Project Performance Audit Report
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Project Performance Audit Report

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ASIAN DEVELOPMENT BANK PPA: MLD 24342 PROJECT PERFORMANCE AUDIT REPORT ON THE SECOND MALÉ PORT PROJECT (Loan 1226-MLD[SF]) IN THE MALDIVES October 2000 CURRENCY EQUIVALENTS Currency Unit – Rufiyaa (Rf) At Appraisal At Project Completion At Operations Evaluation (February 1993) (July 1998) (March 2000) Rf1.00 = $0.096 $0.085 $0.086 $1.Rf10.445 Rf11.77 Rf11.55 ABBREVIATIONS ADB − Asian Development Bank EIRR − economic internal rate of return FI− financial internal rate of return GDP − gross domestic product m − meter MCPW − Ministry of Construction and Public Works MFA − Ministry of Foreign Affairs MPA − Maldives Ports Authority OEM − Operations Evaluation Mission PCR − project completion report SDR − special drawing rights TA − technical assistance teu − twenty-foot equivalent unit NOTES (i) The fiscal year (FY) of the Government and the Maldives Ports Authority ends on 31 December. iv (ii) (ii) In this report, “$” refers to US dollars. Operations Evaluation Office, PE-554 v CONTENTS Page BASIC DATA ii EXECUTIVE SUMMARY iii MAP v I. BACKGROUND 1 A. Rationale 1 B.Formulation C. Purpose and Outputs 1 D. Cost, Financing, and Executing Arrangements 2 E. Completion and Self-Evaluation 2 F. Operations Evaluation 2 II. ...

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  ASIAN DEVELOPMENT BANK               
 
 
 PPA: MLD 24342
PROJECT PERFORMANCE AUDIT REPORT   ON THE   SECOND MALÉ PORT PROJECT (Loan 1226-MLD[SF])   IN   THE MALDIVES               October 2000
    CURRENCY EQUIVALENTS  Currency Unit – Rufiyaa (Rf)   At Appraisal At Project Completion At Operations Evaluation  (February 1993) (July 1998) (March 2000) Rf1.00 = $0.096 $0.085 $0.086 $1.00 = Rf10.445 Rf11.77 Rf11.55           ABBREVIATIONS  Development Bank Asian  internal rate of return economic  internal rate of return financial  domestic product gross  meter  Ministry of Construction and Public Works  Ministry of Foreign Affairs  Ports Authority Maldives  Operations Evaluation Mission  project completion report  special drawing rights  assistance technical  equivalent unit twenty-foot
 ADB EIRR FIRR GDP m MCPW MFA MPA OEM PCR SDR TA teu         NOTES  (i) The fiscal year (FY) of the Government and the Maldives Ports Authority ends on 31 December.
 
 
(ii)
(ii)
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In this report, “$” refers to US dollars.  
 
Operations Evaluation Office, PE-554
 
 
v  CONTENTS
   BASIC DATA  EXECUTIVE SUMMARY  MAP  I. BACKGROUND   A. Rationale  B. Formulation  C. Purpose and Outputs  D. Cost, Financing, and Executing Arrangements  E. Completion and Self-Evaluation  F. Operations Evaluation  II. PLANNING AND IMPLEMENTATION PERFORMANCE   A. Formulation and Design  B. Cost and Scheduling  C. Consultant Performance, Procurement, and Construction  D. Organization and Management  III. ACHIEVEMENT OF PROJECT PURPOSE   A. Operational Performance  B. Performance of the Operating Entity  C. Sustainability  IV. ACHIEVEMENT OF OTHER DEVELOPMENT IMPACTS   A. Socioeconomic Impacts  B. Environmental Impacts  C. Impacts on Institutions and Policy  V. OVERALL ASSESSMENT   A. Relevance  B. Efficacy  C. Efficiency  D. Sustainability  E. Institutional Development and Other Impacts F. Overall Project Rating G. Assessment of ADB and Borrower Performance  VI. ISSUES, LESSONS, AND FOLLOW-UP ACTIONS  
 
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A. B. C.
Key Issues for the Future Lessons Identified Follow-Up Actions
    APPENDIXES   
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 vii BASIC DATA Second Malé Port Project (Loan 1226-MLD[SF])  PROJECT PREPARATION/INSTITUTION BUILDING  TA No. Type Amount Approval Date TA Name 1656 Second Malé Port PPTA $250,000 13 Jan 1992 1865 Institutional Strengthening of the A&O $200,000 1 Apr 1993 Ministry of Public Works and Labor  r  KEY PROJECT DATA ($ million equivalent)1pes  AoLnaDA BmuneD coActuts  al Total Project Cost 10.41 10.20 Foreign Exchange Cost 8.80 7.85 Local Currency Cost 1.61 2.35 ADB Financed 8.80 7.85 Borrower Financed 1.61 2.35 ADB Loan Amount/Utilization 7.85 ADB Loan Amount/Cancellation 1.26  KEY DATES Expected Actual Appraisal Dec 1992 2-9 Dec 1992 Loan Negotiations End Feb 1993 1-4 Mar 1993 Board Approval End Mar 1993 1 Apr 1993 Loan Agreement 6 May 1993 Loan Effectiveness 4 Aug 1993 12 Aug 1993 Project Completion 30 Apr 1996 30 Apr 1997 Loan Closing 31 Oct 1996 12 Mar 1998 Months (effectiveness to completion) 33 45  KEY PERFORMANCE INDICATORS(%) PPAR PCR Appraisal Financial Internal Rate of Return 12 18 23 Economic Internal Rate of Return 25 22 27  BORROWER of the Maldives Republic  EXECUTING AGENCYMinistry of Foreign Affairs  IMPLEMENTING AGENCYMinistry of Construction and Public Works  MISSION DATA  Type of Mission Missions(no.)Person-Days(no.) Fact-Finding 1 30 Appraisal 1 28 Project Administration Review 3 17                                                 A&O = advisory and operational, ADB = Asian Development Bank, PCR = project completion report, PPAR = project  performance audit report, PPTA = project preparatory technical assistance, TA = technical assistance. 1  ADB’s loan amount was approved in special drawing right (SDR) equivalents for SDR6.395 million.
 
  
Project Completion Operations Evaluation
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 EXECUTIVE SUMMARY
 
  The Project aimed to increase port capacity at Malé for foreign shipping, and was included under the Government’s Eighth Five-Year Plan (1991-1995) for sustaining economic growth. The project scope included (i) construction of an alongside berth to service vessels up to 6,000 deadweight tons; (ii) ancillary works covering pavement, pier reclamation, utility extension, seawall rehabilitation, and construction of a marine workshop; (iii) provision of cargo-handling equipment, port service craft, workshop tools, and navigation aids; and (iv) consulting services for detailed design, preparation of tender documents, implementation administration, institutional strengthening of the Maldives Ports Authority (MPA), construction supervision, and a planning study. In conjunction with the Asian Development Bank’s (ADB) loan, additional consulting services were included under technical assistance (TA) to strengthen project management capabilities of the Ministry of Construction and Public Works (MCPW).   ADB’s Appraisal Mission was completed in December 1992, and ADB’s loan of SDR6.395 million ($8.8 million equivalent) and TA for the Project were approved on 1 April 1993.2 The Borrower was the Republic of Maldives. The Ministry of Foreign Affairs was the appointed Executing Agency, and MCPW, with responsibility and experience in public works construction covering harbors, seawalls, and roadworks, was designated the Implementing Agency. MPA was the operating authority with responsibility and control over Malé Port operations.   The Project was implemented with an expansion in the project scope to extend construction of the alongside berth from 70 meters to 101 meters, and to purchase a 45-ton stacker and additional 25-ton forklift. The overall Project was completed in May 1997, nearly 12 months later than envisaged at appraisal. The final project cost of $10.2 million was slightly less than the appraisal estimate of $10.4 million. ADB’s loan disbursements were $0.95 million less than the amount approved. The attached TA financing amounted to $183,992 or 92 percent of the total amount approved. Overall financing by ADB represented 77 percent of the total project cost.   The Project s evaluation results provide strong support for the Project s overall ’ ’ success. The project rationale to increase port capacity and help sustain economic growth proved relevant with cargo throughput double the appraisal forecasts. The efficacy of project outputs and operational targets measured against appraisal expectations was achieved except for delays in completion. The economic internal rate of return for the Project of 26.8 percent attests to the operational efficiency achievements and economic viability of the Project. The financial internal rate of return for the Project is a high 23.3 percent and compares favorably with the weighted average real cost of capital of about 11 percent. The overall financial performance of MPA also proved stronger than projected, and development impacts for institutional strengthening of MPA and MCPW were largely achieved. The socioeconomic benefits were largely in the form of avoided congestion costs that would deter investment in the Maldives and lessen the growth of employment opportunities. Improved working conditions for port labor and opportunities for higher paid employment in accounting, computer, and management services were also beneficial outcomes.                                                 2 Loan 1226-MLD(SF):Second Malé Port Project,for SDR6.395 million; and TA 1865-MLD: Institutional Strengthening of the Ministry of Public Works and Labor,for $200,000, approved on 1 April 1993.
 
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 The less than satisfactory efficacy aspects of the Project include implementation delays in appointing consultants and awarding civil contracts, and the continuing weaknesses in MPA’s capacity to (i) meet reporting covenants, (ii) provide timely annual reports, (iii) operate effective information and accounting systems, and (iv) take responsibility for planning future port operations. ADB’s covenanted time-bound action plan for MPA to carry out a review of privatizing operations was also ineffective. These weaknesses detract from the overall effectiveness and achievements of the Project—which is rated successful.   The single key issue to arise from this operations evaluation concerns the need to overcome political constraints against the deeper privatization of MPA’s operations.   The key lesson from the Project is the shortage of qualified and experienced staff in MPA to operate the computer-based accounting and information systems, and take responsibility for planning and identifying expansion requirements as intended under MPA’s Charter. Staff requirements for institutional strengthening of MPA should have been more comprehensively addressed under the Project.  Apart from loan administration, no follow-up action is recommended for ADB. Follow-up actions aimed at addressing observed weakness in organization and planning for port development requirements are recommended. The Government should, as soon as possible, (i) clarify and strengthen the organization responsible for planning and identifying expansion requirements at Malé Port, (ii) develop a master transport plan that identifies port expansion requirements consistent with meeting least-cost development considerations for Malé Port and the outer islands, (iii) initiate an immediate feasibility study to extend the wharf area at Malé Port to two berths, and (iv) initiate a study for privatizing the management and cargo-handling operations of MPA by way of a lease.  
I. BACKGROUND
 A. Rationale  1. The Project was included as a priority under the Government’s Eighth Five-Year Plan (1991-1995) for sustaining economic growth. The Government’s strategy was to continue to encourage expansion of the tourist and fishing industries, and remove congestion constraints for the transfer of freight. The Asian Development Bank’s (ADB) strategy for development assistance to the Maldives at the time of appraisal was to continue assistance with infrastructure over the medium term. ADB’s support for the Project was of particular relevance given the high economic growth of the 1980s, the lack of wharf facilities for foreign shipping, the increasing cost of freight as reflected in an average turnaround time of 18.5 days for the loading and unloading of vessels by lighter system, and the absence of foreign investment funding.  B. Formulation  2. The Project was formulated as a follow-on from Loan 911,1 addressed congestion which constraints through rehabilitation improvements and construction of a separate harbor for interisland vessels.2 Consideration for construction of an alongside berth under Loan 911 was deferred pending findings of a site selection study. Technical assistance (TA) for a feasibility study of the Project, including site selection, was approved in January 1992.3Fact-finding for the Project was carried out in May 1992, and the Appraisal Mission was completed in December 1992. ADB’s loan of SDR6.395 million ($8.8 million equivalent) and TA for the Project were approved on 1 April 1993.4The Borrower was the Republic of Maldives.  C. Purpose and Outputs  3. The stated project objective5 was to improve foreign cargo handling and enhance port productivity. The project scope included (i) construction of an alongside berth of 70 meters (m) in length to service vessels up to 6,000 deadweight tons; (ii) ancillary works covering pavement, pier reclamation, utility extension, seawall rehabilitation, and construction of a marine workshop; (iii) provision of cargo-handling equipment, port service craft, workshop tools, and navigation                                                 1 Loan 911-MLD:Malé Port Development Project, for SDR4.968 million, approved on 20 October 1988. The project scope included reclaiming land for the future construction of an alongside berth, increasing the port storage area, and constructing cargo sheds. 2 PCR: MLD 20069:Malé Port Development Project, March 1993, rated the Project generally successful. The need to tailor technical assistance for institutional strengthening to the absorptive capacity of the institution (Maldives Ports Authority) and available human resources was identified as the only lesson learned. Postevaluation in August 1994 reconfirmed the project completion report’s assessment rating, and identified the advantages of allowing flexibility in the design of a project to respond to changing circumstances. roved anuary 1992. 432162ao nM-DL-M56: LD LT 61 AS(eScFo)n:condSeé Malla éoPtrP r Md ,  rPotoejtcfPorro j$e2c5t,ppaJ 31 no 56M-DLde0T, 0 0A08,1 e attach; and thlim noil6RDS593. r fo: Institutional Labor, April 1993.for $200,000, a 1 5 SHterreenagfttheer,n itnhge  omf tehaen iMnign isotfr yo bojfePctuivblei calWsoo rkesn caonmdht sessaveihca eoft enemctjero pptor goal and secetdndep p rsonvae dd noin developments from the Project.
 
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aids; and (iv) consulting services for detailed design, preparation of tender documents, implementation administration, institutional strengthening of the Maldives Ports Authority (MPA), construction supervision, and a container storage and transportation planning study. In conjunction with ADB’s loan, TA (para. 2) was provided to strengthen the operation and management capabilities of the Ministry of Public Works and Labor.6This was to be achieved by providing advice on organization, management of maintenance, and procurement including preparation of tender documents and bid evaluation, and overseas training for the Ministry of Construction and Public Works (MCPW) staff.7  4. The alongside berth was expected to reduce dependency on the existing lighter system for cargo loading and unloading, reduce ship turnaround time, and facilitate cargo transfers by container. The cargo-handling equipment, port service craft, and other facilities were expected to supplement MPA’s working capital and improve the efficiency of cargo transfer from the wharf and basin apron to storage areas. The institutional measures from consulting services specified under the project scope and advisory TA were expected to strengthen project management capabilities of MPA and MCPW. Appendix 1 provides details of the project scope and targets.  D. Cost, Financing, and Executing Arrangements  5. Details of expected project costs, TA costs, and sources of financing at appraisal are presented under basic data (page ii). ADB’s loan of $8.8 million equivalent to the Government was drawn from ADB’s Special Funds resources to cover the entire foreign exchange cost of the Project, including service charges on ADB’s loan during construction. The Ministry of Foreign Affairs (MFA) was the Executing Agency; and MCPW, with responsibility and experience in public works construction covering harbors, seawalls, and roadworks, was designated the Implementing Agency.  E. Completion and Self-Evaluation  6. ADB’s project completion report (PCR) circulated in July 1998 rated the Project generally successful as the Project (i) was completed below the appraised cost estimate, (ii) met its basic objectives, and (iii) was financially and economically viable.8 The TA for institutional strengthening of MCPW was not given a rating assessment, but from the stated favorable points of completion and outcomes, a generally successful rating is inferred. Based on the information covering implementation and operations of Malé Port to year-end 1996, the Operations Evaluation Office is of the opinion that the PCR assessment of the Project was realistic. Recommendations from the PCR for follow-up included (i) reducing the free-parking period for containers from 10 days to 7 days, (ii) converting the existing transit shed into a container freight station, and (iii) making pilotage compulsory to ensure the safe passage of vessels in the port.
                                                6 Along with initiatives for strengthening the Ministry of Public Works and Labor in 1996, the Government renamed t7hesM ianirsetrsyu lotf  oPfusblaicv inWgosr kosn  atnhde  Lcaobsotr  otfh ec oMninsitsrturyc tiofo nC oannsdt rduectpiorencaiantdi oPnu bolfi ct hWeodroklsl.a r against the Borrower’s  A loan in special drawing rights, ADB approved an expansion in the project scope to extend construction of 8Tthe alongsstiimdea tbeedrtah  ftion a1n0c1i alm ,r aatnedotfo  rpetuurrcnh aosfe1a8  4p5e-trcoennrteaancdh setcaocnkoemriacnrda taenoafdrdeittuironn aolf225-2t opne rfcoernktli.ftT.he  he PCR e corresponding estimates at appraisal were 12.3 percent and 24.6 percent.