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copy ~The World Bank

FOR OFFICIAL USE ONLY

Repi N.. P-229 1-SO

REPORT AND RECOMMENDATION

OF THE

PRESIDENT OF THE

INTERNATIONAL DEVELOPMENT ASSOCIATION

TO THE

EXECUTIVE DIRECTORS

ON A

PROPOSED CREDIT

TO THE

SOMALI DEMOCRATIC REPUBLIC

FOR A

FOURTH PORT PROJECT

June 21, 1978

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CURRENCY EQUIVALENTS(CY 1977, and May 1978)

Currency Unit Somali Shillings (So.Sh.)US$1.00 So.Sh. 6.295So.Sh. 1.00 = US$0.1589

WEIGHTS AND MEASURES

1 meter (m) 3.28 feet (ft.)1 kilometer (km) 2 - 0.62 mile (mi.)1 square kilometer (km ) 0.386 square mile (sq. mi.)I hectare (ha) 2.47 acres1 kilogram (kg) - 2.2 pounds (lbs.)I meter ton (ton) = 2,205 pounds (lbs.)

GLOSSARY OF ABBREVIATIONS

SPA - Somali Ports Authoritydwt - deadweight tonsPW = Price Waterhouse Associates (Consultants)PPF = Project Preparation FacilityNBB - National Banana Board

FISCAL YEAR

January 1 - December 31

FOR OFFICIAL USE ONLY

SOMALIA - FOURTH PORT PROJECT

Credit and Project Summary

Borrower: Somali Democratic Republic

Beneficiary: Somali Ports Authority (SPA)

Amount: US$5.5 million

Terms: Standard IDA terms

On-Lending The proceeds of the Credit will be onlent by the SomaliTerms: Democratic Republic to SPA for a period of 20 years,

at an interest rate of 7-1/2 percent per annum.

Project The Project is intended to provide a conventional tankerDescription: pier in Mogadishu deep-water harbor. It would be used for

receiving inbound crude oil for the Mogadishu oil refineryand for outbound refined products. Its layout and designwill make provision for its possible future use also forhandling bulk grain, sugar and molasses. The Projectconsists of:

(a) a tanker pier for crude oil tankers of maximum 50,000dwt and for small-products' tankers;

(b) pipelines within the port limits;

(c) hydraulic model tests, site investigations, detailedengineering, preparation of tender documents, assis-tance during tendering and supervision of constructionof the tanker terminal, and

(d) site investigations, detailed engineering, preparationof tender documents and assistance during tendering byconsulting engineers for a 210-meter extension of theexisting banana quay in Mogadishu harbor.

Benefits The quantifiable benefits of the Project consist of costand Risks: savings due to reduced ship waiting time as a result of

released general cargo berth capacity. The weakness inSPA's management, coupled with the recent transfer ofoperations from lighterage port to the new deep waterfacility entail some risk in respect to future effectiveworking of the Port.

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

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EstimatedProlect Cost: 1/

US$ Million% of

Local Cost Foreign Cost Total Cost Total

Civil Works andEngineering 0.9 4.6 5.5 83

Contingencies 0.2 0.9 1.1 17

Total Cost 1.1 5.5 6.6 100

Financing Plan:

Government 1.1 1.1 17IDA 5.5 5.5 83

Total 1.1 5.5 6.6 100

EstimatedDisbursements:

US$ Million1979 1980 1981

1,500 3,600 400

Rate ofReturn: 15% (calculated on 91% of total project costs).

Staff AppraisalReport: "Staff Appraisal Report, Mogadishu Fourth Port Project,"

(No. 1967-SO), dated June 20, 1978.

1/ The Project would be exempt from taxes and duties.

INTERNATIONAL DEVELOPMENT ASSOCIATION

REPORT AND RECOMMENDATION OF THE PRESIDENTTO THE EXECUTIVE DIRECTORS

ON A PROPOSED CREDITTO THE SOMALI DEMOCRATIC REPUBLIC FOR A

FOURTH PORT PROJECT

1. I submit the following report and recommendation on a proposedcredit to the Somali Democratic Republic for the equivalent of US$5.5 millionon standard IDA terms to help finance the Fourth Port Proiect. The proceedsof the Credit would be onlent to the Somali Ports Authority for a period of 20years, at an interest rate of 7-1/2 percent per annum.

PART I - THE ECONOMY 1/

2. A Country Economic Memorandum (Report 1421a-SO) was distributed tothe Executive Directors on April 18, 1977. An IDA economic mission is cur-rently visiting Somalia. Country data sheets are attached as Annex I.

3. The Somali Democratic Republic was formed in 1960 by a merger ofthe former Italian Trust Territory of Somalia and the British Protectorateof Somaliland. Following a decade of parliamentarv rule. the Government wastaken over by the military in 1969. The Supreme Revolutionary Council, con-sisting of army and police officers became, in fact, the highest policy-makingbody until mid-1976 when it was abolished and a political party, the SomaliRevolutionary Socialist Party, was formed and became the key politicalinstitution.

4. Since 1970 the Government has adhered to a program of "scientificsocialism", emphasizing egalitarianism and social justice, development throughthe public sector, nationalization of certain foreign enterprises, and theformation of cooperatives. While the Government has always stated that thereis room for private initiative in Somalia and several privately financed proj-ects have been implemented, the main emphasis has been given to developmentof the public sector. The Government's development efforts have been charac-terized by austerity and self-reliance.

5. Somalia is located on the Horn of Africa with three thousand kilo-meters of coastline on the Gulf of Aden on the north and the Indian Ocean onthe east. The topography varies from a hot and arid coastal plain, which gives

1/ This section is the same as that of the Mogadishu Water Supply andTechnical Assistance Projects.

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way to sparsely wooded savannah, to rugged mountains, agricultural plateaus and

lowlands of varying fertility and rainfall. Much of the country is arid; watersupplies are scattered and often unreliable, and periodic droughts bring hard-ship to both the people and their livestock. Only a small proportion of the

land, approximately 13%, is arable. While the existence of several minerals

has been confirmed, exploration is still in the early stages and commercialviability remains to be proved. Short of other known resources, Somalia'sprospects center on agricultural and livestock development in which progresswill depend upon careful management of scarce land and water resources.

6. With an estimated per capita income in the order of US$110 in 1976,

Somalia is classified by the UN as one of the 25 least developed countries

of the world. Of the total population of approximately 3 million, about two-

thirds are nomads and semi-nomads, who depend on livestock for their livelihoodand about 20-25% are farmers cultivating land along the Juba and Shebellirivers and in the higher-rainfall North-West region. The small monetary sectorof the economy provides only limited opportunities for employment. Apart fromthe traditional export of livestock, commercial agriculture is mainly centeredon the production and export of bananas, in which Italian concession holdersare still important, and the production of sugar for the domestic market. Theexpansion of manufacturing and other service sectors of the economy is limitedby the small size of the domestic market, poor infrastructure, and the shortageof capital and entrepreneurial experience. No income distribution data exist,but the Bank estimates that about 70% of the population live at subsistencelevels of about US$200-250 per family of five. Social services are still veryinadequate; the school enrollment ratio was until recently among the lowestin the world but took a great leap forward in the past two years. There islittle economic data on Somalia. Even basic figures such as GNP, population,

number of livestock, or output of major agricultural crops are only roughestimates. Therefore, it is extremely difficult to measure economic perfor-mance except in a very rough manner.

Political Changes and their Economic Consequences

7. The effect of recent political events on economic developmentpolicy in Somalia is bound to be rather limited because of the lack of alter-native strategies to the one currently followed. However, some change was

perceived in recent months as evidenced by a revision (and liberalization)of the law on foreign investment of 1960 and the reappointment of a tech-nician as Chairman of the Planning Commission.

8. Since various state enterprises (such as the Kismayu Meat Factory

and the Las Koreh Fish Factory) were organized with Soviet assistance, thedeparture of Soviet technicians will cause problems in these firms and in thePlanning Commission, which also received Soviet personnel. However, the realneed for replacements is estimated to be substantially less than the numberof departures (estimated at 200-250 civilian technicians).

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Development Planning Achievements

9. The long-range objectives of the Government are strongly influencedby the desire to be self-reliant. The Government is seeking to make thecountry self-sufficient in agriculture through both an expansion of the areaunder cultivation and the development of irrigation while trying to providepermanent settlement for many of the nomads and putting considerable emphasison modernizing and mobilizing the population. Of central importance forachieving these objectives are education, rural literacy and self-help pro-grams such as those in agriculture and public works (referred to as "CrashPrograms"). Finally, the Government places emphasis on developing infra-structure, especially transportation and communications.

10. Since the bulk of the population is engaged in herding or in sub-sistence farming, a development strategy for Somalia must start with agri-culture and livestock as a base. The major development goals of the SomaliGovernment include self-sufficiency in foodgrains, the partial substitution ofother food imports (oils, rice) and improvement of the lot of the traditionalnomadic herdsmen through settlement programs and improvements in livestockproduction and marketing facilities. The current Plan's emphasis on irrigatedagriculture is meant to make the country less dependent on the erratic patternof rainfall, and assure more stable and predictable increases in output.Attention is also being given to projects in rainfed agriculture (mainlythrough the Government-financed self-help projects, the IDA-financed rainfedcrop production project under the Juba-Shebelli Area Emergency SettlementScheme and the North-West Region Agricultural Development Project) which focuson making the best use of the limited amount of rainfall. Improvements inlivestock production and marketing are being promoted by the IDA-financedTrans-Juba Livestock Project designed to provide market access to the nomadsin the southern part of the country and the Kuwait Fund-financed NorthernRangelands Project with emphasis on rehabilitation of the denuded rangelandsin the North. The Plan continues to base its development of industry on theprocessing of domestic raw materials to substitute for imports.

11. The 1974-78 Five-Year Plan, as originally conceived, called forinvestments of So.Sh. 3.9 billion and was probably overly ambitious, both withrespect to financial and implementation constraints. Because of inflation,the cost of carrying out the same (physical) investment program will nowrequire an additional So.Sh. 1 billion. A review of Plan implementation afterthree years shows (financial) rates of implementation of 46.2%, 40.8% and77% in 1974, 1975 and 1976, respectively. If adjustments for investmentsoutside the Plan (mainly drought relief and rehabilitation) were made, theywould show implementation rates (in financial terms) of about 60% in 1974 and55% in 1975. In absolute terms, annual investment therefore increased fromabout So.Sh. 340 million in 1973 to an average of So.Sh. 500-600 million in1974-75 and to about So.Sh. 700 million in 1976 which suggests that annualinvestment in real terms is increasing. However, it also seems that anessentially financial constraint in 1974 has turned into an implementationconstraint in 1976. The implementation constraint is particularly acute asthe result of a sharp exodus of skilled Somalis to the neighboring oil-exporting countries.

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12. The Government's achievements over the past several years have beenimpressive by any standard. Before the present Government came to power in1969, the economy was stagnant and the Government often in severe financialdifficulties. Today the pace of development (as measured by public investment)has quickened and a far higher level of public services is being supplied.

13. Two fields where the Government's achievements have been particularlyoutstanding have been in the settlement of nomads and in education. Withina period of less than one year beginning in the summer of 1975, more than100,000 nomads were transported from the arid rangelands of the North andsettled on unutilized agricultural areas in the South. Small harvests havealready been reaped and this has encouraged both the Government and thesettlers. In education, the Government has concentrated on two aspects:basic education (literacy and numeracy) for all people, young and old, toenable them to effectively participate in the social, economic and politicalprocess; and specialized manpower training as a requirement for nationaldevelopment. With respect to the former, the mass literacy campaign conductedin the years 1973, 1974 and 1975 at a cost of So.Sh. 100 million (US$16million) has resulted in an increase in the adult literacy ratio from about 5%to about 50-60%, according to Government estimates. The formal primary schoolenrollment ratio has risen from less than 15% of the relevant age group a fewyears ago to approximately 34% at present, and universal primary education maybe reached by the mid-1980's. A script, introduced by the Government in 1972,made the writing of the Somali language possible for the first time, and thisremoved one of the major constraints to progress in the field of education.With respect to manpower development, the Government is concentrating on thetraining of high- and middle-level personnel in its principal developmentsectors--agriculture and livestock.

Recent Economic Performance

14. Poor rainfall in 1973 and a virtual absence of rain during 1974 andthe first half of 1975 led to widespread crop f-ailures. The drought hurtexports of livestock and bananas, the two largest earners of foreign exchange,and resulted in large imports of maize, sorghum, rice and sugar. The entirecentral and northeastern parts of the country were affected, as well as alarge part of the population, mostly nomads. Iln 1976, the Somali economyexperienced a further slight recovery from the effects of the serious droughtof 1973-75, mainly on account of continued expansion in Government expenditure,which contributed to substantial increases in overall investment and consumption.

15. Since 1973, production and exports of bananas have continued todecline and export volume in 1976 amounted to 72,500 metric tons, only 54percent of the 1972 level. It is expected to have fallen further in 1977,partly because of a disruption in exports to the Middle East on account of acommercial dispute. Because of a flood which seriously affected growing areasin late 1977, recovery of production and exports of bananas may be delayedfurther. A partial recovery in output of local food grains was evidenced byincreases in marketed quantities in 1976/77 when the Agricultural DevelopmentCorporation purchased 54,000 tons of grains, up from 45,000 tons the previousyear, but only 55% of the predrought level.

16. Somalia's manufacturing sector consists of a few relatively large-

scale, public-owned enterprises and a large number of small private enterprises.

In 1973, the public sector accounted for about 80% of value added in industry

then estimated at US$20 million. Most of the industries are agro-based,

depending upon locally produced raw materials. After making strong progress

in the period 1968-70, industrial production stagnated from 1971 to 1973 but

appears to have picked up since. Several investments were made in the latter

period such as a brick factory, a flour and pasta mill, grain mills, and a

corrugated carton factory. Existing plants, especially the sugar complex and

the textile factory, were expanded and modernized. Also, increased fishing

capacity is contributing to the improved performance of the fish factory.

Construction of a 500,000-ton petroleum refinery is nearly completed. Short-

ages of technical and managerial staff and in some cases lack of domestic

inputs have resulted in underutilized capacity, and the recent departure of

Soviet technicians is aggravating this problem in specific industries.

17. Somalia's fiscal performance has continued to be encouraging, and

budgetary savings will remain an important goal of the Government. Together

with the many self-help projects, the country's efforts to help finance its

investments provide evidence of commitment to self-reliance. Since 1971 when

the Government succeeded in reversing a ten-year history of budget deficits, a

surplus has emerged every year (approximately $5.2 million in 1976). However,

the increasing supply of Government services nation-wide and the recurrent

cost implication of recent large public investments will make it increasingly

difficult for the budget to generate substantial savings.

18. To raise Government revenues will probably require a reform of the

tax system and identification of new sources of revenue, including measures to

mobilize remittances of Somalis working abroad. In addition, ways of improving

efficiency in parastatal enterprises are necessary to turn them into larger

and growing sources of public savings. A World Bank mission recently studied

state firms and discussed its findings with the Government. Further assistance

to Somalia in this matter is being contemplated.

19. Somalia's balance on goods and services has been in deficit since

Independence. The gap has grown from US$18.6 million in 1970 to US$110

million in 1976 and US$154.2 million in 1977, largely as a result of rapid

growth in merchandise imports. Imports (f.o.b.) have risen steadily from

US$56.8 million in 1971 to US$153 million in 1976 and US$193.5 million in

1977. 1/ The Government's comprehensive import licensing system can only have

a limited impact, since development-related imports (which are not actively

limited) already accounted for 40% of the total in 1974 and undoubtedly

account for a higher share at present while another non-compressible import,

food, accounted for a further 35-40%. Exports jumped from US$31.9 million in

1970 to US$85.3 million in 1975 but have stagnated at about US$80 million in

1/ Foreign trade statistics for 1976 have been revised downward but still

remain provisional; data for 1977 are preliminary estimates based on

returns for the first 10 months.

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1976 and 1977. Also, increasing banana prices more than offset a markeddecline in volume exported in 1975 and 1976 but prices stopped rising in 1977and export receipts actually dropped. The overall balance of payments in 1977is likely to show a small surplus (in the range of US$7-8 million) as has beenthe case in the last two or three years because of large transfers and netcapital inflow.

20. In view of Somalia's poverty, external assistance has played a majorrole in the financing of investment for the development of the country.Somalia joined the Arab League in 1974 and mounted a major effort to attractcommitments of funds from the Arab petroleum exporting countries. The largeinflows of external capital and transfers from 1975 onward indicate that theeffort has been successful. Due to political events, the source of foreignassistance has recently changed from the socialist block (except for Chinawhich maintains a large program) towards Arab bilateral and multilateralinstitutions (continuing the trend started in 1975) and Western countries,several of which have had substantial assistance programs for a number ofyears.

21. The public external debt of Somalia as of December 1976 (outstandingand disbursed) was approximately US$277 million. Although a large share ofthis debt is on fairly soft terms, the debt service ratio has increased from3.4% in 1972 to about 9% in 1977, and will probably continue to increase,because of increased amounts of aid. Somalia's export prospects are ratherpoor because of the concentration on two primary products--livestock andbananas--both of which face problems in expanding production in the long run.Livestock is subject to cyclical droughts which decrease export supplies andcompetition from the Sudan and Ethiopia, and even Australia and New Zealand,are to be reckoned with in assessing Somalia's future market position in SaudiArabia. Banana exports have fallen because of both supply (drought, floods,poor marketing practices) and demand (increasing competition from multinationalsin both Italy and the Middle East) problems. Diversification efforts havebeen attempted in hides and skins and fisheries with limited success but arebound to receive a setback with the withdrawal of Soviet technical assistancewhich was especially important in all aspects of fisheries and processing offish. Therefore, in view of the country's poverty and uncertain exportprospects, assistance should be provided on the softest terms possible andcontain provisions for local currency financing.

PART II - BANK GROUP CPERATIONS IN SOMALIA 1/

22. Starting in 1965 IDA has made 16 Credits totalling about US$105million of which about 35% have been made for transportation development,including construction of three trunk roads and a new deepwater port andassociated extensions at Mogadishu. IDA Credits were also made for livestockdevelopment in FY74, for a development finance company project in FY77, and

1/ This section is the same as that of Mogadishu Water Supply and TechnicalAssistance Projects.

for education in FY71, FY75 and FY78. Lending for agriculture commenced inFY76 with two Credits for a Drought Rehabilitation Project and a North-WestRegion Agricultural Development Project. A Credit for development of watersupply in Mogadishu and a technical assistance Credit for project prepara-tion were approved recently. No Bank loan or IFC investment has been madeto Somalia. Annex II contains a summary statement of IDA Credits as ofJune 16, 1978 and notes on the execution of ongoing projects. Performanceon ongoing projects generally has been satisfactory. However, as the paceof development continues to rise, absorptive capacity constraints are likelyto become increasingly evident, especially in the field of agriculture whereprojects are rather complex and implementation experience is limited. There-fore, in preparing and appraising new projects, particularly close attentionwill have to be paid to implementation capacity and the adoption of measuresto ease this constraint when necessary.

23. We plan to direct our future efforts on the country's directlyproductive sectors, agriculture and livestock, and also on education andtransportation. While agriculture and livestock offer potential for devel-opment, most rural development activities are only at the beginning stage.Moreover, agricultural development in Somalia is particularly difficultbecause most of the people in rural areas are nomadic. For these reasons,we plan that much of our future lending will be in the agriculture and live-stock sectors, and this will be complemented with near equal attention oneducation. In the future we intend to seek Board approval for an Agricul-tural Extension and Training Project, a Central Rangeland Livestock Projectand an agricultural project for the Bay Region. In addition to these sec-tors, we plan to support the Government's industrial development efforts(and assist in the formulation of an industrial development policy) throughour country economic work and future DFC projects. We also plan to continueassistance to the water supply sector.

24. To facilitate the development and implementation of the Associa-tion's growing operational program in Somalia, we recently established, aone-man resident mission. The mission represents the Bank Group in itscontacts with the Government thus facilitating an efficient and smooth day-to-day working relationship and assists in coordination of the cofinancingefforts.

25. Although the situation in the Horn of Africa is a cause for concern,the impact of the recent events on our operations has not been much. Only oneproject, i.e., North-West Agriculture Development Project, was affected in thesense that the management consultants invoked "force majeure" and left theproject area. However, since the troop withdrawal in March, 1978, conditionsin Northwest Somalia are returning to normal and the Government intends toproceed with implementation of the Project until new management consultantsare appointed.

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26. Implementation of other projects is proceeding generally satisfac-torily, although some are affected by shortages of qualified staff, adminis-trative and other factors which sometimes slow project implementation.

PART III - THE TRANSPORT SECTOR

27. The exploitation of Somalia's limited resources has been inhibitedby the lack of adequate transportation facilities. The density of freightand passenger traffic is light in all modes. Although some 10,400 motorvehicles operate in the country, camels and donkeys continue to play animportant part as reliable means of transport.

Road Transport

28. The road network is still limited and comprises about 17,700 km, ofwhich some 1,400 km are bituminous surfaced roads and about 1,000 km are gravelroads. Long distances and light traffic densities make road projects difficultto justify economically although they are necessary to ensure national unityand administrative accessibility. IDA has financed the Afgoi-Baidoa highway,providing a road link from Mogadishu through the center of its hinterland andthe Hargeisa-Berbera road, and is currently financing the construction of apaved road from Hargeisa to Borama (113 km) with a link to Tug Wajale (19 km)under the Third Road Project. A 1,045 km road, financed by the People'sRepublic of China, is under construction from Belet Uen in the central region,to Burao in the north, and the unpaved section (275 km) of the coastal roadbetween Kismayu and Mogadishu are now being paved under a project financed bythe European Development Fund.

Ports

29. Four major ports accommodate practically all of Somalia's shipping.Of these, ports with deep-water facilities are: Berbera, which exports mostlylivestock; Mogadishu, which imports most of the country's general cargo; andKismayu, which exports bananas and meat. Merca, which exports bananas, is alighterage port. The new deep-water port at Mogadishu financed jointly by IDA(Credits 359-SO and 586-SO) and the European Development Fund, was inauguratedon October 22, 1977.

30. Most of Somalia's international trade is handled by foreign vessels,supplemented by the National Shipping Line, which was established in 1974 asa joint venture of the Governments of Somalia (51% ownership) and Libya. Thisline operates two refrigerator ships, of 4,000 dwt and 4,700 dwt capacity,a livestock-carrying ship of 12,500 dwt capacity and two small general cargovessels of 1,500 and 2,000 dwt capacity.

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31. Despite the long coastline, transport by coastal shipping withinSomalia is limited because there has been little inter-regional trade suitablefor such shipping. However, a cement plant under construction in Berberawill send most of its annual output (100,000 tons) by sea to Mogadishu.Similarly, petroleum products from the new refinery outside Mogadishu willbe transferred by small tankers to Berbera and Kismayu. Current developmentof commercial fishing is also expected to stimulate some growth of coastalshipping because the fish are to be transported from a number of small portsto a few processing and distribution centers, particularly Mogadishu andBerbera.

Civil Aviation

32. The air transport system in Somalia serves ten scattered regionalcenters, with Mogadishu as the focal point. Only three airports have pavedrunways. Somali Airlines operates three DC-3's, two turbo-prop aircraft(F-27 and Viscount) on its domestic routes. Two Boeing 720 jet aircraftconnect Mogadishu with Rome, Cairo, Nairobi, Djibouti and various points onthe Arabian Peninsula. A few foreign airlines link Somalia with other Africancountries and Europe.

Transport Policy. Planning and Coordination

33. The Government's transport objectives, as indicated in the 1974-78Plan, are to (i) open new areas for development and thus increase the economy'sproductive capacity; (ii) foster regional economic integration of the country'smany isolated areas; and (iii) lower the cost of, and facilitate domestictransport, thereby reducing the disparity between rural and urban areas inprice and availability of goods. The Government intends to achieve thesegoals primarily through construction of main and feeder roads; two of thesemain roads are included in the Third Road Project. Other key plans are thecompletion of the Mogadishu harbor and relocation of its airport, improvementof the Hargeisa airport, and strengthening of the Somali Airlines and theNational Shipping Line.

34. Transport and communications account for 25% of total planned publicinvestment over the 1974-78 Plan period, compared with 29% of actual invest-ment in the previous Three-Year Plan. Within the transport and communicationssector of the 1974-78 Plan period, 73% of the investments are allocated tohighways, 19% to ports and shipping, 3% to civil aviation and 5% to communica-tions. While the current investment plan is not likely to be fully imple-mented, a substantial portion of the investments will probably be made and thecountry's transport infrastructure is expected to continue to improve over the1974 78 Plan period.

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35. Four ministries are concerned with the transport sector; the Minis-try of Public Works which, through its Civil Engineering Department, isresponsible for highway maintenance and for planning and construction ofhighways, ports and airports; the Ministry of Transport which is responsiblefor vehicle registration and control, and for civil aviation through its CivilAviation Department; the Ministry of Marine Transport and Ports which, throughthe Somali Ports Authority, is responsible for port operations and, through theNational Shipping Line, is responsible for marine transport planning; and theMinistry of Interior which is responsible for highway traffic control. NoGovernment agency exists to oversee the functioning of the whole sector, butsome limited coordination is provided by the Planning Commission.

36. Intermodal coordination is not an issue; there is no railway norare there any plans for one, and the limited coastal shipping is not likelyto increase significantly in the foreseeable future with the exception ofcement and petroleum products.

PART IV - THE PROJECT

Background

37. A report entitled "Staff Appraisal Report, Mogadishu Fourth PortProject--Somalia" (No. 1967-SO) dated June 20, 1978 is being distributed sepa-rately. A Credit and Project Summary appears at the beginning of this reportand a Supplementary Project Data Sheet is given in Annex III. The Projectwas prepared by the Government with assistance of consultants, and appraisedby an IDA Mission in December 1977. Negotiations were held in Washington, D.C.from April 17 to 19, 1978. The Somali Delegation was headed by Mr. AbdurahmanNur Herzi, Economic Advisor to the President of Somali Democratic Republic.

38. Somalia and Iraq have jointly constructed a petroleum refinerysome 15 km south of Mogadishu which will be in operation by July 1978. Therefinery will be operated by experienced Iraqi technicians while Somali per-sonnel is trained in Iraq. It is expected that the refinery will operateat full capacity, 500,000 tons per year, from the start and that the surpluswhich is not consumed within Somalia will be marketed abroad with the assis-tance of Iraq. Present consumption in Somalia amounts to about 200,000 tonsof petroleum products per annum. Imports of crude oil and exports of refinedpetroleum products will temporarily be handled at the third general cargoberth in the new deep-water Port of Mogadishu. This is both a wasteful useof an expensive general cargo berth and a hazardous operation.

Project Objective and Description

39. The purpose of the Project is to provide economical and safe facil-ities for accommodating petroleum tankers carrying crude oil for the newMogadishu refinery, and for smaller tankers transporting petroleum productsfrom the refinery. The proposed facility would be a tanker pier in the

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Mogadishu deep-water harbor. However, its layout and design will also pro-vide for its future use for handling bulk grain, sugar and molasses. Atthe Government's request, engineering preparations of the next extensionof Mogadishu harbor have also been included in the Project, as there areconsiderable savings in combining this with engineering of the proposedtanker terminal.

40. Specifically, the Project would comprise:

(a) a tanker pier for crude oil tankers of maximum 50,000 dwt andfor small products tankers. It consists of a loading/unloadingplatform, berthing platforms and mooring platforms connectedto shore by a causeway and/or trestles which would carry acrude oil pipeline and petroleum products pipelines and aroadway for light trucks. The platforms will either consistof concrete caissons or be supported on steel piles;

(b) pipelines within the port limits;

(c) hydraulic model tests, site investigations, detailed engineer-ing, preparation of tender documents, assistance during tender-ing and supervision of construction of the tanker terminal byconsulting engineers; and

(d) site investigations, detailed engineering, preparation oftender documents and assistance during tendering by consultingengineers for a 210 meter extension of the existing banana quayin Mogadishu harbor for general cargo traffic, the constructionof which will be optional under the tanker terminal contract(but not financed under the proposed Credit).

41. Total Project cost, including contingencies, is estimated at US$6.6million,of which US$5.5 million is in foreign currency. The Project isexempted from duties and taxes. Project costs are outlined below.

US$ Million% of

Local Cost Foreign Cost Total Cost Total

Civil Works 0.9 3.5 4.4 66Engineering - 1.1 1.1 17

0.9 4.6 5.5 83

Contingencies:Physical 0.1 0.5 0.6 9Price 0.1 0.4 0.5 8

Total Cost 1.1 5.5 6.6 100

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Cost estimates for civil works are based upon the preliminary project designprepared by consultants after studying the technical feasibility of the Proj-ect. An additional allowance of 10% has been provided for physical contin-gencies. Annual price contingency factors ranging from 7% to 8% were appliedfor the civil works. Cost estimates for consultants' services are based on alump-sum proposal, without price escalation, which has been submitted to theMinistry of Public Works; the average man-month cost for each consultant isUS$6,000.

Financing

42. The proposed Credit of US$5.5 million equivalent would be used tofinance all foreign costs, representing 83% of total project costs. Thesewould include costs of the project preparation paid by advances under theProject Preparation Facility (US$0.5 million). The advances would be reim-bursed from the proposed Credit when it becomes effective. The Goverrunentwill provide for local currency expenditures.

43. When construction of the new tanker terminal is completed, it willbe handed over to and owned by the Somali Ports Authority which will beresponsible for its operation and maintenance (see para. 44). The resultingloan from the Government to SPA, covering the equivalent in Somali shillingsof the proposed Credit, will be for a term of twenty years at an interest rateof 7-1/2% per annum. The above conditions would be reflected in a subsidiaryloan agreement to be entered into between the Government and SPA, execution ofwhich is an additional condition of effectiveness (draft Development CreditAgreement, Sections 3.01 and 6.02).

Implementation

44. The Project will be carried out by the Civil Engineering Departmentof the Ministry of Public Works with the assistance of consultants. TheCivil Engineering Department has in the past carried out several IDA-financedprojects satisfactorily. Implementation of the Project will require aboutthirty months. When the Project is completed, it will be handed over to theSomali Ports Authority for operation and maintenance.

45. The management of the Somali Ports Authority would need strength-ening, particularly in planning, accounting, and management information sys-tems. Under a previous Project (Credit 359-SO), Price Waterhouse Associates(consultants) made a study of SPA's management, accounting and operations andhave made several proposals for improvements. To implement consultants'recommendations and to train SPA's staff, a management expert experiencedin these fields would be needed. Assurances have been obtained that a suit-ably qualified port management expert with terms of reference satisfactory tothe Association would be employed no later than December 31, 1978 (draftProject Agreement, Section 2.02). The European Development Fund has agreed inprinciple with SPA to provide the necessary financing for the port managementexpert. Assurances have also been obtained that SPA will prepare a trainingprogram for its staff in consultation with the Association and commence theimplementation of the program not later than June 1, 1979 (draft ProjectAgreement, Section 3.05).

- 13 -

46. In order to improve the performance of the Somali Ports Authority inregard to its operation of the new alongside general cargo facilities financedunder the previous two IDA Credits, certain operational targets were preparedby the consultants and are suitable for implementation. Assurances have beenobtained that these operating targets will be achieved (draft Project Agree-ment, Section 2.03).

Procurement

47. The contract for the civil works will be awarded on the basis ofinternational competitive bidding in accordance with Bank Group guidelines.No local contractor is expected to qualify as the principal contractor,although some are likely to be eligible as subcontractors or joint venturepartners.

Disbursements

48. Disbursements from the proceeds of the proposed Credit will befully documented and will be on the basis of 80% of the cost of civil worksand 100% of expenditures for engineering consultants' services.

Environmental Impact

49. The existing primitive facility for unloading crude oil and loadingpetroleum products presents considerable pollution risks. The new facilitywill be designed to avoid spills.

Financial Aspects

50. SPA's operating results have been satisfactory. Under Credit 359-S0, SPA was required to produce a 5% annual return on net fixed assets; how-ever, because of the subsequent extension under Credit 586-SO of the newMogadishu deep-water harbor, and the resulting higher investment, the re-quirement was reduced to 4.5% for 1977, though retained at 5% for subsequentyears. SPA has consistently met the above requirements which has enabled itto generate sufficient revenues to cover all financial requirements.

51. SPA introduced new tariffs effective on December 1, 1977, as aresult of the tariff revision studies undertaken by Price Waterhouse & Asso-ciates, the consultants under the previous Credit 359-SO. SPA followed therecommendations of the consultants in general, although in some cases, wherethe rates proposed by the consultants were relatively high, SPA lowered therange somewhat. SPA's concern is that any immediate higher rates withoutbetter quality of service would be unreasonable. As the expected operationalimprovements take place, particularly in the new Mogadishu Port, SPA willre-study the tariff situation and introduce such changes as may be necessaryto maintain as well as improve its financial performance.

- 14 -

52. Financial projections indicate that SPA would earn annual returnson net fixed assets ranging from 5% in 1979 to 7% in 1982. This would enableSPA to cover its operating expenses, meet its debt service requirements andmake routine capital investment additions. However, no major ports develop-ment, in addition to the tanker terminal, has been taken into account. Toensure a sound financing plan for the proposed Project, assurances have beenobtained that (i) SPA will maintain its tariffs at such levels to enable it tocontinue to earn an annual return of not less than 5% (draft Project Agreement,Section 4.05); and (ii) SPA shall not, without prior consultation with theAssociation, undertake any capital investment exceeding So.Sh. 6,000,000 p.a.before completion of the Project (draft Project Agreement, Section 4.03).

53. Since SPA's financial viability could also be endangered if itwere to incur substantial additional debt, assurances have been obtained thatSPA will not incur any additional long-term debt without the Association'sprior agreement unless its net cash revenues for the fiscal year or the twelveconsecutive months immediately before the date of incurrence, would be atleast two times its maximum debt service requirements of any succeeding yearon all SPA's debt (draft Project Agreement, Section 4.04).

54. The Magistrate of Accounts, who is independent and reports directlyto the President, is responsible for the audit of all Government departmentsand agencies in Somalia and will audit SPA's accounts. While the Magistrateof Accounts audit of SPA's accounts has generally been satisfactory in thepast, the audit practices employed by the Magistrate need to be reviewed,particularly in the verification phase of the work. The Association intendsto assist the Magistrate of Accounts in this area during Project implementa-tion. Assurances have been obtained that SPA will have its accounts auditedannually by auditors acceptable to the Association and would furnish suchaudited accounts to the Association not later than six months after the endof its fiscal year (draft Project Agreement, Section 4.02).

Economic Evaluation

55. The quantifiable benefits of the Project consist of cost savingsdue to reduced ship waiting time as a result of released general cargo berthcapacity. In calculating the economic return, only half of the benefits fromreduced ship waiting time have been considered. This is due mainly to uncer-tainty about the extent to which these benefits will be passed on to theSomali Economy. The cost savings are estimated at US$5,000 per day, beingthe average cost per day for the typical 8,000-12,000 dwt general cargo shipcalling at Mogadishu. The even higher cost per day for oil tankers is dis-regarded as a benefit since tankers are assumed to get preferential berthing.For the purposes of calculating the economic return, total project costs havebeen adjusted by excluding price contingencies. Furthermore, a shadow rate ofabout 40% above the official rate has been applied to the Project's foreignexchange costs to reflect its estimated economic value.

- 15 -

56. Based on the above benefits and costs, and assuming a 25-yearlife, the Project is estimated to yield a quantifiable economic return of 15%(calculated on 91% of total Project costs) in addition to the importantbenefits of providing a safe and efficient tanker terminal. Without shadowpricing foreign exchange the economic return is estimated 14%. The returnfrom the Project is sensitive to traffic developments, and to the cost of theProject. If traffic falls short of forecast and the corresponding savingsfrom ship waiting time are assumed to be 20% less, the return from the Projectwill drop to 13%. A 20% increase in cost will also lower the return to13%.

Risks

57. The weaknesses in SPA's management, coupled with the recent transferof operations from a lighterage port to the new deep-water facility, entailsome risk in respect to the future effective working of the Port. To reducethe risks, assurances have been obtained for SPA to employ a port managementexpert to assist in implementing sound management practices and training SPA'sstaff (para. 45).

PART V - LEGAL INSTRUMENTS AND AUTHORITY

58. The draft Development Credit Agreement between the Somali DemocraticRepublic and the Association, the draft Project Agreement between the SomaliPorts Authority and the Association, and the Recommendation of the Committeeprovided for under Article V, Section 1(d) of the Articles of Agreement of theAssociation are being distributed to the Executive Directors separately.

59. Features of the Development Credit Agreement of special interestare referred to in Annex III of this report.

60. An Additional condition of effectiveness would be conclusion of asatisfactory Subsidiary Loan Agreement between the Government and SPA (draftDevelopment Credit Agreement, Section 6.01).

61. I am satisfied that the proposed Credit would comply with theArticles of Agreement of the Association.

- 16 -

PART VI - RECOMMENDATION

62. I recommend that the Executive Directors approve the proposedDevelopment Credit.

Robert S. McNamaraPresident

AttachmentsWashington, D.C.June 21, 1978

TABLt 3A ANNEX ISOMALIA - SOCIAL INOICATORS DATA SHE£T Page 1 of 4 pages

LAND AREA (THOU KMi2) ------ _____- SOMALIA O NERENCE COUNTRIES (1970)

TOTAL 637.7 MO05T RtECCNTAGRIC. 299.0 1940 Tt70 ESTIMATE ETHIOPIA TANZANIA SEINEAL**

GNP PER CAPITA (USS) 70.0* *6.0* 110.0*/a 70.** 1O0.0*. 27.0*_______.____________

POPULATION AND VITAL STATISTICS

POPULATION (MID-VA, MILLION) 2.2 2.2 3.3/a 24.0 12.9 4.4

POPULATION OENSITYPER SOUARE Km. 3.0 4.0 5.01/ 20.0 14.0 22.0

PER SQ. KM. AGRICULTURAL LAND 7.0 9.0 11.021 31.0 25.0 35.0

VITAL STATISTICSCRUDE SIR1H RATE (/THOU. AV) 47.3 47.7 47.2 50.3 50.5 47.6

CRUDE OEATH RATE U/THOU,AV) 27.6 23.8 21.7 2S.? 23.0 24.4

INFANT MORTALITTY RATE (/THOU) .. .. .. .. 160-165

tIFE EX. CTANCY At BIRTH VTinS) 31.1 30.1 41.0 .36.6 41.6 40.0

GROSS REPtOOUCTtON RATE .. 3.0 3.0 2.6 3.2 3.0

POPULATION GROWTH RATE (%)TOTAL 2.0 2.4 2.4 2.1 3 -0ok 2.6

URBAN 2.9 6.1 4.4 6.0 S.6 6.0

URBAN POPULATtON t1 OF TOTAL) 1S.0 2.6 28.23 9.6 5.5/b 2S.O

AGE STRUCTURE (PERCEi.t)0 tO I4 TEARS - 43.6 46.5 45.0 43.0 44.4/b 41.2

IS tO 64 YEARS 13.S 51.6 S3.0 14.3 63.0/ 4.9

65 YL..RS AND OVER 2.7 1.S 2.0 2.7 2.6 3.S

AOF DEPENDENCY RATIO e.9 0. e-0. o.T h./b *.g

ECONOMIC DEPENDENCY RATIO I 1I 1.2/L 1.2L/ l.Oj& 1.2/ 1i.2/

FAMILY PLANNINGACCEPTORS ICUMULATIVE. THOU) .. .. ..

USERS Cs OF tARRIED WOMEN) .. .. ..

EMPLOYMENT

lOTAL LABOR FORCE (TtlOUSANO) 930.0 1100,0 1250.0 10600.0 s600.01SOO,b Go.0

LABOR 'ORCE IN AGRICULTURE CE 66.0 62.0 77.0 OS.0 i.O / 73.0

UNEMPLOYEO (% OF LABOR FORCE) . .. 2e °! .. 2.5 . 7.0

INCOME DISTRIBUTION____.__ _________

i OF PRIVATE INCOMtE REC D SY-HIGHEST 5% OF HOUSEHOLDS .. .. .. .. 23.5HIGHEST 20% OF HOUSEHOLDS .. .. .. .. 63.3LOWEST 20% OF NOUSEHOLDS .. .. .- . 2.3

LOUEST 40e OF HOUStLOLDS .. *- .- .- 7.0

DISTRIBUTION OF LAND OWNERSHIP

3 OWNED BY TOP 10% OF OWNERS .. .. ..

I OWNED 0: SMALLEST 10% OWNERS .. .. . .. ..

NEALTH AND NUTRITION

POPULATION PER PHYSICIAN 33220.0 21420.0 1S760 0 73300.0 ,. 21570 16640 0

POPULATION PER NURSING PERSON 3700.0/b 3260. L-. 2900:0 .C-d 2364IO.0 Ib 4Bo0:o7ir 2680.0/bPOPULATION PER HOSPITAL BED 630.- 100.0 S7O.0o 2960.0 700.0/a Q10.07

PER C&PITA SUPPLT OF - -

CALORIES 1% OF REQuIREMENTS) 77.0 80.0 79.0 92.0 73.0 S1.0

PROTEIN (GRAMS PER DAY) 57.0 S7.0 55.1 66.0 43.0 64.0-OF WHICH ANIMAL AND PULSE lI.O/C 27.0 21.0 23.0 2o/d

DEATH RATE I/THOU) AGES 1-4 .. .. ..

IDUCAtIOM l _

ADJUSTED ENROLLMENT RATIOPRIMARY SCHOOL 0.0 16.0 34.0 17.0 *5.0 42.0

SECONDARY SC.JOL 1.0 1.0 3.0 4.0 3.0 10.0

VEARS OF SCHOOLING PROVIOED(FIRST ANO SECOND LEVEL) 12.0 12.0 10.0 12.0 13.0 13.0

VOCATIONAL ENROLLMENT(S OF SECt^NDARYI .- .. 14.0 4.0

0*0 .0 t.OADULT ITERACY RATE C%) .. S.0 30.0/f .. .. 10.0

MOUSING -

PERSONS PER QOCM IURBAN)OCCUPIED DWELLINGS WITHOUT

PIPEO WATER II .. .- . .. 30.0/b.dACCESS TO ELECTRICtTY

I% Cf ALL DWELLINGS)RURAL DWELLINGS CCNNECTED

TO ELECTAICITYaI% .. *. ..

CON SUMP TION

QA-:O REEIjV RtS tPEq T..U POp, 12.0 1*.0 22.0 6.0 11.0 6S.O

PASS(NGEA CARS IPti *s<U PoP) 2.0/C 2.0 3.0 2.0 3.0 0.0

ELECTAICITY tIK.4/,R PtR CAP) 5.0 IS.0 13.0 1.0 31.0 73.0

NEWSPRINt tKG/YR PER CAP .. 0.2 0.2 0.04 G 0. 0.1

SEE NOTES AND OEINITlIONS ON REVERSE

otiemcitO aboted. date for 1960 eeger to soy pact bore..: 1030 TAd 1061, for 1070 betwceen 1068 and 1070. Std fOr most 1.0e05 zItadtbt6C fl1913 sed 1973.

a MTp per capita data are aSed4 em the World leenk Atlas aotadeleor (1974-76 beat.).

a. Sia-sal ha. boom &eleatod an as objeciv.a coutery bcwotaa of iu t. ifevest ooteeo-eavDii struturle and giMtlet sek-arid aeologysad PoPcaltietlt mile.

1960 LA Ratieofe pooolatios uader LS and GS sad Over to total labor foreo.; Lk ~imieWin midwvesi OWi assistant 1141`9eeIs. 1063.

U - La Retio of poptulatione nuder 13 s.d 63 sad wet to total labor forte; Lk Urbas only; L5 lInludingi uld'ivaasod 4as a teat norsec; 1j 96-69.

W)ST RZCV%T rSTLITI Ls 1976; lb Racto of pepalattoo under 13 end 55 sad o,,or to total labor force: Li. 1971;Li( latodiag sitiveaa sad assistaeti ewarled Lj 1972; LI Gacerment *,ttlatc.

1970rt M La Ratio Of poptelatiew under 13 sod 6 cAnd o-er to total labor force; Lb Incledies cldeuiv*s.j

I -ZAN ZAI Mff La Mcailanbd onsanceic 1k 1067; Le. 1163: I_ Ac percenttage at urban houtsaholds.

SUNEGAL 197 Li. Ratio of Popu.lation wider 13 cod 63 and over to total labor Tort.; 1kb laclcadlINS ae sacitet suasCs.Lc Cocermoet hoepitel estcbliaiaeet.; Ld 1964-66.

96. December 30. 1977,

BUN1it1114 o? SOCIL. DDICATCl

ck. a.'ihc P=llslto ar -nera:tedorson - rputeation dLiod.d by saber Of pt.cCtti.s:-a Tot-l i-rt c. or.. comprislto lead sreat- tadlec .idtars.. mle .n fastr. S rad.sto nars.a, *traiad" or 'carti lad" pcr.e.., ae

Cotrc ac caea at *eri.tc.rlta area aced tomporarily at paima- surili.ry parawit aith tr.alig Or eapriosce.asetu fo ao. Icatetra, machet 4 klitbew gardeac or to li fall... F992aul-te kichr 9t bedact . - Popm.iatta di.td.d by s.-bor of hepit.l bad.

sastLabl. to peidia ned *rlct. Suscrat cod sape icitid hoapita1 sadflY oa 1enit f'IsS . tI pet taPita #ltast.ct at tenerra mCarkt Prica. r.bbilititoal ceet-r.; aaeindcc erslac baa sad .. t.bLlsbot. far

Iccltdb a Oam.roreia aetbAd a. Vorld Peak Atlas (1973-75 bas is); estadL.1 cod pa....ti.e car..1040. ltio sad 1975 date. Pa~~~~~~ir ctaita %.p2ly of calortna (, of -ocuIrceet.t. SCeampted fr-e aoaa"

aqta of atet feed seppIa. a-ec.iebia tosctty par Capite per say;Icoalel.cad vtal tetialtta Available acapplica eaprica daaciti preductir, Imports I..a .. part. ..adp,,a.ia.c old-yar 1tlica A, of July fir.e; if got availeble, coerce. tbaacaa in stock; sot suapplites aeled. cabl feed,..noad, quactittas .cO

at ta 0.8-year aait-Ctoa; 1-40, 1070 ad 1070 data, to food pracectag ead lsea. In dilstTbetion; roqat stac -re ca.Ceacitatdby lAO b.s.d Os phs.elg~tac.l ueeds far norma acti.try cd li.41th tcald-

Pns,iactn daat Part necar, - Kitd-ytar popolatica per aqunare Minutest ering eovtrat-eal taporat.rn body waighU. at. anod e.. di.ntrtboeia ofilAlhettrsa of ata rc. pcpolatia, cod al1ti.6o 10 for -. C.t aa household Laval.

PaltIadensity cot nn.:C; h. of cnt. land * Captotd cc above for Pe ent *n of stat.ta fat-c wr dcvI Prntac natn.tat ofPer capitaairiawitetal lead aeiy. Ia apt Iof o per day; ace .. Vppy oft. toa Wcdeined cc abat; toqeire-

aMta for all co-trtale .. tab1blh.d by WIDA tCwetetC I.O.arCb Sarcta.elevel ntaetatirs prOvIdt far a aelsu allowance at 60 aracof cattat. prorae par day, aendt,-4.. birch rat "l th-ened. Annuc. acel lIt" birtha P.r ehawiad of 20 Sra at fntac1 cod penat pracals. at which 10 trawa oboa1d bo aebaelold-7o-t ropel.ttee; ta.n rIthenttC cratagaa adla I& 1960 Gad 1970. proutala thaea atasada are. !f aCa than tha. at 7 trees of taI t .t Prteiad ftoe-year evrates sading la 1973 fot neat recent aetteet.. cd 13 grow at saoet pe,auals as a at.sarate faw the -a14. prapeaad by lAo

Crued death Tate P., chocaa,d. nvraao - Amaeail dearhe par theeead Of .1i.yner is the third Wnrld lad i.ney.Ppulpca?aio; t*ao-par erLthetIe -r.ttac Mniad i. 1060 ned 1970 and floe- p. siaoaeenol fa cabal tod cola. * FroteIn seppip at foow

pearorats. ndla f.a107 forsco r"aret .atiats. dariand fin arIsat cod p.alc Ic Sgnsc Par day.Inicot walttalic ltea Ufc.h.. * Attest deatba of infdats imder eie yAeT of ago Dsach r4t* f/the) eate., I-. Aneal d.etha par thousansd in at. stoop 1-ipar tecad 'L'e hirtha. peata, to Cbildrl, LA Chis aft Snap; csuggaced en as tadlet.t of

1Sf. =.ntec at btrth tvr.) - kleafS a..hor of "oan of lif. etasingt at ala.ailttoLit.birth; na-taly five--yca ."ag.te caIdie La 1060, 1020 a.d 1073 for deorolp-teg neitrisaa. Idoratba

Cf.. n9letd-ltbc rate . eA-rosa snaebot of live deeghtar. a octs sill boa d.andcriot rto oia ahocl - toarllacot of all ag.. an Par-L. bar -Lns tnptte-tiva period It ahe oopaltone.cpoataanacfceteaO priasrysam afole pop1491loc Iaclod. ahildc-acged 6-1l year.totiit usta uaeclly fIvo-yeag Moorala aodia ito 1960, 1907 and 1973 but adjactad tot diffrovat taagtba of p,toary odacatta; far ta-.trea. athfar daM ePopi countraies. aivaroal ad.cntic. atrollate Say axteed 1001 n.ats aw papllc aer bb.1.

199icatatfa irat-S rats I%), . 1 to l - Capoad ect grtwth gaca at aid-peer or above the afficial ctbool aga.

popaiaicefaritt-SO 34i -71 and 1070-71I. :II*o crabnt at - acodar, aeh:ol * Capitad sc aba.; acteed.ryP...latco reeh rnn p *-rha . Ce.ata like Stutlb rato of toutalaaaiotqta tlstt er at appraed primary ioatrsctuias

op.a1.Iamtiot: ffer-at dafintittna at otbA cre" my affeot teapaability of prwvidaa g.t-nool Mectional or teacher tr.tlatg 1tacretions fat ppilJ.data -.. Sg eaut I... *f 12 to 17 ycnrs of ala; -arrepamdoo- -at..a sar *ar.bIT oaettadadtabo seplacin f. of total - Sail. .f urban to total Ppopileettan difftarot etan at scb-llr.a prctdad (firer end *..Atd ol - Tata1 7oar. ofdofiitte o ar., artas say affoat topearabilfty of dateoa g tountrics. scheoling; at socadary Ia.-L, -ocetioel itructiaat may he partialy at

aepltaluy eatclod..fAaL structre,r fiarclat) ebCtldro (0-14 y.a.n), norktag-aSs (13-4' pear.). Ieat-ac earelbet C% af wo-aar) t.teatle Lait.etasioas isolodand -oti-od (II ent.ocd cot .poto a at d-y... papalatios. tebia. iadetrt cr her pr-gram which aor, adpaotl ta

as. dsoador. raSe .-tatl at papkoClatie undet LS ad 63 "Ad wet to thea. _aa .ct f anaadery Leacitltetio.at iA.- I) teto,sh he. edalt litatte e .. I) - Literate &d.Iats (.icto toa c. ad vait.) an par-

icanaicda.nnd,on c R lt . t tiao peitcu .dar 1$ and 61 5 w-deta In ... 1cm. at cotal..1 ndcegluptiattmaed 13 Years ad wet.the lakebfs .I... o. gtetp af 15-41 yacro.

Sail, sleaito cacascr. ftci1alve th.)-C-aat.sber ofat-aopit.r lqua Iacatbirth- -c.tI dn-ica und.r csfo of settac -itati Pi.slad prasane Paeoti- Par to ferb..l * A-rtase suabor at pnamea per rome isacap

alec. Incapties-.aaaattoaaa 4foniitae L. orb.. er 111c; d...laf eeald. o-amlash olaaici ecro C' of -tatid fati . araott.. of marraS -a Of at=oo-o and oaacrpid P."ta.

ahldIkcto afa (31-44 y.ara) ab. -t Mtcoahtb talro danes to all -ciatad 0rrsid ,alboc atiCb t oIP.4.dtain C.) - Iteepiod Caae.sttoaldo. llL.a it a cia im,-F it urban cd rura -ct. oCthatc bald. or *,aL. Wid opod uesta f."Ilttla.

te-Amically cti" peneou, includiang armfaledcanpiedIdollise.

larso cadeanelaro b.ccatloiac ataaolve. aldeeca, sec.; defatitine mrea sreen..a acracs a.aceinner oat baitab.Rrldii. eaCtad to 0.i.ctlrttv M i Computeod a. oh.. far t nuac

Lhrfaa:. 3o .nr;,1 t... C,,) - .t.araltarai labor fMata (to faersl. fotneta. dalb!; arbotiefcodflaSal 5~rarotef. f toeci labo force.haslood cl t 1.5. farat . 7caplaed ae aaaLi dafised a. paso ub. IMac,cInan

ar able cr8 tiia totC.- a ab. see of a Ja6 a a Si". dlv. tailemd eat kea netaa 'hasel*il 'Ia t- flooia.re faC rod1 brOadac-tsofajob, cad acokiss oars far a aaaolfiad Gainias period agea esoaeae at s teaa eitprtaoada oaltn;aaea lama oerr

Meto; say age be Comp.table bars-ea ta.ttie dee 50 dtffoarat d.1af bts.. ito o ttrta. cod to pyets wha. r.tetO.ttatbatO rdiaeae . cae i f.. , -f-COf aalioo and --araa ait .Ga., ampleysmal WIoff Gtatiatis. aempi. dnla fwr toe-t yace sep tee he comparable since s-as aes-atl. aboliabad

:W-,O.y * o"nearly otagplayaca Insurance. Iltatetec. -7, Foegrcr mpiomtrcr .tjbs~~~~oat ktodi ftU-q-,~~~~~~~P A! ac....ft hosel Plaa s.torea mta.$ loa matarca. 003

ZkS.t..Li.flictt. a 0rt.tsa4 of vrtltta Satt (bath to lab and had Ic. ets. eight P.,c;oeee aecea atnnadatthT-cOeo by Unceet St, richesOt lOT. "Westt M0. ate perat.. bi of konae. vahlti...

tIa f.-d crt.ist!t. .... .aaseag. of lad f.ad by waealchiat 10 bacda peJ-ris na aih.n iait o acei rd n ti

12.3 t.LQLp.-.L.L2n± a,tpt oci .cpi cbitt

Sad,?, a.i 5attftfea eatfajiod tie deactia prndeeiiaaLeplea at aporin of acop-isi

pai...nanibn Itat 5 -ahce - C.c at caSt... It, iltal.

Page 3 of 4 pages

SOMALIA

ECONOMIC INDICATORS

CROSS NATIO1NAL PRODUCT ANNUAL RATE OF CROWTIH tZ constant prices)

US$ MlD. 1961-6 1969-73 1974

GNP at Market Prices (1976) 380.0-/ 100.0Gross Domestic Investment ..

Gross National Saving ..Trade Balance (1977) -112.5Exports of Gooda,(1977) 81.0Imports of Goods (1977) 193.5 .. ..

OUTPUT, LABOR FORCE ANDPRODUCTIVITY

Value Added Labor Porce V. A. Per Worker

US5 Mln. Z us % US5

Agriculture . . . .Industry ..Services .. .. ..

Unallocated ..

Total/Average L2_ ±... *

100.0 100.0 100.0

GOVERNMENT FINANCECeneral Govermeent Central Government

(SoSh Mln.) % of GDP (SoSh Mln,) . of GDP1973 1973 1969-73 1976 1973 1969-73

Current Receipts 497.8 . . 689.4Current Expenditure 414.7 656.1Current Surplus 83.1 . .. 33 3Capital Expenditures 327.0 .. . 634:1-'External Assistance (net) 247.0 . ..

:1DEY. CREDIT end PRICES-/ 1970 1971 1972 1973 1974 1975 1976 1977(Million SoSh Outitanding End Period)

money and Quasi Money 466 391 518 608 783 1005.1 l100.0 1240.7Bank Credit to Public Sector 100 72 13 5 2.4 -238.2 124.4 46.4Bank Credit to Private Sector2/ 297 254 315 622 916 934.6 986.4 1001.6

(Percentages or Index Numbers)

Money and Quasi Money as Z of GD10 1. 17 6 1 6.General Price Index (1966 - 100)-/ 10S.5 10S.5 107 4 126.6 l5l l l63.0 190.0

Annual Percentage Changes in:General Price Index -9.8 0 -1.0 17.9 19.4 7.9 16.6lank Credit to Public Sector 61.8 -28.0 -81.9 -61.5 -52.0 -98.3 52.1Bank Credit to Private sectora/ 27.1 -14.5 24.0 50.2 47.3 2.1 5.5

NOTE: All conversions to dollars In this table are at the average exchange rate prevailing during the period covered.

1/ Computed on the basis of en aseumed GNP per capita of $110 in 1976 but vith a revised population figure of3.5 million. Date for 1976 and 1977 are either preliminary or estimates.

t/ Private sector here includes decentralized, government-owned enterprises.

This is a preliminary figure; It includes only investments under the Plan.

S Source: Central bank of Somalia: Monthly Report.

/ All data (except C.O.L. index) taken from IMW. IFS.

not available.not applicable.

EACPII, FANFebruary 22. 1978

SOMALIA

TRADE PAYMENTS AND CAPITAL FLOWS

PALA'CE OF PAYMENTS MERCHANDISE EXPORTS (Average 1974-77)

1974 1/ 1975 1976 10J 1977 10/ USs Mln. X

Exports of Goods, NFS 55.Do/ 88.5 81 81 Live animals 47.4 51.3Imports of Goods, NFS 157.43/ 177.6 153.1 193.5 Bananas 12.6 13.6Resource Gap (deficit - -) -102!4_/ -89.1 Meat & meat productsServices (net) -38.0 -41.6 Hides and skinsIntcrest Payments (net) 1 9Workers' Remittances -16:6-1/ -21.0-kOther Factor Payments (net)Net Transfers 44.9 119.8 40.9 64.7 All other commodities 32.5 35.1balance on Current Account -72.2 9.7 -69.2 -89.4 Total 92.5 100.0

D'rect Foreign Investment 5.6 EXTERNAL DEBT, DECEMBER 31. 1977Net 1LT Borrowing

Disbursements ., USS Mln.AmortizationSubtotal 55.7 42.1 85.7 96.9 Public Debt, inl. guaranteed 595.59/

Capital Grants .. .. Non-Guaranteed Private DebtOther Capital (net) ,. .. Total Outstanding & DisbursedOther Items n.e.i. . . 0.5increase in Reserves (+) -10.8 51.8 17.0 7.5 DEBT SERVICE RATIO FOR 197_7 §

Gross Reserves (end year) ,Net Reserves (end year)

Public Debt, incl. guaranteed 9.0Fuel and Related Materials Non-Guaranteed Private Debt

Imports 11.7 19.9 ,, ., Total Outstanding & Disbursedof which: Petroleum 11.7 19.9

Exports .. .. IBRD/IDA LENDING. (Dec. 31. 1977) (Million USS)of which: Patroleum

IERD IDARATE OF EXCHANGE

Outstanding & Disbursed . 46.3Throuch - 1971 Since April 1973 Un4iabursed 30.9US $ 1.00 - SoSh 7.143 US $ 1.00 - SoSh 6.295/ Outstanding incl0 Undisbursed 77.2SoSh 1.00 - US $ 0.140 SoSh 1.00 - US $ 0.160

1/ Estimated debt.2/ Exports f.o.b.3/ Imports c.i.f.4/ Trade balance.5/ ';et non-factor services.6/ Ratio of Debt Service to Exports of ,, not available 00

mmgoods and Non-Factor Services (estimate). D7/ Ccntral Rate (Somalia avails itself of , not applicable

wider margins); the trade conversion afactor used by IMF is 6.233 SoSh/US$.

8/ All factor services (net).9/ D,sbursed debt at December 31, 1976 was approximately $277 million.12/ Balance of payments data for 1976 and 1977 are preliminary.

T-norts and Fynorts refer to goods only and services are shown net.

ANNEX IIPage 1 of 4

STATUS OF BANK GROUP OPERATIONS IN SOMALIA

A. Statement of IDA Credits (as of June 16, 1978).

(US$ Million)Amount Undisbursed

(Net of cancellationsNo. Year Borrower Purpose and exchange adjustments)

(CY)

Three credits fully disbursed 9.7

123-SO 1978 Somalia Highway-Supplementary(Afgoi-Baidoa Road) 2.3 0.3

295-SO 1972 Somalia Highways II (Hargeisa-Berbera Road) 9.6 0.0

359-S0 1973 Somalia Port of Mogadishu 12.95 0.0

462-S0 1974 Somalia Trans-Juba Livestock 10.0 6.7

511-S0 1974 Somalia Second Education 8.0 3.9

586-S0 1975 Somalia Mogadishu Port Extension 5.2 5.7

623-SO 1976 Somalia Drought Rehabilitation 8.0 7.1

635-S0 1976 Somalia North-West Agriculture 10.0 9.4

698-S0 1977 Somalia Somali Development Bank 5.0 5.0

699-SO 1977 Somalia Third Highway (Hargeisa-Borama) 7.0 6.4

738-SO 1977 Somalia Third Education 8.0 8.0

821-SO 1978 Somalia Technical Assistance 3.0 3.0

822-SO 1978 Somalia Mogadishu Water Supply 6.0 6.0

Total 104.75 61.5

of which has been paid 0.4

Total now held by IDA 104.35

ANNEX IIPage 2 of 4

B. PROJECTS IN EXECUTION - SOMALIA 1/

Credit No. 123: Highways Supplement (Afgoi-Baidoa); $2.3 million Credit ofJune 26, 1968: Date of Effectiveness: February 25, 1969;Closing Date: originally December 31, 1971 and postponedseven times to June 30, 1978.

The construction of the Afgoi-Baidoa road was completed inMarch 1971. The International Chamber of Commerce made an arbitration awardto the Contractor (Joint Venture) on December 3, 1975, in an amount ofDM 11,648.333.04 with interest at DM 1,356.20 per day from December 15, 1975;a Government counterclaim against the Contractor was rejected. A series ofmeetings were held between Government and the Contractor to try to resolve thematter, the last such meeting, convened by the European Development Fund, tookplace at Brussels on October 4, 1977; representatives of the IDA attended themeeting as observers. No final settlement of the dispute was reached. How-ever, we have since been informed that a Somali Delegation met a representa-tive of the Contractor in Bonn on March 22, 1978, and proposed a DM 10 millionsettlement and a schedule of payments. The contractor's representativeexpressed interest and promised to discuss the proposal with his Board of

Directors and convey their reaction to the Somali Government. A meetingbetween the Government and Contractor is scheduled for August, 1978.

Credit No. 295: Highways II (Hargeisa-Berbera); $9.6 million Credit ofMarch 30, 1972; Date of Effectiveness: May 11i 1972;Closing Date: originally December 31, 1975 and post-poned thrice to June 30, 1978.

The construction of the Hargeisa-Berbera road was completed in

June 1975. The feasibility study and detailed engineering for the Hargeisa-Borama road and technical assistance in transport planning have also beencompleted. The Project was completed successfully.

Credit No. 359: Port of Mogadishu; $12.95 million Credit of March 15, 1973;Date of Effectiveness; September 10, 1973; Closing Date:originally June 30, 1977 and postponed once to June 30, 1978.

Credit No. 586: Mogadishu Port Extension Project; $5.2 million Credit of

October 15, 1975; Date of Effectiveness; January 15. 1976;Closing Date: December 31, 1978.

The civil works, including the extension, were completed inOctober 1977, six months behind schedule. Several outstanding claims of the

1/ These notes are designed to inform the Executive Directors regarding theprogress of projects in execution, and in particular to report any prob-lems which are being encountered, and the action being taken to remedythem. They should be read in this sense, and with the understanding thatthey do not purport to present a balanced evaluation of strengths andweaknesses in project execution.

ANNEX IIPage 3 of 4

contractor were settled in July 1977 and payment effected in April 1978. Theport operating equipment has been delivered. Because of the continuing short-age of skilled staff in the country as a whole, the Somali Port Authoritycontinues to face problems in finding staff with the necessary skills to takefull advantage of the training aspects of the consultancy services providedunder the credit. As a result of the recommendations made by the consultants,tariffs have been revised.

Credit No. 462: Livestock (Trans-Juba) Project; $10 million Credit ofFebruary 20, 1974; Date of Effectiveness: October 29,1974; Closing Date: June 30, 1980.

Stock route and ranch development have made good progress but bore-hole drilling and the veterinary assistance component are delayed. RestrictedGovernment financial contribution is creating a working capital shortage. FAOhas supplied an irrigation engineer, and 4 senior staff have been recruited bythe Livestock Development Agency directly from India, two of whom have alreadyarrived in Somalia. A recent transfer of livestock marketing responsibilitiesin the project area from Livestock Development Agency to the Ministry of Indus-try, and the resignation of the Project Director and an engineer are mattersof concern which are being discussed with Government.

Credit No. 511: Second Education Proiect; $8 million Credit of September 19,

1974: Date of Effectiveness: December 19. 1974: ClosingDate: June 30, 1980.

The Elementary Teachers Training College is complete and in use.Construction of the rnomadic centers, the Academy of Somali Studies and theFishery and Marine Institute are about a year behind schedule due to staffingshortage of the Project Implementation Unit and delays in establishing cri-teria for locating the Nomadic Training Centers. Construction contracts havenow been awarded for 19 of the 22 project institutions and disbursements areexpected to increase rapidly as a result. Latest cost estimates indicate anoverrun of about 3 percent which is manageable.

Credit No. 623: Drought Rehabilitation Program -- Juba-Shebelli EmergencySettlement Scheme; $8 million Credit of July 7, 1976;Date of Effectiveness: August 31, 1976; Closing Date:June 30, 1980.

Project implementation, especially procurement of vehicles andequipment and land clearing, is slow, mainly due to high turnover of consult-ancy staff; one settlement location as originally selected is unsuitable. Theinterriverine study financed under the Project points to a much lower irriga-tion potential than previously expected.

ANNEX IIPage 4 of 4

Credit Nb. 635: North-West Region Agricultural Development Project; $10million Credit of July 7, 1976; Date of Effectiveness:February 9, 1977; Closing Date: June 30, 1983.

In view of the military situation in North-West Somalia, the manage-ment consultants have left the Project area in February 1978 invoking 'forcemajeure', but Somali staff continue project implementation; procurement ofequipment is on schedule. New management consultants are expected to beappointed shortly.

Credit No. 698: Somali Development Bank; $5 million Credit of June 1,1977; Date of Effectiveness: February 27, 1978; ClosingDate: June 30, 1981.

This Credit was declared effective on February 27, 1978. Some com-mitments under the technical assistance component have been made.

Credit No. 699: Third Highway Project; $7 million Credit of June 1, 1977;Date of Effectiveness: January 24, 1978; Closing Date:December 31, 1980.

The contract for construction works on the Hargeisa-Borama road,with a link to Tug Wajale, has been awarded and consultants engaged to carryout supervision. The contractor is currently mobilizing for the constructionwork. Technical proposals, from a short list of consulting firms, for provi-sion of services covering feasibility study for the Dinsor-Bardera-Gelib roadwere received and are being evaluated by the Government. The Association isawaiting the Government's final recommendation regarding selection of theconsultants.

Credit No. 738: Third Education Project; $8 million Credit of September 30,1977; Date of Effectiveness: March 13,1978; Closing Date:September 30, 1983.

This Credit was declared effective on March 13, 1978. The Govern-ment has concluded an agreement with UNESCO for implementation of the fellow-ship training program for curriculum development.

Credit No. 821-SO: Technical Assistance Project; $3 million Credit ofJune 6, 1978; Planned Date of Effectiveness: November1978; Closing Date: December 1, 1981.

This Credit has not yet been signed.

Credit No. 822-SO: Mogadishu Water Supply Project; $6 million Credit ofJune 6, 1978; Planned Date of Effectiveness: September1978; Closing Date: June 30, 1982.

This Credit has not yet been signed.

ANNEX IIIPage 1 of 2

SOMALIA

MOGADISHU FOURTH PORT PROJECT

Supplementary Project Data Sheet

I: Timetable of Key Events

(a) Time taken to prepare Project 12 months

(b) Preparation by: Government, Danish HydraulicsInstitute and Hostrup-Schultzand Sorensen (Denmark) injoint venture with Van HoutenAssociation (USA).

(c) Initial discussions with Bank: December 1976.

(d) First Bank mission: December 1976.

(e) Appraisal mission departure: December 1977.

(f) Negotiations: April 1978.

(g) Planned Date of Effectiveness: October 1978.

II: Special Bank Implementation Actions

None

III: Special Conditions

1. SPA will appoint a suitably qualified port managementexpert no later than December 31, 1978 (paragraph 45).

2. SPA will prepare a suitable training program for itsstaff in consultation with the Association and imple-ment it not later than June 1, 1979 (paragraph 45).

3. SPA will maintain its tariffs at such levels to enableit to earn an annual return of not less than 5 percent(paragraph 52).

4. SPA shall not, without prior consultation with theAssociation, undertake any capital investment exceedingSo.Sh. 6,000,000 per annum before completion of theProject (paragraph 52).

ANNEX IIIPage 2 of 2

5. In order to improve performance of the Somali PortsAuthority in regard to its operation of the new generalcargo facilities, SPA would adopt operating targetsprepared by consultants under previous IDA credits(paragraph 46).

6. Conclusion of a satisfactory Subsidiary Loan Agreementbetween the Government and Somali Ports Authority would bean additional condition of effectiveness (paragraph 60).

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