PROJECT INFORMATION DOCUMENT (PID)
CONCEPT STAGE
Report No.: AB1628
Project Name / TRADE AND TRANSPORT INTEGRATIONRegion / EUROPE AND CENTRAL ASIA
Sector / Ports, waterways and shipping (50%); General transportation sector (20%); Other domestic and international trade (20%); Railways (10%)
Project ID / P093767
Borrower(s) / CROATIA
Implementing Agency
Port of Ploce Authority
Croatia
Environment Category / [X] A [ ] B [ ] C [ ] FI [ ] TBD (to be determined)
Date PID Prepared / May 17, 2005 (updated August 2nd, 2005)
Estimated Date of Appraisal Authorization / February 28, 2006
Estimated Date of Board Approval / August 30, 2006
1. Key development issues and rationale for Bank involvement
The main strategic objective of the Croatian government is successful accession to the European Union (EU) so that Croatia enters the EU as a dynamic and competitive economy that can rapidly achieve convergence to EU living standards. This includes supporting an increase in the economic growth rate, since the per capita gross national income, at purchasing power parity, was only 32 percent of that the EU 15 in 2003. It will be achieved through a downsizing of the state presence in the economy, encouraging enterprise restructuring and new business creation. The Country Assistant Strategy (CAS No-30717-HR) supports accordingly the government’s growth and reform strategy for successful EU accession, with a focus on improvement of the investment climate, fiscal consolidation and strengthened governance. The proposed project is listed in the CAS for Fiscal Year 2007, and rated high in terms of strategic rewards.
Proposed geographic focus on Corridor Vc. Trans-European corridors carry the vast majority of all trade and transit in the region. Croatia is crossed by two of them, Corridor X and V, with two branches Vb and Vc, as shown on the map above. Corridor X was the first to be upgraded with new road, rail and border infrastructure, given its strategic significance for Croatia and the EU. Corridor Vb, connecting Rijeka to Budapest, is also being upgraded, in part under the Rijeka Gateway Project. In comparison, Corridor Vc underwent limited upgrades including rail tracks and post-conflict emergency reconstruction in the Port of Ploce.
Pan-European Corridor Vc connects the Port of Ploce, in Croatia, to major cities, mines and heavy industrial centers in Bosnia Herzegovina (BiH), in particular Mostar (77 km), Sarajevo (199 km), Zenica (275 km) and Zvornik, both by road and rail, through a mountainous environment (see map of industrial centers above). The corridor has a comparative advantage to serve these markets, but alternatives exist, using other ports or the Danube. Beyond BiH the Corridor Vc reaches the Danube Port of Vukovar in Croatia before ending in Budapest (Hungary). The Port of Ploce, located on the Adriatic coast at mid-distance of Split and Dubrovnik, is the gateway of the corridor and as such impacts its overall efficiency.
Traffic. Traffic is experiencing strong growth (+40 percent in 2005 foreseen by Ploce Port) following the recent purchase and restructuring of BiH companies, by large international firms, such as Mittal Steel, the world’s largest steelmaker. Over the next five years, preliminary projections estimate the annual traffic volume to increase from 2 million tons (2004) of about 6.5 million tons. About 80 percent of the Corridor traffic transits to/from BiH. About 75 percent is dry bulk cargo (coal, alumina, bauxite). Most of this bulk traffic comes from four large clients (mine and metallurgical factories) located on Corridor Vc and one client in Split (cement). These companies require sustained inflows of raw materials and generate new outflows of metal products. They are sensitive to any disruption of inputs and to the level of logistical cost. General cargo (steel/aluminum products, timber, bananas) and particularly containerized cargo, has grown in parallel, with containerized cargo increasing from 4,000 in 2001 to 14,500 containers (TEU) in 2004, despite the lack of equipment for such cargo in the Port of Ploce. It is subject to significant seasonal fluctuation linked to tourism. General cargo is more time sensitive and face active competition from road transport.
Economic role of Corridor Vc. The Corridor Vc generates significant, year-around, economic direct and indirect activity for Southern Dalmatia with a direct economic activity preliminarily estimated at about US$14 per ton on average for the Port, the Croatian railway and other transport intermediaries. It is an essential income source for this isolated part of Croatia with limited economic activity aside from seasonal tourism. Capturing the additional transit cargo generated by new market demand provides as such an opportunity for further economic development for Southern Dalmatia.
Corridor Bottlenecks for Bulk. The corridor operated relatively well at low traffic volumes, but, with traffic increases, weaknesses in operation, infrastructure, and related equipment are becoming more visible, leading to delays, demurrage and dissatisfaction from some shippers (insufficient storage, slow handling). Weaknesses include: (i) insufficient capacity in port handling, port storage and rail transport (rolling stock/track) to face the foreseen traffic increases; (ii) majority of transport time spent in the port of Ploce (estimated at 30 to 50 percent) and to a lesser extent at other transport nodes (border, clearance at destination) resulting in low effective corridor speed; (iii) railway operations disrupted by borders (22 km from Port) and requiring use of two to three railway companies (up to two in BiH) for each rail transportation and change in locomotives; and (iv) insufficient coordination among participants in the port community leading to unforeseen peak in traffic and congestion. A proposed EBRD/EIB project is expected to support rail track upgrade in BiH along the corridor and ensure sufficient track capacity. Increase in rail rolling stock availability could be partly addressed by increasing train turnaround time, through cooperation along the corridor. The Port of Ploce will then be the main corridor capacity constraint both in terms of handling and storage with an estimated capacity of 4 million tons only, expected to be reached by 2007-8.
Challenges for Container Traffic. Containerized cargo experiences significant competition from road transport to and from Europe but also offers value adding opportunities. In a sample case, transport time on the corridor to Sarajevo was found to be relatively long with 70 percent of time spent in the Port of Ploce. Like for bulk cargo, these delays are explained by capacity constraints in the port handling and in the coordination of information flows along the corridor, including within the port community. Road and trucking capacity is presently sufficient, although border crossing times tend to reach three hours in summer time. Traffic growth is expected to continue as a result of new industrial demand, growing imports from China and the EU “Motorway of the Seas” policy that encourages short sea shipping. Building on this trend the region around Ploce could develop a range of value-adding activities in the existing Free Trade Zone, which covers 214 hectares and has been approved by the Government for a thirty year period for activities such as production, trade, and provisions of services.
Ensuring Fair Return on Public Investment. Limiting public investment and attracting private investment in the maritime sector has been a goal of the Croatian Government, as demonstrated under the on-going Rijeka Gateway Project, which provides annual targets for increased private sector participation in the Port. Given the transit nature of traffic, it is in the Government’s interest to generate sufficient revenues through port dues and concession fees to partly cover the infrastructure investment it undertakes, while providing concessionaire(s) with an environment to remain competitive (in terms of price/quality ratio) and profitable. Presently, in the absence of a concession agreement, concession revenues are negligible. A detailed and quantified analysis of options to establish concession fees commensurate with the level of investments required, while remaining competitive, will be part of the project preparation. The project would build on the accomplishment of the Rijeka Gateway Project, and also on a partnership with EBRD and potentially IFC.
Supporting EU Accession. The project would potentially support three elements of the EU Accession agenda: (i) Integrated Border Management Program; (ii) railway track access; and (iii) Motorway of the Seas Policy. The EU Integrated Border Management program supports an extensive border management program to improve border procedures, align them to EU requirements, and strengthen relevant agencies and their coordination. The project may support the implementation of the corresponding strategy and action plan, prepared by Croatia. This would build on the follow up phase of the Trade and Transport Facilitation Project in Southeast Europe[1] that aims at improving the economic growth and regional cohesion by enhancing the sustainability, competitiveness and efficiency of rail, maritime and road transport Trans-European Networks. The project would also support the definition of more efficient track access solutions between Croatia and BiH in line with EU policies. This would contribute to new business generation and to the reduction of financial deficits and fiscal burden under the ongoing Railway Modernization Project[2]. Last by encouraging short-sea shipping through the Port of Ploce, the project would reduce road congestion and its related costs in line with the EU “Motorway of the Seas” Policy.
Learning from Other Projects. Building on the Rijeka Gateway Project, the project would strengthen the Port Authority capacity early on. The Project Team would advance the preparation of supporting documents to obtain building permits to avoid implementation delays (TTFSE). It would also draw on the on-going dialogue with the various stakeholders in TTFSE, Rijeka Gateway, and Railway Modernization to establish a dialogue between parties involved in the Corridor operation.
2. Proposed objective(s)
The overall development objective is to improve the corridor Vc capacity, efficiency and quality of services to meet projected traffic demand with particular focus on the Ploce Port and support regional development. The project would seek to achieve this objective through (i) increased port capacity for bulk and container/multipurpose traffic; (ii) reduction of administrative barriers for rail transport along Corridor Vc; (iii) optimization of the transport chain to and from Ploce Port; (iv) development of activities in the existing Free Trade Zone; (v) improved effectiveness and coordination of border agency activities; and, potentially, (vi) a public-private partnership to address these priorities, reduce commercial risks and secure financing for superstructure and port cargo handling equipment.
Potential indicators. The tentative main indicators of performance would include: (i) increased transport volume on the corridor; (ii) increased economic activity in the region; (iii) income from port dues and concession fees; and (iv) increased average speed of container movement from vessel arrival in the port to arrival in Sarajevo.
3. Preliminary description
Project cost and components. The initial total project cost is estimated at Euro 82 million, with about US$50 million from a World Bank loan. The remainder is expected to be financed by the Government and an EBRD loan. In addition to the project, private sector investment in superstructure and equipment is expected at between US$20 and 25 million under a concession arrangement. The proposed three components are as follows:
Port Component : (i) construction of new proposed bulk facility and multipurpose/container terminal; (ii) capacity building in the Port Authority to create an attractive environment for private investment and strengthen its capacity to manage concessions; (iii) support to maximize the impact of the existing port Free Zone; and (iv) rehabilitation of the rail/other infrastructure within the port area.
Trade Facilitation Component: (i) integration of information flows among border agencies and across border (IT equipment, servers, software, training, technical assistance) in line with the Croatia/EU Strategy/Action Plan for Integrated Border Management; (ii) selective sharing of information flows with BiH border authorities; and (iii) improved transparency of border agency requirements through TTFSE website upgrade and training.
Transport Integration Component: (i) information system for advance notification of vessel arrival to enable faster response time from railways and to meet new demands associated with short sea shipping; (ii) rollout of an electronic port community system, integrating all members of the port community (shipping lines, shipping agent, stevedoring companies, banks, rail, road transport, border agencies…) into a seamless information system enabling accurate and timely exchange of information and automated processing, where appropriate; (iii) development of more effective rail corridor service offered by the Croatian and BiH railways; and (iv) systematic performance measurement across the transport chain.
4. Safeguard policies that might apply
Environmental Aspects. The development of the port will require dredging works of about 2.1 million cubic meters to deepen the draft offered to vessels. This work necessitates a detailed environmental assessment to be available before appraisal. The Port is also close to the Neretva Valley, which is protected under the Ramsar Convention on Wetlands. The environmental category of the project under World Bank’s safeguard policy would be A, which implies a double public consultation: (i) to present the TORs of the Environmental Impact Assessment (EIA) to the public; and (ii) the content of the project as well as the mitigation measures included in the project Environmental Management Plan (EMP). Both the EIA and the EMP will have to be published locally and at the World Bank Infoshop at least three month before Board presentation. The Port Authority initiated the required procedures to obtain environmental clearance in Croatia for the container terminal and expects to use an EBRD grant for the second terminal. The team will review in details the adequacy of the process and disclosures compared to Bank guidelines.
5. Tentative financing
Source: / ($m.)BORROWER / 37
INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT / 50
EUROPEAN BANK FOR RECONSTRUCTION AND DEVELOPMENT / 12
Total / 99
6. Contact point
Contact: Gerald Ollivier
Title: Transport. Spec./Task Team Leader
Tel: (202) 458-4023
Fax: (202) 614-0900
Email:
wb146682
C:\Documents and Settings\wb146682\My Documents\TTI\Project Information Document - Concept Stage.doc
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[1] The first TTFSE program aimed at reducing transport costs, fighting corruption at border crossing points, and supported Customs administrations in Southeast Europe in aligning their procedures to EU practices. A follow up operation is being prepared, focused on the development of main trans-European transport corridors, achieved in particular through coordination and cooperation among various border agencies, and communication and information sharing across transport modes in the region.
[2] This project objective (P039161) is to diminish the burden of the Croatian railways on the Government budget while creating a competitive railway company as measured in terms of increased net revenue and cost recovery.