Transport and Digital Development Global Practice South Asia Region

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

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CURRENCY EQUIVALENTS (Exchange Rate Effective April 30, 2018)

Currency Unit = Pakistan Rupee (PKR)

PKR 115.77 = US$1

US$1.43806 = SDR 1

FISCAL YEAR

July 1 – June 30

ABBREVIATIONS AND ACRONYMS

CPS Country Partnership Strategy CRE Chief Resident Engineer GDP Gross Domestic Product GM General Manager GOP Government of Pakistan EAD Economic Affairs Division EHS Environment, Health and Safety EIRR Economic Internal Rate of Return EMS Environmental Management System EOP End of Project ERP Enterprise Resource Planning ICR Implementation Completion and Results Report IFRS International Financial Reporting Standards ISO International Standards Organization KPT Karachi Port Trust M&E Monitoring and Evaluation MoPS Ministry of Ports and Shipping MTDF Medium-Term Development Framework NMB Napier Mole Boat NPV Net Present Value OHSAS Occupational Health and Safety Assessment Specification P&D Planning and Development PDO Project Development Objective PIU Project Implementation Unit PSC Project Steering Committee PPP Public-Private Partnership Ro-Ro Roll On-Roll Off

SAPT South Asia Port Terminal SRB Ship Repair Berth TTL Task Team Leader UNCTAD United Nations Conference on Trade and Development

Regional Vice President: Hartwig Schafer Country Director: Patchamuthu Illangovan

Senior Global Practice Director: Jose Luis Irigoyen Practice Manager: Olivier P. Le Ber

Task Team Leader(s): Hasan Afzal Zaidi ICR Main Contributor: Ninan Oommen Biju

TABLE OF CONTENTS

DATA SHEET ....................................................................... ERROR! BOOKMARK NOT DEFINED.

I. PROJECT CONTEXT AND DEVELOPMENT OBJECTIVES ....................................................... 5

CONTEXT AT APPRAISAL ............................................................................................................... 5

SIGNIFICANT CHANGES DURING IMPLEMENTATION (IF APPLICABLE) ....................................... 10

II. OUTCOME .................................................................................................................... 12

RELEVANCE OF PDOs ................................................................................................................... 12

ACHIEVEMENT OF PDOs (EFFICACY) ........................................................................................... 12

EFFICIENCY .................................................................................................................................. 17

JUSTIFICATION OF OVERALL OUTCOME RATING ........................................................................ 19

OTHER OUTCOMES AND IMPACTS (IF ANY) ................................................................................ 19

III. KEY FACTORS THAT AFFECTED IMPLEMENTATION AND OUTCOME ................................ 21

KEY FACTORS DURING PREPARATION......................................................................................... 21

KEY FACTORS DURING IMPLEMENTATION ................................................................................. 21

IV. BANK PERFORMANCE, COMPLIANCE ISSUES, AND RISK TO DEVELOPMENT OUTCOME .. 22

QUALITY OF MONITORING AND EVALUATION (M&E) ................................................................ 22

ENVIRONMENTAL, SOCIAL, AND FIDUCIARY COMPLIANCE ........................................................ 23

BANK PERFORMANCE ................................................................................................................. 25

RISK TO DEVELOPMENT OUTCOME ............................................................................................ 25

V. LESSONS AND RECOMMENDATIONS ............................................................................. 26

ANNEX 1. RESULTS FRAMEWORK AND KEY OUTPUTS ........................................................... 28

ANNEX 2. BANK LENDING AND IMPLEMENTATION SUPPORT/SUPERVISION ......................... 35

ANNEX 3. PROJECT COST BY COMPONENT ........................................................................... 37

ANNEX 4. EFFICIENCY ANALYSIS ........................................................................................... 38

ANNEX 5. BORROWER, CO-FINANCIER AND OTHER PARTNER/STAKEHOLDER COMMENTS ... 45

ANNEX 6. SUPPORTING DOCUMENTS (IF ANY) ..................................................................... 49

The World Bank Karachi Port Improvement Project (P112902)

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DATA SHEET

BASIC INFORMATION Product Information Project ID Project Name

P112902 Karachi Port Improvement Project

Country Financing Instrument

Pakistan Investment Project Financing

Original EA Category Revised EA Category

Partial Assessment (B) Partial Assessment (B)

Organizations

Borrower Implementing Agency

Islamic Republic of Pakistan Karachi Port Trust

Project Development Objective (PDO)

Original PDO The Project Development Objective (PDO) is to replace the lost port capacity and reduce shipping costs to the Pakistan economy through the reconstruction of the failed berths at Karachi Port and increasing the effectiveness and efficiency of port operations and enhancing environmental sustainability. PDO as stated in the legal agreement The Project Development Objective (PDO) is to replace lost port capacity and reduce shipping costs to the Borrower’s economy through the reconstruction of failed berths at Karachi port, an increase in the effectiveness and efficiency of the operations of Karachi port, and enhancement of its environmental sustainability.


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FINANCING

Original Amount (US$) Revised Amount (US$) Actual Disbursed (US$) World Bank Financing IBRD-79560 115,800,000 115,800,000 106,480,373

Total 115,800,000 115,800,000 106,480,373

Non-World Bank Financing Borrower 600,000 600,000 500,000

Total 600,000 600,000 500,000

Total Project Cost 116,400,000 116,400,000 106,980,373

KEY DATES

Approval Effectiveness MTR Review Original Closing Actual Closing 09-Sep-2010 15-Jul-2011 22-Apr-2014 31-Dec-2015 30-Dec-2017

RESTRUCTURING AND/OR ADDITIONAL FINANCING

Date(s) Amount Disbursed (US$M) Key Revisions 22-Apr-2011 0 Other Change(s) 22-Dec-2015 95.03 Change in Loan Closing Date(s) 28-Dec-2016 99.76 Change in Loan Closing Date(s) 29-Jun-2017 100.12 Change in Loan Closing Date(s)

KEY RATINGS

Outcome Bank Performance M&E Quality

Moderately Satisfactory Satisfactory Substantial


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RATINGS OF PROJECT PERFORMANCE IN ISRs

No. Date ISR Archived DO Rating IP Rating Actual

Disbursements (US$M)

01 10-Apr-2011 Satisfactory Satisfactory 0

02 24-Oct-2011 Satisfactory Satisfactory .29

03 16-May-2012 Satisfactory Moderately Satisfactory .29

04 01-Dec-2012 Satisfactory Moderately Satisfactory 13.28

05 17-May-2013 Satisfactory Satisfactory 20.26

06 28-Dec-2013 Satisfactory Satisfactory 55.49

07 28-Jun-2014 Satisfactory Moderately Satisfactory 78.71



10 06-Jan-2016 Satisfactory Moderately Satisfactory 97.19



13 06-Feb-2018 Moderately Satisfactory Moderately Satisfactory 105.79

SECTORS AND THEMES

Sectors Major Sector/Sector (%)

Transportation 100

Public Administration - Transportation 3 Ports/Waterways 97

Themes Major Theme/ Theme (Level 2)/ Theme (Level 3) (%)


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Private Sector Development 43 Jobs 33

Job Creation 33

Public Private Partnerships 10

Urban and Rural Development 66

Urban Development 33 Urban Infrastructure and Service Delivery 33

Rural Development 33

Rural Infrastructure and service delivery 33

ADM STAFF

Role At Approval At ICR

Regional Vice President: Isabel M. Guerrero Ethel Sennhauser

Country Director: Yusupha B. Crookes Patchamuthu Illangovan

Senior Global Practice Director: John Henry Stein Jose Luis Irigoyen

Practice Manager: Michel Audige Olivier P. Le Ber

Task Team Leader(s): Simon David Ellis, Hasan Afzal Zaidi Hasan Afzal Zaidi

ICR Contributing Author: Ninan Oommen Biju


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I. PROJECT CONTEXT AND DEVELOPMENT OBJECTIVES

CONTEXT AT APPRAISAL

Context

1. At appraisal in 2010, Pakistan’s macroeconomic environment was influenced by the intensification of the war on terror and deepening of the global financial crisis, which affected the domestic economy. Real gross domestic product (GDP) grew by 2.0 percent in 2008–09 as the economy was confronted with major challenges that threatened Pakistan’s recovery and socioeconomic growth including regaining macroeconomic stability, poverty reduction, fiscal retrenchment, and weaknesses in the external account.

2. The inefficiencies in the national transport system were estimated to cost the economy at least 4 percent to 6 percent of GDP each year.1 The port charges were high, with long dwell times for inbound containers congesting the terminals; access channels being too shallow for the bigger ships; and a shortage of modern bulk handling facilities delaying the turnaround of vessels and increasing the cost of importing essential commodities. The trade logistics services as well lacked breadth and vertical integration; the railways carried little long-distance freight; the main road infrastructure lacked investments to provide the accessibility, capacity, and quality for operating reliable road services; and the trucking services were unreliable with an old and outdated fleet.

3. Port capacity remained a major constraint for the Government of Pakistan (GoP) to achieve its strategic objectives. The GoP had initiated the National Trade Corridor Improvement Program in 2005 and encouraged modern streamlined trade and transport logistics practices including the improvement of port efficiency to reduce costs for port users, enhancement of port management accountability, and boosting of transport and trade logistics efficiencies for stabilization and growth.

4. The ports handled 95 percent of Pakistan’s trade, of which Karachi Port (KPT) handled more than 60 percent of the sea-borne trade. There are about 30 dry cargo berths at KPT with an average berth length of 168 m; berths 1 to 17 and the ship repair berths (SRBs) are at the East Wharf and another 13 berths at the West Wharf. Most of the berths were built in the 1950s, of which five berths at the East Wharf were modernized in the 1990s through financing from the World Bank. Berths 25 to 30, on the West Wharf, were rehabilitated in mid-2000 through KPT’s own resources. In 2007, two berths collapsed into the water and another eight berths2 were declared unfit for operations, exacerbating the capacity constraints, resulting in ships queuing for berths. Shipments were diverted to other ports, and the limitations to handle bulk cargo capacity delayed wheat imports causing serious economic and social repercussions for the GoP. Eventually berths 10 to 14 were rehabilitated by KPT in 2012 through its own resources. In 2008, Economic Affairs Division (EAD) of the Government of Pakistan approached the World

1 Transport Competitiveness in Pakistan, World Bank Report No. 36523-PK, July 18, 2006. 2 Berths 10 to 17A on the East Wharf.


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Bank to finance the rehabilitation of berths 15 to 17, create an additional berth 17A by extending the quay wall to the SRBs, and add two additional berths 17B and 17C in place of the SRBs.

5. With extensive experience in improving port efficiency and in developing institutions and polices toward sector regulation, commercial orientation, and integrated development, the World Bank designed the project to complement the GoP’s Medium-Term Development Framework (MTDF) 2005–10 to establish an efficient and integrated transport system for the development of a competitive economy and poverty reduction. Among other requirements, the MTDF had also identified the need for infrastructure improvement at the ports, including deeper channels and deeper drafts alongside berths, to make the ports competitive, and bring them in line to cater to modern shipping practices.3

3 Government of Pakistan: “Medium Term Development Framework 2005-10” Chapter 29: Transport Development.


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Theory of Change (Results Chain)

Activities Outputs PDO Outcomes LT Outcomes

ISO 14001 environmental management

bl h d d

Berth Reconstruction Reconstruction of berths, quay wall, and backyard facilities

Construction of pavements and storage facilities for the whole b k d

Reconstruction of berths 15, 16, 17, 17A, 17B, and 17C and quay wall of 936 m; increase in turning circle

- Reduced waiting to service time ratio for the project berths

- Improved occupancy rate of the project berths

- Increased throughput of the project berths

- Development and implementation of strategic development and business plans

- Development and implementation of environmental management system

- Improving financial management and planning

Institutional Strengthening In the areas of long-term business planning, financial management, and environmental management

Reduced shipping costs to the Pakistan economy Improved logistics efficiencies to enhance trade competitiveness and economic growth Efficient and sustainable transport management for development of a competitive economy and poverty reduction

Financial Planning and Management complying with IFRS

Demolition of the two existing SRBs and existing shed

- Replace lost port capacity

- Increase efficiency and reduce shipping cost

- Increase effectiveness

- Enhance environment sustainability

Ten year Business Plan and Strategic Development Plan developed and key short-term recommendations implemented


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6. The critical assumptions of the Theory of Change included adequate capacity in KPT to implement the project, adequate response from qualified consultants and contractor, and timely decision making by KPT management. There were two factors that could possibly affect the outcomes. One was the inability or willingness of KPT management to implement the recommendations arising out of the business plan and the inability of KPT to dredge the area adjacent to project berths after reconstruction.

Project Development Objectives (PDOs)

7. The objectives of the project in the Loan Agreement were to replace lost port capacity and reduce shipping costs to the Borrower’s economy through the reconstruction of failed berths at Karachi port, an increase in the effectiveness and efficiency of the operations of Karachi port, and enhancement of its environmental sustainability.

Key Expected Outcomes and Outcome Indicators

8. The outcome indicators were

(a) Reduction in waiting to service time ratio;

(b) Improvement in occupancy rate of project berths; and

(c) Increase in berth throughput.

9. The intermediate outcomes were measured by

(a) Reconstruction of berths 15, 16, 17, and 17A, quay wall of 922 meters and backyard facilities completed;

(b) KPT’s Five-year Business Plan developed and key short-term recommendations implemented;

(c) KPT’s audits fully complying with International Financial Reporting Standards (IFRS);4 and

(d) KPT complying with ISO 14001 environmental management.

Components

10. Component A: Reconstruction of Berths 15–17A at Karachi Port (US$112.6 million, of which GoP contribution US$0.6 million and IBRD US$112.0 million). The component financed the reconstruction of berths 15–17A on the East Wharf at KPT. Costs associated with environmental management and project management were financed by KPT. The World Bank financing was used for a single consultancy

4 IFRS is a set of International Financial Reporting Standards or accounting standards, developed by the International Accounting Standards Board that is becoming the global standard for the preparation of public company financial statements.


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procurement for the supervision consultant, contingencies, interest during construction, fees and taxes, and a single civil works procurement comprising the following:

(a) Construction of a total length of quay wall of 922 m comprising 448 m for the rehabilitation of the four berths 15 to 17A and the further continuation of the quay wall by 474 m at an angle of 20 degrees, adding a general cargo and a roll on-roll off (Ro-Ro) berth

(b) Demolition of the two existing SRBs and existing shed

(c) Construction of pavements and storage facilities for the whole backyard

11. Component B: Institutional strengthening (US$3.8 million, the entire contribution coming from IBRD). The component addressed three main areas, as follows:

12. Subcomponent B1 supported the preparation of a Ten-Year Business Plan and Strategic Development Plan (US$3.2 million) to redefine KPT’s business structure and provide (a) future orientation of KPT as an institution with greater planning and regulatory function and (b) for development of assets and territorial management as a landlord port. The development plan was to identify the core port business, make recommendations on effective exploitation of noncore areas such as land management, cover capital investment requirements for development of infrastructure facilities; efficiency enhancement of shipping and cargo handling operations; shore-side transport and logistics; career planning and training for human resource development; modern concepts for land management; and provision of IT-based management and operations and port users’ representation in policy decisions. The subcomponent also supported the implementation of three activities emerging from this process:

(a) Training to support recommendations on human resource development;

(b) Design and evaluation of the tender process for the concession of a bulk terminal; and

(c) Implementation of other short-term recommendations emerging from the process.

13. Subcomponent B2: Strengthening environmental management at the port to eventually comply with International Standards Organization (ISO) standards (US$0.3 million). This subcomponent supported the design and implementation of an environmental management system (EMS) for a structured program of continual improvement in environmental performance that follows procedures drawn from established international business management practices and principles of quality management systems. The EMS was to support KPT to (a) define and implement the organization’s environmental policy, (b) ensure compliance with relevant environmental legislation and regulations, (c) identify and manage its environmental impacts, and (d) achieve continual improvements in environmental performance. The development and implementation of an EMS will allow KPT’s management to track its environmental performance and thereby develop and adopt measures to improve performance.

14. Subcomponent B3: Improving financial management and financial planning to meet IFRS accounting standards (US$0.3 million). This component supported KPT’s move toward IFRS-compliant accounts to facilitate greater access to market-based financing over the medium term and implement the necessary steps for computerization of accounts.


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SIGNIFICANT CHANGES DURING IMPLEMENTATION (IF APPLICABLE)

Revised PDOs and Outcome Targets

The PDO was not changed during implementation.

Revised PDO Indicators

Not applicable.

Revised Components

15. Component A was revised as follows:

• Construction of a total length of quay wall of 936 m comprising 448 m for the rehabilitation of three berths, 15 to 17. Further continuation of the quay wall by 488 m at an angle of 20 degrees, comprising berths 17A and SRBs 1 and 2, and further increasing the ships’ turning circle. SRBs 1 and 2 were renamed as berths 17B and 17C. The revision also substituted the construction of the proposed Ro-Ro berth with a multipurpose berth (berth 17C). The new lengths of berths 15 to 17 were approximately 150 m each. Berths 17A and 17B were 176 m each, and the length of berth 17C was 136 m. All the new berths (15 to 17C) were constructed with a design depth of 16 m catering to future requirements; however, these will be currently dredged up to 13.5 m, in line with the depth of the channel, with the exception of berth 17C, which will remain shallow (7 to 8 m). The main reason for this is the fact that berth 17C is adjacent to the Napier Mole Boat (NMB) Wharf, which is structurally a shallow berth, and deepening of berth 17C can cause the NMB Wharf to collapse. Hence, 17C in future will be used as a multipurpose berth, catering to smaller ships, country crafts, and KPTs own fleet. The original and revised plans for project berths are attached as sections A and B, respectively, of annex 6.

• Components were not cancelled.

• The reconstruction of the berths was planned to be completed in year 4, that is, in 2014; however, due to the delays the project was extended. The details are reflected in the section ‘Other Changes’.

Other Changes

16. The delay in signing of the Subsidiary Agreement between Economic Affairs Division (EAD) and KPT also resulted in extending the effectiveness deadline by two months, that is, from April 24, 2011 to June 24, 2011. The project was also restructured four times.

Table 1.(Details of Re-Structuring)

Restructuring No. Date Level Purpose

1 May 4, 2011 2 Correction of onlending rate in the Loan Agreement


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Restructuring No. Date Level Purpose

2 December 22, 2015

2 First extension in closing date from December 31, 2015 to December 31, 2016

3 December 22, 2016

2 Second extension in closing date from December 31, 2016 to June 30, 2017

4 June 30, 2017 2 Third extension in closing date from June 30, 2017 to December 30, 2017

17. The progress on the civil works contract slowed in 2015 because of (a) change in design due to site requirements, (b) delay in approval of design change and extra work variation orders by KPT, (c) impediments faced due to the law and order situation in Karachi city, and (d) change in alignment of the quay wall to avoid damage to the possible cultural heritage building. Further, there were unforeseen obstructions in the removal of old structures (166 reinforced cement concrete piles) from the sea bed at SRBs 1 and2 and the NMB Wharf. Subsequently, the project closing date was extended to December30, 2017.

Rationale for Changes and Their Implication on the Original Theory of Change

18. The project experienced one substantial change as requested by KPT after construction had commenced. It was related to the revision in design of the reconstruction of berths because (a) after deepening of main channel in 2012, larger size ships with length exceeding 300 m were using the port; this required further widening of the turning circle, hence moving the quay wall further inland and (b) the provision of a Ro-Ro berth was replaced with a general cargo berth as the new car carrier ships were operating with their own ramps. This also resulted in a straighter quay wall and added 14 m to the quay wall length, providing more berth space.

19. Consequent to the above change, further changes to the anchor wall design were required as KPT wanted to ensure protection of the heritage building near berth 17C. Originally, the old building which was used as a dangerous goods shed was earmarked for demolition but was declared as a cultural heritage building after expert assessment.

20. A drawback of changing the layout was the fact that in the original design, the existing quay wall was retained to provide additional protection to the new structure. However, after the revision the existing quay wall from 448 m onward (berths 17A, 17B, and 17C) required not only demolition of SRBs 1 and 2, and the superstructure, but also the removal of existing quay wall piles and design of new quay wall protection. This turned out to an arduous and difficult task and contributed substantially to the delays. Even though comprehensive subsoil investigation had been conducted, the deformities in the existing piles could not be detected, and their removal was eventually achieved after colossal efforts. The works contract was extended to August 2016, and further to March 2017, and the closing date was extended to December 30, 2017.

21. The above changes did not require any change to the disbursement category allocation or any restructuring. The civil works contract cost increased by 6.6 percent, which included variations and escalation paid during the currency of the contract, and this increase was covered through the contingencies head.


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22. While the above changes did not affect the original Theory of Change, the delays resulting from the above changes did not allow KPT sufficient time to complete the dredging operations alongside berths 17A to 17C, rendering these berths nonoperational for ship operations even at the time of project closing. The dredging works were outside the scope of the project but was necessary for safe berthing of the vessels and commencement of operations, as the quantitative and qualitative assessment of the project outcome indicators was to be derived from the vessel operations data at the project berths.

II. OUTCOME

RELEVANCE OF PDOs

Assessment of Relevance of PDOs and Rating

23. The relevance of PDO is rated High, as it was aligned with the World Bank’s Country Assistance Strategy for 2010–2013. The PDOs remain aligned to the Country Partnership Strategy (CPS) for FY15-20, under Results Area 2 (Private Sector Development), Outcome 2.4 (Improved Trade Tariff and Ports/Border Logistics). The CPS stressed the need for sound trade facilitation and logistics systems and improving connectivity as the key for export-led growth. The CPS clearly mentioned the World Bank’s interventions to help improve occupancy rates of selected berths at KPT.

24. Further evidence of the PDO’s relevance can be gauged from the Government’s embarkation on a massive program to improve Pakistan’s transport and trade infrastructure, with a special focus on regional connectivity. The World Bank is supporting GOP’s agenda, among others, through the recently approved US$460 million Khyber Pass Economic Corridor Project. The KPT has a direct link to the narrative of greater regional integration as it provides a gateway for landlocked Afghanistan and to other Central Asian countries. The project completion came at an opportune time as the sea-borne shipment volumes through KPT increased rapidly during the past few years.

ACHIEVEMENT OF PDOs (EFFICACY)

Assessment of Achievement of Each Objective/Outcome

25. The overall Efficacy has been rated “Substantial”. The ratings for efficacy have been assigned based on the data available for the operational berths 15 to 17 only, as berths 17A to 17C remained inoperative till the finalization of this report. The reasons have been explained in detail in paragraphs 30 and 31.

26. The PDO was divided into four interlinked objectives.

(a) Replace lost port capacity

(b) Increase efficiency and reduce shipping cost

(c) Increase effectiveness


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(d) Enhance environment sustainability

27. The achievements of each of the objectives are provided in the following paragraphs.

PDO (a): to replace lost port capacity

28. The key indicators for this part of the development objective were berth occupancy and berth throughput. The 2017 data for operational berths 15 to 17 indicate that the average occupancy of the project berths was 44.6 percent, meeting the end-of-project (EOP) target of 45–55 percent. The baseline was 74 percent average berth occupancy in 2007, before the berth failure. The average throughput for each of the operational berths was 0.85 million tons, against the EOP target of 1.12 million tons, that is, one target was met and the other was 76 percent met. The available data are representative of only half the project scope; however, strong evidence of growth in traffic suggests that once all the project berths are fully operational, the targets will be fully achieved or surpassed. Similar trend was noted when KPT’s adjacent berths 10 to 14 became operational after reconstruction in 2012. This assumption is further strengthened by the reduced waiting to service time ratio of 0.33 as against the ratio of 0.54 for the KPT berths that handled the main dry bulk shipments at the East Wharf, during the project appraisal in 2010. Once the remaining project berths 17A to 17C are dredged to the designed depth and become operational, more ships could be accommodated at the project berths with further reduction in waiting to service time ratio and increased volume throughput at the project berths.

29. Another benefit was the storage area made available after reconstruction of project berths. Even Berths 17A to 17C, which were inoperative as far as ship handling was concerned, the back-up area was utilized since May 2017 for storage of cargo.

30. A key question is when will berths 17A to 17C become operational. All the works required for these berths were successfully completed during the project. As mentioned in the preceding section, the impediment to fully operationalizing these berths is the inability of KPT to dredge the area alongside the said berths. Dredging was not part of the project as KPT had its own dredging fleet and had been utilizing this fleet for maintenance and capital dredging. Two new dredgers were inducted by KPT just before project appraisal. The same fleet was used between 2010 and 2015 to (a) deepen the main channel from 12 m to 13.5 m, (b) dredge the area adjacent to berths 10 to 14 and in front of the two container terminals, and (c) dredge the area adjacent to project berths 15 to 17. The main backhoe dredger broke down in 2015, and to date, KPT has not been able to get this dredger repaired, primarily due to issues related to the original equipment manufacturer and unavailability of spare parts. Foreseeing possible delays due to this issue, the World Bank had raised concerns repeatedly and had even suggested considering alternate options of outsourcing dredging operations through separate third-party dredging contract. However, until the end of project implementation, KPT continued to express its confidence in getting its fleet operational and completing the dredging works in the shortest possible time. Subsequently, a high-level decision was taken by the Ministry of Ports and Shipping (MoPS), instructing to call for bids from dredging companies. As the volume of dredging adjacent to the project berths is relatively small, and as other dredging requirements have also come up in the past two years, KPT is now preparing a comprehensive contract to cater to routine maintenance dredging of the main channel, dredging adjacent to berths 17A to 17C, and dredging of the approach channel to the new Deepwater container terminal and fish harbor. The proposal has already been approved in principle by KPT’s Board, and the bidding process has started—draft terms of reference for the supervision consultants has been prepared and the expression of interest


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is planned to be published by the last week of July. KPT has communicated that the entire process will be completed in 10 to 12 months, that is, the remaining project berths 17A to 17C are expected to become operational by June 2019. A copy of KPT’s Board Resolution is attached as section C of annex 6.

31. There is additional assurance that the dredging outsourcing will be done by KPT as the main channel to the new South Asia Port Terminal (SAPT) (new Deepwater container terminal) also requires deepening at certain locations.

PDO (b): to increase efficiency and reduce shipping cost

32. The main indicator to measure reduction in cost for ships is the waiting to service time ratio. The longer a ship waits prior to berthing, the higher the cost to the ship. The average waiting to service time ratio at the project berths before appraisal was 0.54. With the reconstructed berths (15–17), a reduced waiting to service time ratio of 0.33 was measured in 2017, against an EOP target of staying below 0.35. This means that before the collapse, if a ship was spending 48 hours at berth being serviced, the same ship would have waited 26 hours at anchor to get a berth assigned. After reconstruction and operationalization of berths 15 to 17, a ship is waiting less than 16 hours to get a berth assigned, translating into an average time saving of more than 10 hours per ship call. The current charter rates for a supramax class ship is approximately US$350 per hour. Hence on an average, each ship utilizing berths 15 to 17 is saving US$3,500 per call. Further benefits were derived by avoiding lighterage and rehandling of cargo. This is based on the assumption that if berths 15 to 17 were not available, the larger ships would have required lighterage, that is, removal of cargo through barges or smaller vessels at the outer anchorage, before being berthed at shallower berths of the West Wharf. The approximate cost of lighterage is about US$4 per ton. If the project berths 15 to 17 had not been operational in 2017, at least half of the 0.85 million tons of cargo handled per berth would have the need to be lightered before the vessels being accommodated at other shallower berths. This would mean an extra cost of approximately US$1.7 million per berth per year saved after operationalization of these berths.5 The newly reconstructed project berths were also able to handle larger ships, enabling economies of size for those cargoes that use the largest ships possible. These cargoes, which account for about half of the total (mainly coal and fertilizers), are now coming in vessels typically around 52,500 tons compared with around 47,500 before the reconstruction. This translates to an average saving of US$0.2 per ton.6 For the 0.85 million tons of cargo handled at each berth, the estimated cost savings are US$0.17 million per berth per year.

33. Another method of measuring efficiency is the improvement in cargo handling speed. While there was no separate indicator for this, the data of main cargoes handled at berths 10 to 17 pre-collapse and post reconstruction show an overall improvement (see table 2). Coal handling shows the most significant increase, up by 39 percent. Fertilizer handling speeds also increased by over 5 percent. Other miscellaneous bulk handling also increased by 33 percent. On the other hand, speed of handling of steel cargoes shows a decline of 11 percent. As coal, fertilizers, and other bulk cargoes account for over 75 percent of the total cargoes handled at these berths, the increase in handling speed is considerable and indicates increase in overall efficiency. The two main reasons that can be attributed to this improvement is economy of size of larger ships using these berths and also to more modern and efficient cargo handling

5 850,000 × 50 percent × US$4 6 Detailed calculations are presented in annex 4.


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equipment being used by the private stevedores. It is expected that the cargo handling speeds will further improve once the berths are concessioned out to a modern bulk terminal. A feasibility study for setting up a bulk terminal is already under way.

Table 2. Average Cargo Handling Speed (tons per ship day at berth)

Cargo Type At Appraisal (2009–2010) At Completion (2017) % Increase/Decrease

Coal 9,000 12,500 39

Fertilizers 4,000 4,200 5

Other bulk 3,000 4,000 33

Steel 7,000 6200 −11

PDO (c): to increase effectiveness of the operations at Karachi Port

34. The main indicator to measure effectiveness is development of a comprehensive Ten-Year Business Plan and Strategic Development Plan. The purpose was to redefine KPT’s business structure as a landlord port with greater planning and regulatory functions. It also covered strategic planning of capital investments for development of infrastructure facilities to enhance efficiency of shipping and cargo handling operations, training for human resource development, provision of IT-based management and operations, and improving financial management to enable KPT to be IFRS compliant. Partial success was achieved as the Strategic/Business Plan was prepared and adopted by the KPT Board through a formal resolution. The implementation of the short-term recommendations arising out of the said plan is progressing slowly and is explained in the following paragraphs. This was an intermediate outcome indicator and, in the absence of a PDO indicator, is assessed to measure the outcomes.

35. The implementation of an Enterprise Resource Planning (ERP) system was delayed due to lengthy bureaucratic procedures, and KPT was not able to conclude the procurement process by the project closing date. However, during project implementation, the ERP cell was set up and a detailed assessment of the requirements, selection of system technology, finalization of terms of reference and bid documents, and most importantly internal approval by KPT’s Board to proceed with implementation were obtained. KPT is now undertaking this through its own resources.

36. Technical feasibility and public-private partnership (PPP) viability study for a port access elevated expressway was also started by KPT and had reached the Request for Proposals stage by the project closing stage. This is now being undertaken by KPT through its own resources, and a consultant firm has been appointed, and has commenced work on the assignment.

37. KPT has selected a consultant for the feasibility study for setting up a dedicated bulk/coal terminal. The consultant report is expected to be concluded by September 2018.

38. Due consideration is to be given to the fact that these were more medium-term recommendations undertaken for implementation. The only substantial short-term recommendation of the plan implemented by KPT was strengthening the Marine Pollution Department by inducting additional staff


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and procurement of laboratory/IT equipment and a boat for sea water monitoring and testing. Another short-term measure implemented by KPT included a comprehensive training program for officers in key areas.

39. The KPT accounting standards are now IFRS compliant and have updated its financial and accounting manuals. The audit of the books of accounts was delayed due to lack of audit staff, the audited accounts for FY2011/12 were completed only in 2017. The audit for the next four years until FY2015/16 period has already been started and is expected to be completed by end 2018.

PDO (d): enhancement of its environmental sustainability

40. At appraisal, KPT did not have an EMS. The Environment, Health and Safety (EHS) management system is now functional at KPT, and the entire staff has gone through mandatory EHS training. A Crisis Response Center has also been established. KPT has been undertaking more structured air, water, and soil quality testing since the start of the project. However, the Occupational Health and Safety Assessment (ISO/OHSAS) certification process is still ongoing, with a certification firm carrying out an external audit. More than 80 percent of the work is completed, and it is expected that KPT will receive ISO 14001 and OHSAS 18001 certification by the end of 2018, making KPT the first port authority in the region to be ISO and OHSAS certified.

Justification of Overall Efficacy Rating

Rating: Substantial

41. The overall efficacy of the project is rated Substantial. Achievement of each of the four ‘unpacked’ development objectives has been presented in the preceding paragraphs. Most of the objectives have been substantially met or are expected to be met soon. The major reason for the shortcoming was the inability of KPT to dredge the area adjacent to half of the project berths 17A to 17C, meaning that these berths could not become operational. Consequently, most of the assessment has been based on PDO data from operational project berths 15 to 17.

42. Just considering the data from the operational project berths 15 to 17, two out of three PDO outcomes (waiting to service time ratio and berth occupancy) were met, while the third (berth throughput) was 76 percent met. However, looking at the bigger picture of how the project contributed to port capacity and operations, even without half the project berths operational, the impact is substantial. To understand this, it is important to look beyond the Results Framework. Currently, the majority of bulk and general cargo is handled at berths 10 to 17 at the East Wharf. In 2007, before the collapse, the average berth occupancy at berths 10 to 17 was 74 percent, indicating high utilization of the berths, and based on the forecasted cargo growth rate, the waiting to service time ratio was expected to increase fourfold. Berths 10 to 14 was reconstructed and became operational in late 2012. While overall growth in cargo remained modest till 2014–15, within a few years of becoming operational, the occupancy rate of berths 10 to 14 was already close to the pre-collapse levels in 2007. If the project berths 15 to 17 had not become operational in 2015, the occupancy rate of berths 10 to 14 would have been around 92 percent in 2017, resulting in extremely long and unacceptable queues, and long waiting time for ships. In 2017, the occupancy of berths 10 to 14 had gone up to 72 percent, which was still quite high. At the project berths (15 to 17) the average occupancy rate was 44.6 percent, with an average of 100 vessels handled at


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each of these berths during 2017. Without the newly reconstructed berths 15 to 17, the traffic at berths 10 to 14 is assumed to reach full capacity at 92 percent occupancy, which is the occupancy at which the waiting to service time ratio would reach 2.00. At this occupancy, the capacity would be constrained to a maximum of 9.67 million tons. However, with the addition of project berths 15 to 17, the waiting to service ratio at 72 percent occupancy would be 0.17, based on the United Nations Conference on Trade and Development (UNCTAD) tables of waiting to service time ratios for random arrivals and service times conforming to an Erlang 2 distribution. This is a clear indicator that the port capacity was being replaced and the shipping cost was reduced by minimizing delays through berthing of the vessels at the reconstructed berths. This has facilitated record handling of bulk cargo shipments at KPT berths 10–17, more than doubling the volumes handled in the last five years to 12.2 million tons in 2016/17.

43. The benefits will further increase once berths 17A and 17B7 (353 m of quay length) become operational, with bulk handling capacity increasing from the current 12.2 million tons to 16.1 million tons in 2019–20, and eventually reaching a peak at 22.6 million tons in 2026–27. Without berths 15 to 17B, the bulk handling capacity of the port will be limited to 9.6 million tons. Similarly, the overall occupancy of berths 10 to 17B will come down from the current 72 percent to 57 percent. The waiting to service time ratio will also further come down to 0.03 percent.

EFFICIENCY

Assessment of Efficiency and Rating

Rating: Modest

44. The economic analysis at appraisal considered the cost for the civil works plus the estimated cost of the equipment necessary to operate the terminals. It comprised an assessment of costs and benefits of the project investments for berths 15–17A as compared to a rational ‘without-project’ scenario and covered a period of 20 years. The main benefits considered in the analysis included (a) a reduction in the cost of queuing for berths as a result of the provision of additional berths and (b) reductions in the costs of ship time at berths. Neither the costs nor benefits from the economies of size in shipping from the use of larger ships were included in the analysis, as it was unclear by when KPT will carry out capital dredging to deepen the main channel. The project was estimated to yield a net present value (NPV) of US$118 million and an economic internal rate of return (EIRR) of 23.2 percent.

45. The ex post economic analysis was based on the actual cost of civil works, including supervision consultancy, that is, for a cost of US$100 million. In addition to the avoidance of high queuing costs and some reduction in costs of ship times at berths, the additional benefits include the avoidance of lighterage costs and the gains accrued from economies of scale from the larger ships that can be accommodated at the reconstructed berths. The last was considered due to the fact that KPT had carried out capital dredging between 2012 and 2014, increasing the depth from 12 m to 13.5 m. Similar to the analysis conducted during appraisal, the ex post analysis considered with- and without-project berths scenarios.

7 Berth 17C is of shorter length (136 m) and will remain a shallow draught berth due to its proximity to the shallow NMB Wharf. The berth will be a multipurpose berth, mostly used for smaller ships, country craft, and KPT’s own fleet.


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46. Considering that half of the project berths were still not operational, the two scenarios were considered. The first (worst case) considered only the operational berths 15 to 17, assuming that the remaining project berths 17A to 17C will not be put to use. The second scenario considered all project berths 15 to 17 and 17A to 17C, with the assumption that the remaining berths 17A to 17C will become operational within 2019.

47. For these two scenarios, the EIRR calculated was 49 percent and 50 percent, respectively, for the 20-year period from 2017 to 2036. The ex post analysis also estimated the project to yield an NPV of US$239 million and US$210 million respectively for both the scenarios.

48. The reason for a very small difference between only half project berths versus all project berths operational (berths 15 to 17 versus berths 15 to 17B) is due to the fact that (a) in any project with a very high EIRR the benefits in later years are discounted within the calculation at the project internal rate of return and so become very low and (b) the additional benefits of berths 17A and 17B—which consist of handling traffic there that would otherwise have had to be lightered—do come mainly in the later years.

49. The ex post EIRRs were exceptionally high because of the estimated savings of US$33 million in 2017 in ship queuing, the avoidance of lighterage of overspill cargoes, and gains from economies of scale of larger ship calls. The detailed analysis and calculations are presented in annex 4. The project achieved the expected efficiency in supporting KPT with low waiting to service time ratios and higher berth productivity.

50. However, the project encountered about two years of implementation delays, requiring extension of the project closing date. The project remained mostly on track till midterm. Half the project berths were completed in November 2014 and became operational in May 2015. However, completing the other half proved to be the main challenge. Reasons for the delay have already been explained in the preceding paragraphs. The implementation delays, to some extent, affected the efficiency of the project.

51. Frequent changes in senior management also affected the efficiency. At times these changes were beyond the control of KPT. As an illustration, the first General Manager Planning and Development (GM P&D) (the designated Project Director) retired soon after the project became effective. The second GM took early retirement as he was migrating to Canada, the third died as a result of heart attack while in office, and the fourth retired. The positive was that there was no change in the Project Manager, Project Engineer, Executive Engineer of KPT, and key staff of the contractor and the supervision consultant throughout the duration of the project. This meant continuity in implementation and retention of institutional memory.

52. Change in design of civil works component. While the design changes directly or indirectly caused implementation delays, they did improve the efficiency of the berths, by slightly increasing the capacity and increasing the turning circle, allowing larger ships to come in safely. The other positive factor was that even with a change in design, there were no major cost overruns. The original civil works contract was awarded at a cost which was very close to the engineer’s estimate. The contract price increased by only 6.6 percent, including escalation and variation in contract.

53. The consequences of failing to rebuild the collapsed berths that are necessary to handle Karachi’s share of national port traffic would have been catastrophic. In the five years between 2012/13 and


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2017/18, the bulk cargoes that were handled at berths 10–17 more than doubled. Without the project, the ships calling at Karachi would have been queueing outside for twice as long as they spent at berth and the overspill cargo that could not be handled at the limited number of berths would have had to be handled by lighters. The total cost of not having berths 15–17C reconstructed has been estimated at over US$33 million by 2017/18 and would have risen thereafter. Although the project suffered from delays, especially to the dredging necessary to fully utilize berths 17A to 17C in 2018, these delays do not undermine the high economic rate of return on the project.

JUSTIFICATION OF OVERALL OUTCOME RATING

Rating: Moderately Satisfactory

54. The overall project outcome rating is Moderately Satisfactory based on the combined assessment of relevance, efficacy, and efficiency. There were some minor shortcomings in the operation’s achievement of its objectives and in its efficacy. The PDOs are consistent with the relevant Country Assistance Strategy/CPS, and relevance was high. The achievements of the project met most of its stated targets or is expected to meet these targets soon. While the economic rates of return were high, the efficiency was rated Moderate, primarily due to implementation delays.

OTHER OUTCOMES AND IMPACTS (IF ANY)

Gender

55. While the project did not carry out activities to enhance benefits especially targeted for women, it has considerable impact both men and women in business by increasing the effectiveness and efficiency of port operations.

Institutional Strengthening

56. The institutional strengthening component has provided a road map for KPT to restructure and function as a planner regulator with focus on resource and asset management and initiate port infrastructure developments critical for Pakistan’s economic development. The recommendations of the Business Plan and Strategic Development Plan prepared in 2016 were approved through a board resolution. KPT had already started implementation of (a) feasibility studies for concessioning of coal and bulk handling berths, (b) an ERP system, and (c) feasibility and PPP viability of constructing a port access elevated expressway through the project. However, these could not be completed in time and are now being undertaken by KPT through its own resources.

57. As part of the project, an EHS management system has been developed and implemented in KPT and an audit for ISO certification process is expected to be completed by end 2018. KPT also updated its financial and accounting manuals and KPT accounts are now fully IFRS compliant, providing greater access to market-based financing.

58. By project closing, more than 550 KPT employees were imparted training on EHS. Seven different courses in project management, contract management, monitoring and evaluation (M&E), creative writing, stress management, improving workplace effectiveness, and so on, were conducted through the


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Pakistan Institute of Management, and 156 officers benefitted from these trainings. About 54 officers were imparted port-related training—port planning and operations, improving port productivity, project management, and so on—through a special training program conducted by Asian Institute of Technology, Bangkok, Thailand.

Mobilizing Private Sector Financing

59. KPT was successful in developing the container terminals—Karachi International Container Terminal, Pakistan International Container Terminal, and recently the SAPT—with private terminal operators under the build-operate-transfer model of PPPs. Furthermore, even on the remaining berths managed by KPT, all cargo handling is conducted by private sector stevedores. The Business Plan and Strategic Development Plan prepared under the project recommends that KPT assumes greater planning and regulatory functions and identified proposals to mobilize private sector financing through landlord port management. Apart from the recommendations already under implementation, the plan also recommends the following for early action:

• Concession agreements for the handling of bulk cargo at the reconstructed berths 15–17

• Outsourcing of the operation and maintenance of tugs and pilot boats

• A service contract with a private dredging company for repairs and maintenance of dredgers. KPT in fact has decided to concession out dredging operations through the PPP model.

Poverty Reduction and Shared Prosperity

60. The main benefit of the project is avoidance of high queuing costs at KPT berths after the reconstruction of berths 15–17A. The avoidable cost of queuing would be extremely high at full occupancy without the project, with twice as much time spent waiting for a berth as spent handling cargo at the berth, and the total costs savings derived, including additional benefits, are estimated at US$33 million in 2017/18.

61. Savings in shipping costs are critical for Pakistan where agriculture contributes about 80 percent of export earnings directly and indirectly through its forward links to agriculture-based industries. KPT handles more than 60 percent of Pakistan’s sea-borne traffic and berths 10–17C primarily handles bulk cargoes comprising coal, fertilizers, wheat, cement, and rice. An efficient and well-integrated transport system with improved port operations reduces shipping and transportation costs, enhances service quality and improved connectivity between domestic and foreign markets, and plays a decisive role in attaining export-led growth, facilitating the development of a competitive economy, poverty reduction, and shared prosperity.

Other Unintended Outcomes and Impacts

62. The civil works were to have been completed by December 31, 2014; however, only 50 percent of the quay length was ready by the completion date. The remaining works could only be completed by May 2017 due to the additional work of (a) demolishing and clearing the fenders and logs at the project site, (b) removing the relics at the Ro-Ro berth and extracting screw steel piles (273 piles- 25 m deep) from


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berth 17, (c) preserving the heritage building, and (d) shifting the mosque near the NMB Wharf. This reconfiguration increased the width of the storage area by 30 m, which contributed to enlarging the berth storage yard by an additional 30,000 m2.

III. KEY FACTORS THAT AFFECTED IMPLEMENTATION AND OUTCOME

KEY FACTORS DURING PREPARATION

63. The project benefitted from the long engagement of the World Bank in Pakistan and there were adequate preparations to avoid delays in the approval process and agreement on the terms and the reforms proposed. Lessons from the previous engagement and the ongoing project helped the design of the project and the components.

64. The background analyses were sound with consideration of the country and sector contexts and the emerging trends in the maritime sector. The project objectives were straightforward as they addressed an immediate and critical problem due to the collapse of two of the berths at KPT and the partial suspension of port operations. The project design duly addressed key institutional strengthening requirements, which helped the implementation of the project in a low capacity environment, and informed on areas for long-term strategic engagement.

65. The Results Framework was well designed with the focus on delivering physical outputs, strategic directions, and operational benefits. The indicators were aligned with operational objectives and linked to the PDOs. Systems and processes were already in place at KPT to ensure the availability of monitoring data required for the review.

66. The project risks were correctly identified, except the unforeseen delays in extracting the relics of berth 17A and NMB Wharf from the seabed. The proposed mitigation measures design changes were adequate and added value to the project outcomes. The risks reflected KPT’s lack of capacity for contract implementation and financial management, which were addressed in the project design with an emphasis on institutional strengthening and capacity-building activities.

KEY FACTORS DURING IMPLEMENTATION

67. KPT’s higher-level commitment for the project remained inconsistent. Since project approval in 2010, there have been seven chairpersons at the helm of the KPT Board and seven GMs (P&D) with direct responsibility for the project. The lack of continuity and high turnover of senior most management at times delayed the timely processing and achievement of key milestones. The P&D Department, which was responsible for project implementation, lacked capacity at certain levels, for example, procurement and economic analysis. This was compounded by the lengthy internal approval process.

68. The project implementation suffered delays right from the early stages for the reasons stated, and also from delays in mobilizing a dedicated procurement team and the lengthy internal approval process.


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69. The works contract had to be extended due to the complex nature of piling and wreck removal work. But for the strong team of engineering consultant and contractors who worked around the challenges, including the weak management and the centralized decision-making process, the delays would have been longer. The success of the project can be largely attributed to the solid engineering team that supervised and implemented the project, despite the challenges and the unforeseen delays that necessitated the restructuring of the project.

70. The support of the GOP through the Economic Affairs Division (EAD) was an important factor. EAD’s efforts and facilitation extended from time to time, through regular portfolio review meetings, helped address key issues and streamline project activities.

71. The project implementation support was solid with good supervision and reporting. The in-country Task Team Leader (TTL) and the World Bank’s team anticipated challenges and took proactive steps for regular and continuous engagement with the Government and support to KPT for early resolution of the problems. Reporting of Implementation Status and Results Reports and Aide-Memoires were candid because of which issues were tackled head-on with inputs from the World Bank team and the project management team.

72. The most important factor for the project completion was continuity at implementation level. KPT’s Project Manager, Chief Resident Engineer (CRE), and Deputy CRE from the supervision consultant, Project Manager of Contractor, and the World Bank Task Team remained the same for most of the duration of the project, which helped in developing a conducive working relationship between all players involved.

IV. BANK PERFORMANCE, COMPLIANCE ISSUES, AND RISK TO DEVELOPMENT OUTCOME

QUALITY OF MONITORING AND EVALUATION (M&E)

M&E Design

73. The M&E was based on clear indicators that were measurable and were adequate to monitor the progress of the project toward achieving the PDO. The intermediate outcome indicators included physical outputs that linked to the PDO as well as project development enablers and strategies for policy and sector development. The Theory of Change was straightforward and the outcomes would be clearly visible as supporting economic development. The only drawback was that key data from the main development indicators would only be available at the end of the project; however, given the nature of this type of project, this was recognized and accepted during project preparation.

M&E Implementation

74. M&E implementation was carried out in-house by the various departments at KPT. Data on intermediate outcome indicators were generated internally and the information helped contain slippages by accelerating the civil works and interventions at the management level. While the project suffered implementation delays, these could have been worse had the M&E data not been available for decision making. KPT maintains data on the shipments handled at KPT berths and can report on PDO indicators on


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a real-time basis. Data from the adjoining berths (11 and 12), which were similar in design and operations, were used as a proxy to assess the outcome of the project, as the data for analyzing outcome indicators would be available only upon commencement of operations at the reconstructed berths.

M&E Utilization

75. M&E information was regularly used to provide evidence of achievement of outcomes and in general informed management and decision making of the project. M&E information was also regularly communicated to the MoPS and the Economic Affairs Division (the borrower). M&E information positively influenced implementation, in terms of accelerating the civil works when warranted. M&E was effectively used to inform the Project Steering Committee (PSC) and helped the PSC to make informed decisions on project issues.

76. Even when project berths were under construction, the project was providing M&E data for the recently completed adjacent berths 10 to 14, which were handling similar cargo. These data were used to have informed discussions on relevance of the PDO during the midterm review.

77. As the M&E implementation was carried out in-house by the various departments of KPT, it is highly likely that data analysis and the analytical approach would continue to be part of the decision-making process and would continue to be utilized in the monitoring of the future projects.

Justification of Overall Rating of Quality of M&E

78. Overall quality of M&E is rated Substantial as there were only moderate shortcomings in the design, implementation, or utilization of the M&E system. The M&E system was helpful in containing the delays as it informed the decision makers through simple data analysis and timely reporting of the project status. The indicators particularly helped in pushing the KPT management to make up the internal processing delays and act on all the three main areas under the institutional strengthening component.

ENVIRONMENTAL, SOCIAL, AND FIDUCIARY COMPLIANCE

Environment

79. The project was classified as Category B, due to potentially adverse environmental impacts from project interventions in the project influence areas. The only environmental safeguards policy triggered under the original project and maintained under the additional financings was Environmental Assessment (OP/BP 4.01). Compliance with this policy was satisfactory and no significant environmental safeguard issues arose during implementation. The borrower prepared all the required assessments and mitigation plans, which were properly disclosed. Adequate environmental monitoring was performed during civil works by the Marine Pollution Control Department of KPT and by the Environmental Safeguards Specialist from KPT. The overall assessment of implementation performance of the Environment Management Plan (EMP) was positive and generally effective, as most of the mitigation measures were adopted. The effectiveness of implementation of the EMP greatly benefitted from the contractor’s Construction Health Safety and Environmental Protection Plan. A Crisis Response Cell has been established after merging the existing EHS system and Marine Pollution Control Department (C) to strengthen the capacity of KPT. Staff


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of KPT have been trained in various emergency response trainings. The project has also established an EHS system to improve the overall environmental management in KPT.

Social Safeguards

80. No social safeguard policy was triggered for this project, and social risk remained low. During construction, a case of an old heritage building arose, which was planned to be demolished as part of the redesigning of berths. However, with deliberations with the client and the TTL, not only was the building saved from demolition but also a plan was made to refurbish it. During project design and appraisal, no need was felt to either establish a grievance redress mechanism nor were any gender-related activities considered.

Procurement

81. Procurement was Moderately Satisfactory in compliance with World Bank procedures and as set out in the Loan Agreement. The main procurements involved one large civil works contract and two consultancies, one for hiring supervision consultants and the other for hiring consultants to prepare KPT’s strategic/business plan. There were two smaller consultancies and some goods contracts. The procurement of the civil works contract faced an initial delay due to a complaint filed by one of the bidders. The complaint was eventually disposed of as being without substance, and the contract was awarded after clearance from Operations Procurement Review Committee (OPRC). Similarly, selection of consultancies also faced delays due to lack of procurement capacity and the long internal approval process of KPT. Contract management of the civil works remained satisfactory, and the performance of the supervision consultant was also satisfactory. However, processing of contractor and consultant’s time extension cases were delayed due to the long internal processing and approval by KPT. There were several iterations of the three-time extensions of the supervision consultants (with some cost implication), which KPT sent to the World Bank, but the information was incomplete. The first and second time extension cases were approved by the KPT Board without World Bank No Objection Letter (NOL). Eventually in May 2017, after substantive advice and support by the World Bank, KPT submitted a consolidated case for these time extensions and cost changes. The original contract was for 30 months and cost GBP 0.79 million, and PKR 78.6 million (US$2.3 million equivalent), and the revised cost for the duration of 66 months was GBP 1.3 million and PKR 143,519,289 (US$4 million equivalent). Overall the contracts were awarded and implemented well; however, the contract management documentation was weak and the approval took very long, largely due to management turnover. The project encouraged procurement and contract management staff to take relevant trainings but there was slow response and lack of encouragement from KPT’s management for such an initiative.

Financial Management

82. Financial management is considered to have been Satisfactory and in compliance with World Bank procedures and as set out in the Loan Agreement. The financial covenants, that is, hiring a Manager (Finance), Chief Accounts Officer, and Chief Internal Auditor were complied with, albeit with some delay. Budgeting, accounting, flow of funds, annual year-end financial reporting, and submission of audit reports were found acceptable by the World Bank. Submission of interim financial reports was occasionally delayed, but overall were acceptable. The internal control systems were also found to be adequate. KPT


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could improve its financial management and planning by ensuring its accounts were IFRS compliant well before the end of project target.

BANK PERFORMANCE

Quality at Entry

83. The project design was straightforward and the PDO was highly relevant and critical to the development of a trade-oriented economy. The World Bank has been active in KPT for more than 55 years and the experience from previous engagements helped in project preparations, especially in supporting institutional strengthening and prioritizing environmental sustainability. The task team had analyzed many alternatives—scenarios as well as alternate suitable locations before finalizing the project, and this has enabled the project to be a real value addition to the existing maritime infrastructure at KPT. The team was also cognizant to draw on the lessons from the ongoing construction of berths 10–14 and applied design changes to improve sustainability, efficiency, and risk mitigation.

Quality of Supervision

84. The World Bank’s supervision was effective in the implementation of the project. The team understood the low capacity at KPT and recommended solutions including the mobilization of experts. In addition to the routine missions twice a year, the expert teams from the World Bank made an average of five interim missions every year to advise KPT, and to follow-up on issues, and collaborated actively to achieve the development objectives.

85. The World Bank’s team provided technical support in dealing with the unexpected changes, adjusting the project design, and maximizing the value added by the project. The collaborative approach boosted the commitment of the Project Manager and the team as well as the engineering consultants and the civil work contractors, who offered extensive support as the project went through design changes and engineering challenges in removing the relics at berth 17. The presence of the TTL and the key team members in the region was helpful as the responses were faster and issues could be discussed and handled expeditiously before it snowballed into bigger problems. This has helped make up the delays thrust upon the project by the unavailability of KPT management.

86. The World Bank team regularly and candidly kept management informed of project status and issues.

Justification of Overall Rating of Bank Performance

87. The World Bank’s performance was rated Satisfactory for both quality at entry and quality of supervision, hence the overall World Bank performance is rated Satisfactory

RISK TO DEVELOPMENT OUTCOME

88. The project involved reconstruction of port infrastructure to boost capacity to serve existing traffic. The risk to development outcome was low, as the berths were already being utilized to capacity before the damages that led to the reconstruction of the berths.


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89. A potential risk area would be maintenance of the newly reconstructed infrastructure. It is informed that KPT has a separate department for carrying out maintenance, with budget allocated to support the maintenance program.

V. LESSONS AND RECOMMENDATIONS

90. The project was initiated after the collapse of berths 10 and 14, which were being reconstructed. To include ‘reconstruction of the failed berths’ in the PDO clearly conveyed the potential challenges in handling the project. This message appears to have had the right impact, in that the project team was able to select a capable engineering consultant and civil works contractor. Given the challenges that unfolded during the project cycle, the contractors played a large part in risk mitigation and completion of the project within the budgeted cost, albeit the delays in civil works.

91. A simple and adequate M&E system, including well defined and easily measurable indicators plays a key role in implementation. The PDO selected during design was easily measurable, and hence was not considered as additional burden by KPT, and was used effectively during implementation.

92. Lessons learned from previous projects undertaken by KPT. The task team leveraged on the experience of long engagement with KPT and the information on the construction works at the adjacent berths. These helped take preemptive actions including the design changes for value addition.

93. Timely corrective action to improve implementation arrangements. By 2013, the World Bank Task Team observed some lack of interdepartmental coordination, lack of timely reporting of progress and issues to senior management in KPT, and timely follow-up. While not part of original project implementation arrangement, however, KPT agreed to the formation of a PSC within KPT for project monitoring, approvals, and follow-up. This helped a great deal as timely and on-the-spot decisions were taken after proactive discussions between members of the committee.

94. Internalized implementation. The project did not use any Project Implementation Unit (PIU) or Project Management Unit, and implementation was carried out by the P&D Department directly. Additional resources were hired as project consultants to fill any gaps, for example, Environment Monitoring Specialist, Engineering Coordinator, and so on. The use of consultants was also very limited and predominantly in-house resources were utilized by KPT. Direct implementation not only resulted in doing away with PIU as one additional implementation layer but also reduced coordination issues. Continuity of key staff from KPT, consultants, contractor, and the World Bank was a critical factor in project success.

95. There was realization on the part of KPT on the benefits of implementing an ERP system. This was also a key recommendation of the strategic plan. However, the process to select the right system technology, that is, SAP, Oracle, or a home developed system took a very long time. The reason was KPT’s concerns of possible future complaints by competitors. The recommendation was eventually submitted to the KPT Board. Eventually this activity could not be completed during the project lifetime; however, KPT is now undertaking the same through its own resources. The main factor in this delay was lack of capacity at KPT to undertake this IT-related activity. Based on the World Bank team’s recommendation,


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KPT did hire consultants to help implement this activity; however, the long internal approval process and slow decision making delayed the implementation.

96. During appraisal KPT had informed that dredging activities, if any, will not be outsourced as KPT had its own fleet of dredgers. The cost was also substantially less compared to contracting to the private sector. Unfortunately, the main backhoe dredger became nonoperational in 2015. While efforts were being made to get the dredger operational, in parallel KPT should have outsourced dredging of the area adjacent to project berths. This would have resulted in all berths coming under utilization and generating revenue for KPT. This was not highlighted as a risk during appraisal and leads to the lesson whether activities critical to project implementation, with direct bearing on the outcomes, should be placed outside the control of the project.

97. Changes in design. Straightening of the quay wall, removal of Ro-Ro berths, shifting of the quay wall further landside, and increasing of the turning circle were technically justified and stand out as the right decisions. However, the inordinately long time in decisions and approvals resulted in delay in the completion of berths. To minimize the changes to design after commencement of works, civil works should be carefully designed, catering to future requirements.

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ANNEX 1. RESULTS FRAMEWORK AND KEY OUTPUTS

A. RESULTS INDICATORS A.1 PDO Indicators Objective/Outcome: Replace the lost port capacity

Indicator Name Unit of Measure Baseline Original Target Formally Revised Target

Actual Achieved at Completion

Improvement in occupancy rate of project berths

Percentage 74.00 55.00 55.00 44.51

01-Jul-2010 01-Jul-2010 30-Dec-2017 30-Dec-2017

Comments (achievements against targets): The end of project target was to stay between 45-55%. The 2017 data of the operational berths 15 to 17 indicate an occupancy rate of 44.5%, which can be considered to have met the target. However if 2017 data of berths 10 to 17 (where almost all bulk cargo handling is done) is analyzed in entirety, the occupancy rate is 72%. This means that the growth in cargo handling has increased from 38 million tonnes in 2009 to 53 million tonnes in 2017 i.e. an increase of 37%. This means that on one hand the higher than expected growth in cargo in future years will again put pressure on KPT's capacity, while on the other hand larger ship calls along with more efficient port operations will allow KPT's berths to remain occupied within acceptable levels.



Increase in berth throughput, tons per berth per year

Metric ton 0.00 1125000.00 1125000.00 849448.00

01-Jul-2010 01-Jul-2010 30-Dec-2017 30-Dec-2017


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Comments (achievements against targets): The target is 76 percent met. Of the newly reconstructed berths, only berths 15 to 17 are fully operational. Once the remaining berths 17A to 17C become operational, the throughput is expected to go up further. Objective/Outcome: Reduce shipping costs to the Pakistan Economy



Reduction in waiting to service time ratio

Number 0.54 0.35 0.35 0.33

01-Jul-2010 01-Jul-2010 30-Dec-2017 30-Dec-2017

Comments (achievements against targets): The waiting to service time ratio for the reconstructed berths 15 to 17 at end of project was 0.33 percent i.e. having met the end of project target of staying below 0.35. With additional berths expected to become operational by mid 2019, the waiting to service time ration will improve further.

A.2 Intermediate Results Indicators

Component: Replace the lost port capacity.



Reconstruction of berths 15, 16, 17 & 17A, quay wall of 922 meters and backyard facilities completed

Percentage 0.00 100.00 100.00 100.00

01-Jul-2010 01-Jul-2010 30-Dec-2017 30-Dec-2017

Comments (achievements against targets): The Civil works for reconstruction of 936 meters of quay wall and backyard facilities was completed before


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project closing. Berths 15, 16 and 17 (448 meters of quay wall) were completed by end of 2014. Berths 15 to 17 became operational in April 2015. Berths 17A, 17B and 17C (488 meters of quay wall) were completed by May 2017, however the project faced unforeseen obstacles in removing the older piles, and finally 100% completion was achieved by September 2017. These berths are yet to become operational, as required depth on seaside is not available for ships to berth. This is due to KPT not being able to take up dredging works as their dredging fleet has been in-operational. These three remaining berths are expected to become operational by mid 2019. Component: Increase Efficiency and Reduce shipping cost



Reconstruction of berths 15, 16, 17 & 17A, quay wall of 922 meters and backyard facilities completed

Percentage 0.00 100.00 100.00 100.00

01-Jul-2010 01-Jul-2010 30-Dec-2017 30-Dec-2017

Comments (achievements against targets): The Civil works for reconstruction of 936 meters of quay wall and backyard facilities was completed before project closing. Berths 15, 16 and 17 (448 meters of quay wall) were completed by end of 2014. Berths 15 to 17 became operational in April 2015. Berths 17A, 17B and 17C (488 meters of quay wall) were completed by May 2017, however the project faced unforeseen obstacles in removing the older piles, and finally 100% completion was achieved by September 2017. These berths are yet to become operational, as required depth on seaside is not available for ships to berth. This is due to KPT not being able to take up dredging works as their dredging fleet has been in-operational. These three remaining berths are expected to become operational by mid 2019. Component: Enhancing environmental sustainability.



KPT complying with ISO 14001 environmental

Text No compliance with ISO 14001

Compliance with ISO 14001

Compliance with ISO 14001

EHS Management System has been established. ISO/OHAS


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management certification process

underway, but certification was not achieved by project closing date.

01-Jul-2010 01-Jul-2010 30-Dec-2017 30-Dec-2017

Comments (achievements against targets): EHS Management system setup, and ISO complaint. Internal audit completed. Firm hired by KPT to conduct external audit and ISO/OHAS certification, which was 80 percent completed by June 2018. ISO certification is expected to be achieved by end 2018. Component: Increase Effectiveness



KPT's Five-year Business Plan developed and key short-term recommendations implemented

Text No five-year Business Plan

Key short-term recommendations implemented

Key short-term recommendations implemented

Strategic/Business Plan prepared. KPT has initiated the implementation of the following recommendations:

1. Feasibility study for Concessioning of bulk terminal.

2. Feasibility study for construction of Port Access elevated


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expressway.

3. Feasibility study for privatization of dredging operations.

4. Implementation of an Enterprise Resource Planning (ERP) system.

01-Jul-2010 01-Jul-2010 30-Dec-2017 30-Dec-2017

Comments (achievements against targets): Implementation of key short term recommendations was delayed, primarily due to frequent changes in senior management. KPT started work on implementing medium term recommendations. One activity (Feasibility for concessioning of Bulk Terminal) is nearing completion, one activity (Feasibility for Port Access Expressway) is awarded, while the remaining two activities are in advance stage of procurement. KPT's departments have prepared their individual implementation plans, and by project closing work had already commenced on implementing some of the key recommendations of the Strategic Plan.



KPT's audits fully complying with International Financial Reporting Standards (IFRS)

Text Partial compliance with IFRS

Full compliance with IFRS

Full compliance with IFRS

Full compliance with IFRS. KPT is also implementing Enterprise Resource Planning (ERP) system through own resources.

01-Jul-2010 01-Jul-2010 30-Dec-2017 30-Dec-2017


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Comments (achievements against targets): Full compliance with IFRS was achieved in 2013, well before project closing date


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B. KEY OUTPUTS BY COMPONENT

Objective/Outcome 1: Reduce shipping costs to the Pakistan Economy

Outcome Indicators 1. Reduction in waiting to service time ratio 2. Improvement in occupancy rate of project berths

Intermediate Results Indicators

1. Reconstruction of berths 15, 16, 17 and 17A, quay wall of 922 meters and backyard facilities completed 2. KPT's Five-year Business Plan developed and key short-term recommendations implemented 3. KPT's audits fully complying with International Financial Reporting Standards (IFRS) 4. KPT complying with ISO 14001 environmental management

Key Outputs by Component (linked to the achievement of the Objective/Outcome 1)

1. Component A. Reconstruction of berths 15, 16, 17, 17A, 17B, and 17C, quay wall of 936 m and backyard facilities completed 2. Subcomponent B1. Strategic/Business Plan developed 3. Subcomponent B2. KPT accounts are IFRS compliant 4. Subcomponent B3. EHS management system set up. ISO certification process under way. Actual certification expected by end 2018.

Objective/Outcome 2: Replace the lost port capacity

Outcome Indicators 1. Improvement in occupancy rate of project berths 2. Increase in berth throughput

Intermediate Results Indicators 1. Reconstruction of berths 15, 16, 17 and 17A, quay wall of 922 meters and backyard facilities completed

Key Outputs by Component (linked to the achievement of the Objective/Outcome 2)

1. Component A. Reconstruction of berths 15, 16, 17, 17A, 17B, and 17C, quay wall of 936 m and backyard facilities completed


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ANNEX 2. BANK LENDING AND IMPLEMENTATION SUPPORT/SUPERVISION

A. TASK TEAM MEMBERS

Name Role

Preparation

Supervision/ICR Hasan Afzal Zaidi Task Team Leader(s)

Uzma Sadaf Procurement Specialist(s)

Akmal Minallah Financial Management Specialist

Anwar Ali Bhatti Team Member

Edward T. Laing Team Member

Ghulam Farid Team Member

Yusuf Hussain Team Member

Rahat Jabeen Environmental Safeguards Specialist

Babar Naseem Khan Social Safeguards Specialist

Ninan Oommen Biju Team Member

B. STAFF TIME AND COST

Stage of Project Cycle Staff Time and Cost

No. of staff weeks US$ (including travel and consultant costs)

Preparation FY09 3.295 15,529.56

FY10 63.381 245,774.50

FY11 12.589 27,276.61

Total 79.27 288,580.67

Supervision/ICR

FY11 16.786 44,512.67

FY12 34.226 63,687.73

FY13 44.654 77,375.56


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FY14 45.227 132,058.30

FY15 39.472 82,819.43

FY16 51.831 108,691.29

FY17 31.797 48,912.86

FY18 33.757 138,838.05

Total 297.75 696,895.89


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ANNEX 3. PROJECT COST BY COMPONENT

Components Amount at Approval

(US$, millions)

Actual at Project Closing (US$, millions )

Percentage of Approval

Component A: Reconstruction of berths 15 to 17A

112.00 99.99 90

Component B: Institutional strengthening

3.80 2.75 73

Total 115.80 102.74 88.7


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ANNEX 4. EFFICIENCY ANALYSIS

Traffic

1. The reconstruction of berths 15–17A and B8 has come at an opportune time for KPT, as traffic volumes have been rising rapidly. The main cargoes to be handled at berths 10–17B are imports of dry bulks and iron and steel. After an initial decline of over a quarter in the two years since the project was initiated (2010), this traffic has more than doubled in the last five years, to 12.2 million tons (see table 4.1)

Table 4.1. Bulk Imports from 2007/08 to 2016/17 (tons, millions)

2007/08 2008/09 2009/10 2010/11 2011/12 2012/13 2013/4 2014/15 2015/16 2016/17 Coal 3,556 3,387 3,658 3,895 3,054 3,626 4,082 3,759 5,001 7,062 Fertilizer 1,486 675 1,360 609 636 619 961 1,129 1,289 1,442 Meal 0 34 56 26 29 47 207 611 912 568 Phosphate rock 477 196 369 341 298 321 247 312 478 492 Wheat 473 984 111 46 87 0 113 315 0 0 Seeds 36 89 140 47 87 29 160 143 183 325 Others 408 592 946 715 272 197 225 84 259 169 Bulk imports 6,436 5,957 6,640 5,679 4,463 4,839 5,995 6,353 8,122 10,058 Iron and steel 795 586 769 720 1,016 1,006 1,057 1,509 2,651 2,139 Total 7,231 6,543 7,409 6,399 5,479 5,845 7,052 7,862 10,773 12,197 Growth per year (%) — −10 13 −14 −14 7 21 11 37 13

Note: a. There is little export of bulk cargo at berths 10–17B. In 2009/10, exports of cement, clinker, and rice totaled 4.6 million tons, but the volumes are now minimal.

2. The vast majority of this traffic is to be handled at berths 10–17C, which will have deeper drafts than the other dry cargo berths. Minor volumes of steel and coal are sometimes handled at the shallower berths, but on the other hand, minor volumes of containers and miscellaneous cargoes are handled at berths 10–17. It will therefore be assumed that the cargoes shown in table 4.1 are broadly equivalent to those to be handled at berths 10–17B.

3. The growth rate of the cargoes shown has averaged 6 percent per year over the last 10 years. However, the trend has been very erratic, as shown below.

Growth of Bulk Imports

• 2004/05 to 2008/09: +18 percent per year

• 2009/10 to 2011/12: −14 percent per year

• 2012/13 to 2016/17: +20 percent per year

8 Berth 17C is assumed not to be used for dry bulk cargoes due to its shorter length of 136 m.


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• Average over 10 years, from 2008/09 to 2016/17, was +6 percent per year

4. Given the volatility of the traffic growth and the low probability that the extraordinarily high growth rate of the last four years could be sustained, this analysis will adopt the conservative assumption that the traffic growth over the medium term will revert to the 10-year average of 6 percent per year.

Berth Occupancy

5. The high traffic growth rate has resulted in a high level of occupancy at the reconstructed berths within a year of their completion. As shown in table 4.2, the traffic volumes in 2016/17 required 1,701 berth days, which would entail an occupancy of 57 percent at berths 10–17B (see table 4.3).

6. Without the project, however, berth occupancy would—at least in theory—have been 122 percent (that is, at berths 10–14 only). In practice, however, the berths would be unable to accept more cargo when its occupancy went much above 90 percent.

Table 4.2. Time at Berth Required for 2016/17 Bulk Traffic

Traffic, 2016/17 (tons, thousands)

Handing Speeds at Berths 10–17 (tons per day)a

Days at Berth per year

Coal 7,062 12,469 566 Fertilizer 1,442 4,207 343 Meal 568 2,798 203 Phosphate rock 492 5,887 84 Seeds 325 2,798 116 Other bulks 169 4,000 42 Iron and steel 2,139 6,171 347 TOTAL 12,197 — 1,701

Note: a. Averaged from the Deputy Conservator’s statistics for May–December 2017.

Table 4.3. Berth Occupancy in 2016/17, With and Without Berths 15–17B

With Reconstructed Berths Without Reconstructed Berths Berth days required 2016–17a 1,701 1,701 Available berth days Length of quay (m) 1,564 764 Average ship lengthb 190 190 Number of effective berths 8.2 4.0 Number of berth days per year 3,305 1,468 Berth occupancy 2016/17 (%) 57 116c

Note: a. See table 4.2. b. Averaged from the Deputy Conservator’s statistics for May to December 2017. c. In theory. In practice, the maximum capacity before queues become unacceptable with a choice of four berths would be around 92 percent (see appendix 1).

Waiting to Service Time Ratios

7. At these occupancies the waiting to service time ratios with and without the reconstructed berths would be as follows in 2016/17:


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• With the reconstructed berths 15–17B, the waiting to service ratio at 57 percent occupancy would be 0.03, based on the UNCTAD tables of waiting to service time ratios for random arrivals and service times conforming to an Erlang 2 distribution (see appendix 1).

• Without the newly reconstructed berths 10–14, the traffic is assumed to reach full capacity at 92 percent occupancy, which is the occupancy at which the waiting to service time ratio would reach 2.00 (see Appendix 1). At this occupancy, the capacity would be 9,673,000 tons.

Table 4.4. Waiting to Service Time Ratios

With Reconstructed Berths Without Reconstructed Berths Berth occupancy 2016/17 (%) 57 92a Waiting to service time ratio 0.03 2.0

Note: a. Maximum before waiting times become unacceptable.

Berth Capacities

8. The capacity of berths 10–17B at an occupancy of 95 percent (when the waiting to service time would reach 2.00 with nine berths) would be 20,470,000 tons.9

9. Without the reconstructed berths 15–17C, however, the full capacity of berths 10–14 would be only 9,673,000 tons.10

Allocation of Traffic

10. The reconstructed berths 10–17C would handle all the forecast bulk traffic until it reached their maximum capacity of 22,590,000 tons in 2026/27.

11. Without berths 15–17B, however, the remaining berths would only be able to handle traffic up to the capacity of 9,673,000 tons shown in the previous section. After that, additional traffic would have to be handled at other berths. The bulk cargoes, however, now come in relatively large ships, averaging 190 m in length, with relatively deep drafts, and so cannot be accommodated at KPT’s shallower berths. There might be a possibility of diverting some of the additional cargo to Port Qasim, but there is limited suitable quay length there. The most obvious solution would therefore be to discharge to barges and tow them to shallower draft berths at Karachi.

12. On this basis, the allocation of the traffic with and without the project would be as shown in table 4.5.

99 Current traffic of 12,197,000 tons multiplied by maximum occupancy of 95 percent divided by current occupancy of 57 percent. 10 Current traffic of 12,197,000 tons multiplied by maximum occupancy of 92 percent divided by the theoretical occupancy at berths 10–14 of 116 percent.


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Table 4.5. Forecast Allocation of Traffic Volumes (tons, thousands)

Forecast Traffica

With Project Without Project

All traffic handled at berths 10–17b

Handled at berths 10–14

Lightered

2016/17 12,197 12,197 9,673(b) 2,524 2017/18 12,929 12,929 9,673 3,255 2018/19 13,705 13,705 9,673 4,031 2019/20 14,527 14,527 9,673 4,853 2020/21 15,398 15,398 9,673 5,725 2021/22 16,322 16,322 9,673 6,649 2022/23 17,302 17,302 9,673 7,628 2023/24 18,340 18,340 9,673 8,666 2024/25 to 2035/36 19,440 19,440 9,673 9,767 20,607 20,470 9,673 10,796 21,843 20,470 9,673 10,796 22,590 20,470 9,673 10,796 22,590 20,470 9,673 10,796 22,590 20,470 9,673 10,796 22,590 20,470 9,673 10,796 22,590 20,470 9,673 10,796 22,590 20,470 9,673 10,796 22,590 20,470 9,673 10,796 22,590 20,470 9,673 10,796 22,590 20,470 9,673 10,796 22,590 20,470 9,673 10,796

Note: a. Full capacity, at 95 percent occupancy, with six berths. b. Full capacity, at 92 percent occupancy, with four berths.

Benefits

13. Against this background, the main benefits of the project would be

• Avoidance of high queuing costs at berths 10–14

• Avoidance of lighterage costs

• Economies of scale of the larger ships that can be accommodate at the reconstructed berths

Avoidance of High Queuing Costs at Berths 10–14

14. The avoidable cost of queuing would be extremely high at full occupancy of berths 10–14, with twice as much time spent queuing as waiting for a berth. The cost of the waiting time that would have been incurred is estimated as follows:

1,349 ship days at berth in 2016/17 (that is, 1,701 days × 92 percent/116 percent) × a waiting to service time ration of 2.0 (see appendix 1)


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× a daily ship cost of US$8,000 (Source: Clarkson’s shipping statistics) = US$21,585,000 per year.

Avoidance of Lighterage Costs

15. The avoidable cost of having to discharge to lighters for cargoes after berths 10–14 have reached their full capacity (see table 4.6) is assumed to be US$4 per ton. The total cost in 2016/17 would be US$4 x 2,524,000 tons (see table 4.6) = US$10,094,003.

Economies of Scale with Larger Ships

16. The reconstructed berths are deeper than the original berths, enabling economies of size for those cargoes that use the largest ships possible. These cargoes, which account for about half of the total (mainly coal and fertilizers), are now coming in vessels typically around 52,500 compared with 47,500 before the reconstruction. The economies of size for a typical 5,000 nautical miles voyage are estimated below at

US$0.2 per ton, giving a saving of US$1,200,000 in 2016/17.

Table 4.6. Savings Due to Economy of Size

Ship DWT 47,500 52,500 Voyage distance (n miles) 5,000 5,000 Voyage (days) 15 15 Return empty (days) 7.5 7.5 Total days 22.5 22.5 Daily ship cost, US$a 8,750 9,200 Voyage cost, US$ 196,875 207,000 Cost per ton, US$ 4.1 3.9 Saving, US$ per ton — 0.2

Note: DWT = ; a. Clarkson’s shipping statistics, averaged over the last five years.

17. The original economic evaluation carried out in 2010 also referred to a fourth benefit, which was faster handling speeds when the new, deeper berths are operated by private concession holders with new equipment. However, in 2018, the berths are still operated by KPT and no new handling equipment, which would be required to achieve the faster handling speeds, is planned.

Comparison of Cost and Benefits and EIRR

18. The cost and benefits of the reconstruction are compared in table 4.7. As shown, the EIRR is estimated at 50 percent, and the NPV with a discount rate of 12 percent is US$239 million.

19. The EIRR is very high because the consequences of failing to rebuild the collapsed berths that were necessary to handle national port traffic would have been catastrophic. Without the project, the ships calling at Karachi would have queued outside for twice as long as they spent at berth, and the overspill cargo that could not be handled at the limited number of berths would have to be handled by lighters at an estimated US$4 per ton. As shown in table 4.7, these costs would have been over US$33 million in 2017/18 and would have risen thereafter.


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Table 4.7. Comparison of Cost and Benefits and EIRR (2016/17 to 2035/36)

Costs Benefits Net Benefits

Investment M+O11 (a) Avoidance of Ship Waiting

Time

Avoidance of Lighterage

Costs

Economies of Size in

Shipping

2016/17 −110,000 −1,100 21,585 10,094 1,220 −79,421 2017/18 −1,100 21,585 13,021 1,293 33,506 2018/19 −1,100 21,585 16,124 1,370 36,609 2019/20 −1,100 21,585 19,413 1,453 39,898 2020/21 −1,100 21,585 22,900 1,540 43,385 2021/22 −1,100 21,585 26,595 1,632 47,081 2022/23 −1,100 21,585 30,513 1,730 50,998 2023/24 −1,100 21,585 34,665 1,834 55,150

2024/25 to 2034/35

−1,100 21,585 34,665 1,944 55,150 −1,100 21,585 34,665 1,944 55,150 −1,100 21,585 34,665 1,944 55,150 −1,100 21,585 34,665 1,944 55,150 −1,100 21,585 34,665 1,944 55,150 −1,100 21,585 34,665 1,944 55,150 −1,100 21,585 34,665 1,944 55,150 −1,100 21,585 34,665 1,944 55,150 −1,100 21,585 34,665 1,944 55,150 −1,100 21,585 34,665 1,944 55,150 −1,100 21,585 34,665 1,944 55,150

2035/36 −1,100 21,585 34,665 1,944 55,150 EIRR = 50%

NPV @12% 239,002

Table 4.8. Waiting to Service Time Ratios with Four, Six, Eight, and Nine Berths

Number of Berths Occupancy 4 6 8 9

0.60 0.13 0.06 0.04 0.03 0.61 0.14 0.07 0.04 0.03 0.62 0.15 0.07 0.04 0.03 0.63 0.16 0.08 0.05 0.03 0.64 0.17 0.08 0.05 0.04 0.65 0.19 0.09 0.05 0.04 0.66 0.20 0.10 0.06 0.05 0.67 0.22 0.11 0.06 0.05 0.68 0.23 0.12 0.07 0.06 0.69 0.25 0.13 0.08 0.06 0.70 0.27 0.14 0.09 0.07 0.71 0.29 0.15 0.10 0.08 0.72 0.31 0.17 0.11 0.08 0.73 0.34 0.18 0.12 0.09 0.74 0.36 0.20 0.13 0.10

11 Maintenance and operating


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Number of Berths Occupancy 4 6 8 9

0.75 0.39 0.22 0.14 0.11 0.76 0.42 0.24 0.15 0.13 0.77 0.45 0.26 0.17 0.14 0.78 0.49 0.28 0.19 0.16 0.79 0.53 0.31 0.21 0.17 0.80 0.57 0.34 0.22 0.19 0.81 0.63 0.38 0.24 0.21 0.82 0.68 0.42 0.27 0.23 0.83 0.74 0.47 0.31 0.26 0.84 0.81 0.50 0.34 0.29 0.85 0.90 0.56 0.38 0.32 0.86 0.98 0.61 0.42 0.36 0.87 1.07 0.67 0.47 0.40 0.88 1.16 0.75 0.52 0.45 0.89 1.29 0.83 0.58 0.50 0.90 1.43 0.92 0.64 0.56 0.91 1.70 1.05 0.71 0.63 0.92 2.10 1.20 0.79 0.72 0.95 2.00


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ANNEX 5. BORROWER, CO-FINANCIER AND OTHER PARTNER/STAKEHOLDER COMMENTS

1. Written comments were received from the Economic Affairs Division (EAD) of the Government of Pakistan (the Borrower), and Karachi Port Trust (Project Implementing Entity). The World Bank appreciates the suggestions provided, which helped in further editing and refining this report. Comments from EAD


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Comments from KPT


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ANNEX 6. SUPPORTING DOCUMENTS (IF ANY)

A. Original Plan of Project Berths


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B. Final Revised Plan of Project Berths


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C. KPT Board Resolution on Dredging of Berths 17A, 17B, and 17C

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