11_10_2016_16_7_32_InitiationNoteandISDSVP.docx



.Document ofThe World Bank.FOR OFFICIAL USE ONLY.PROJECT INITIATION NOTE.ON A.PROPOSED COVERAGE GRANTFROM THE PUBLIC PRIVATE INFRASTRUCTURE ADVISORY FACILITY.IN THE AMOUNT OF 0.38 (US$M).TO THE.DEMOCRATIC REPUBLIC OF TIMOR-LESTE.FOR .TIBAR BAY PORT TECHNICAL SUPPORT (P161201)Vice President: Victoria KwakwaCountry Director: Michel KerfSenior Global Practice Director: Pierre GuislainPractice Manager: Almud WeitzTask Team Leader(s): Pierre GraftieauxThis document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.DATA SHEET.Timor-LesteTibar Bay Port Technical Support (P161201).EAST ASIA AND PACIFIC.Basic InformationProject ID:P161201Team Leader(s):Pierre GraftieauxEA Category: A - Full AssessmentEA Completion Date:03-Mar-2017Responsible CC:GTI02 (9381)Requesting CC:GTI02 (9381)Parent GPP:Practice ManagerSenior GlobalPractice DirectorCountry DirectorRegional Vice PresidentAlmud WeitzPierre GuislainMichel KerfVictoria KwakwaJoint IFC: NoEstimated date of Approval:14-Nov-2016Project Implementation Start Date:01-Nov-2016Project Implementation End Date:31-Oct-2018Lending Instrument:PPIAF GrantSeries of Projects[ ]Financial Intermediaries[ ]Fragile and Capacity Constraints[X ]Fragile States [X ] Fragility within a non-fragile country[ ]Natural or man-made disaster[ ]Small States [ ]Post-Conflict[X ]PHBORROWERSECTIONBorrower/Recipient:Democratic Republic of Timor-LesteContact:Title:Telephone No.: Email: PHIMPLEAGENCYSECTIONResponsible/Implementing Agency: Loan and PPP UnitContact:Title: Telephone No.: Email:.Project Financing DataTotal Project Cost:1,219,025.00Total Bank Financing:377,025.00Financing Gap:0.00.Financing SourceAmountBorrower842,000.00Public-Private Infrastructure Advisory Facility377,025.00Total1,219,025.00Institutional DataPractice Area (Lead)Transport & ICTContributing Practice AreasPrivate Capital MobilizedPublic Private PartnershipNo.Gender TagDoes the activity plan to undertake any of the following? Please select Yes or No for each:Gender analysis and/or consultation on gender related issues.NoSpecific actions to address the distinct needs of women and girls, or men and boys, or positive impacts on gender gaps.NoMechanisms to facilitate monitoring and/or evaluation of gender impacts.No.Timor-LesteTibar Bay Port Technical Support (P161201).I. Introduction and ContextCountry ContextTimor-Leste, comprising the eastern half of the island of Timor, is located in the Timor Sea north of Australia. The total land area is 15,410 square kilometers. It is a very mountainous country, with a spine dominated by Mount Ramelau, bisecting the island from east to west. The coastal zones in many parts of the country consist of narrow steep hillside.Estimates from 2014 reported the population to be approximately 1.2 million, with 30 percent of the population residing in urban areas (75 percent of which live in the capital Dili). With a current growth rate of around 2.4 percent, the Government forecasts the population to reach 1.9 million in 2030.Timor-Leste's only international airport is located in Dili, which is served by daily direct flights to/from Australia, Singapore, and Indonesia. The main port is also in Dili with direct shipping links with Australia, Papua New Guinea, Singapore, and Indonesia. Petroleum is Timor-Leste's primary export, accounting for around 57 percent of exports, followed by coffee exports at around 22 percent.As one of the poorest countries in the world, Timor-Leste has basic income, health, and literacy levels similar to those of countries in sub-Saharan Africa. The 2010 national census reported that 35 percent of the total population, and around 40 percent of rural households, did not have access to safe drinking water. Only 19 percent of rural households have access to electricity, compared to around 88 percent of urban households. The percentage of people below the poverty line is estimated to be 49.9% and the country ranks 134th on the Human Development Index.In 2002, Timor-Leste gained independence from Indonesia. The United Nations, supported by Australia, New Zealand, the US, France, Portugal as well as others, provided Australian-led peacekeeping services in the lead up to Timor-Leste's independence from 1999 to 2002. Following the Indonesian withdrawal, widespread civil upheaval and conflict led to the destruction of some 90 percent of the country's infrastructure. The Government of Timor-Leste (GoTL) is proceeding with an ambitious infrastructure program.Oil and gas revenues are critical to the country's economy and its socioeconomic development. In 2005, The GoTL established a Petroleum Fund (PF) to facilitate the sustainable use of oil revenues. By 2015, the PF assets had reached US$16 billion. Withdrawals from the PF can only be used to finance expenditures of the state budget. However, since 2008, government spending has exceeded the level of the Estimated Sustainable Income (ESI) which, at 3 % of the value of the PF and future production, guides the sustainability of the PF. A collapse in the price of oil has also contributed by reducing the value of future oil production and thus lowering the ESI from approximately $730m a year in 2012 to US$545m in 2016. While the value of the PF will peak at a lower level than previously anticipated, a cessation of oil production was always envisaged and the ESI and governance framework around the PF continue to provide a clear framework for sustainably managing the accrued petroleum wealth. With fewer resources, the need to maintain government spending within the available envelope of revenue and ESI is becoming more acute. A recently completed infrastructure Public Expenditure Review also highlights the relatively low effectiveness of much of Timor-Leste's infrastructure spending in boosting growth and productivity, and the need for reducing the quantity and enhancing the quality of infrastructure spending.Economic development in Timor-Leste is dependent on government spending (partially funded by the PF) and assistance from international donors. The private sector has substantial growth potential but faces significant constraints due to human capital shortages, a weak business environment, and infrastructure bottlenecks.Sectoral and Institutional ContextAs part of its Strategic Development Plan 2011-2030 (the SDP) which sets out strategies and actions to transition the country from a low income to upper middle income country by 2030, the Government of Timor-Leste has received support from the World Bank (WB) in better planning of its infrastructure development, implementing a successful Public-Private Partnership (PPP) program and building up the capacity of the PPP and Loan Unit (PPLU), operating under the Ministry of Finance (MoF), and line Ministries. This Infrastructure Development and PPP Technical Assistance (TA) Program was provided with funding support from Public-Private Advisory Facility (PPIAF) and Australian Aid.The Government of Timor-Leste (GoTL) is implementing a PPP for the construction, co-financing and operation of a new port, Tibar Bay Port, which will replace the existing port of Dili and will handle most of the container terminal operations in the country. The Tibar Bay Port concession, the first PPP in the country, was awarded by GoTL, with support from the International Finance Corporation (IFC), to private operator Bolloré Logistics. The firm was selected through a competitive bidding process and the Concession Agreement (CA) was signed on June 3, 2016 with the GoTL (the Grantor), for a period of 30 years with a possibility of extension by 10 years. The Minister of Public Works, Transports and Communications (MPWTC) and the Minister of Finance (MOF), acting as representatives of the Grantor, have decided that the contract management function for the oversight of the Tibar Bay Port concession would be held through a dedicated Project Management Unit (PMU) to be established and staffed for that purpose, by following a PPIAF recommendation to establish such a Unit provided under the previous PPIAF assistance. The PMU will ensure that both parties comply with the terms of the CA, and will also represent the Grantor vis a vis the other government authorities in Timor-Leste in all areas involving decisions or actions from other governmental parties, such as ensuring availability and disbursements of the Viability Gap Funding (VGF) as provided in the CA, assistance in obtaining permits and authorizations, ensuring access to utilities and road, obtaining approval from the National Directorate for the Environment, funding any variations, as well as any unforeseen event that could trigger a Government action. The PMU will report jointly to MOF and MPWTC through an Operations Steering Committee and a Ministerial Steering Committee. The Ministerial Steering Committee would be composed of the two Ministers. To fulfill this role, the PMU will require a thorough understanding of the CA and strong capacity at the legal, technical, health and safety, environmental (HSE), social safeguards as well as economic and financial levels. In order to build up that capacity the various areas of expertise will have to be brought in-house by hiring a team of international and local individuals with the relevant experience. It is critical to the success of the public-private partnership to set up a strong PMU team.Relationship to CAS/CPS/CPFThe Strategic Development Plan (2011-2030), prepared by the GoTL, has four objectives: (i) to continue investing in human capital through improved access and quality of health, education and skills development while protecting the vulnerable; (ii) to use natural resource wealth to fund catalytic infrastructure; (iii) to encourage private sector investment, and diversify the economy to sustain growth and employment and; (iv) to expand the foundations of good governance and institutional effectiveness. Building on this, the current Country Partnership Strategy (2013-2017) focuses on four strategic areas: (i) improving the management and delivery of services in education, health and nutrition, and social protection; (ii) building core infrastructure to connect communities to markets; (iii) supporting economic development for a non-oil economy; and, (iv) strengthening institutions for quality of spending.This project will be crucial to the success of Tibar Bay Port Project (henceforth Port PPP), through which the GoTL aims to improve trade logistics and reduce import costs by 2017. This project would support the GoTL in financing the public investment component of the PPP, encouraging private sector engagement and economic development, while improving export opportunities for the country.II. Proposed PDO/ResultsProposed Development Objective(s)Set up and operationalize the PMU and build its capacity for the management of the first PPP concession contract in Timor-Leste. This support is envisaged to encompass capacity building and transfer knowledge from international experts to local staff for long-term contract management.Key ResultsKey results include meeting the conditions precedent to financial close, reaching financial close according to the CA timeline, and timely disbursements of the counterpart funds.III. Project ConceptDescriptionThe Government of Timor-Leste has identified Tibar Bay, 14 km west of Dili, for the site of a greenfield port handling only cargo operations. The new port will take all of Dili port’s cargo operations and have a 350,000 TEU capacity. This will relieve congestion currently experienced at the Dili port. The Port PPP consists of the construction and operation of a new port at Tibar Bay, under a PPP scheme, whereby public participation in the investment is expected to be partially funded by the WB and ADB, and partially by the PF. The Tibar Bay Port is expected to be operational by end 2019 and replace Dili Port as Timor Leste’s principal port for cargo and container operations. As Tibar Bay becomes operational, Dili Port will only provide ferry and passenger vessels and space currently occupied by cargo and container will be redeveloped as a public marina. The Port PPP financial bid consisted of a single variable, the Viability Gap Financing (VGF) to be contributed by the GoTL through a combination of their own resources, and credits/loans from the WB and the ADB. The Bolloré offer established the VGF amount at US$129.45 million, significantly lower than IFC’s base case scenario. The VGF is to be paid to the concessionaire in tranches, the first of which will be disbursed upon engineering design and mobilization. During negotiations, it was agreed that the GoTL would escrow the full VGF amount, using resources from the Petroleum Fund in order to cover the risk that the WB and ADB loans for the Port PPP are not yet approved. As a result, the installments due to the concessionaire will be paid out of this escrow account, and the proposed WB Port PPP operation will disburse as these installments are being paid, for a total amount of up to USD 70 million (USD 10 million from the International Development Association (IDA), USD 60 million from the International Bank for Reconstruction and Development (IBRD), to be confirmed), along with the ADB (whose expected contribution amounts to USD 59 million). The WB’s proposed involvement on the Port PPP would have one component:Infrastructure Development. Estimated funding of about US$350 million, of which US$170 million would be funded by the WB. The proposed funds would form part of the GoTL’s Viability Gap Financing for PPP for the Tibar Bay port. Money will be disbursed based on attainment of specific construction milestones, certified by the Independent Engineer. In order to support the Port PPP, under the proposed grant, GoTL is planning to hire both local and international individuals with the relevant expertise for PMU establishment and operationalization throughout the project cycle (including environmental and social safeguards). This is to ensure transfer of knowledge from international to local individuals. This approach is appropriate based on the previous PPIAF intervention in the country, which mobilized an international PPP Specialist to build capacity of the PPP Unit staffed with five Timorese staff. This activity successfully facilitated the PPP Unit to perform PPP pipeline identification and development and to implement tendering of the country's first PPP Concession for Tibar Bay Port.The assistance is expected to be provided for the first two years of the Concession (from the signing of the CA until the end of the first year of construction) to ensure the proposed PMU to be operational. More specifically, this proposed assistance includes contract management of the CA, staffing, review of design documents and construction supervision at the initial stage of construction. The contract management support aims to ensure that the GoTL fulfills its contractual obligations including the provision and timely disbursement of the VGF to be funded PF.This assistance will in particular focus on the critical financial close phase. The As the CA was signed on June 3rd 2016, the financial close is required to be reached no later than 11 months after contract effectiveness, allowing construction start by the third quarter of 2017. In order to reach the financial close, GoTL needs to fulfill some Conditions Precedent (including approval of concession by the Auditors' Chamber of the Supreme Administrative, Tax and Auditing Court, granting access to the Concession Area, execution of the Direct Agreements with the key subcontractors and the lenders, appointment of the Independent Engineer jointly with the concessionaire).Implementing Agency InformationThe PMU will be structured as described previously. The National Directorate of Pollution Control and Environmental Impact (NDPCEI) will be the responsible approval authority for environment and social safeguards.The Port PPP will be delivered by Bolloré Logistics, a private sector entity. The Bank’s Performance Standards (PS) will be applied in whole via the triggering of OP 4.03 for both the Port PPP and this proposed project. No project of this type or scale has been supported by either the WB or the IFC in Timor-Leste. Project Stakeholder InformationPublic participation in the Port PPP is expected to be partially funded by the WB and ADB, with the remainder from the GoTL's PF. The concession has been awarded to Bolloré Logistics, a French investment and industrial holding and a major player in transport and logistic operations. The proposed technical support will be partially funded by the PPIAF. IV. Risks and SafeguardsRisksPolitical: the political environment in Timor-Leste is complex and characterized by a certain reluctance to receive donor funding or foreign investment given the petroleum windfall and aversion to foreign management and private financing of public assets. The next Presidential and parliamentary elections to be held in 2017 add a layer of uncertainty to the project.Traffic: the concessionaire is taking full traffic risk, albeit mitigated by an exclusivity on international container handling. This exclusivity however excludes the activities at potential future ports in Oecusse and Suai (South Coast), both scheduled to be developed in the next few years. The Suai supply base is an early stage public project that would include a port, storage yard, warehouses and a fuel tank farm. The concession agreement provides for some level of compensation in case the development of the Suai supply base were to strongly impact the activity at Tibar Bay in any of the first 20 years of the concession. However the likely timing for the development of the port (a public project), as well as the lack of efficient road transport links leading to Dili (at least 6 hours between towns) and the limited population on the South Coast, are strong mitigating factors to the risk of competition. The concessionaire also considers Tibar Bay Port's potential to serve as transshipment hub to Australia and Papua, whereas IFC's base case conservatively ignored any potential for transshipment. Bolloré also estimates that Tibar Bay will capture 20% of the container traffic to the West part of Timor.Currency: currently the currency of Timor-Leste is the US dollar. In response to concerns raised by the prequalified firms prior to submitting their bids, the concession agreement establishes that in case of a change of currency, and if the Concessionaire is required by GoTL to start operations in the domestic currency, an automatic monthly tariff adjustment mechanism would apply, to reflect the exchange rate fluctuations and eliminate the foreign exchange risk. Additionally, the concession agreement requires the Grantor to make the VGF payments in US dollars even in case of a change of domestic currency.SafeguardsProject location and salient physical characteristics relevant to the safeguards analysis (if known)Tibar Bay, running approximately 1.6 km east-west and 1 km north-south, was selected by GoTL as the most appropriate site for the new Port based on a range of considerations. Seven alternative port site layouts were then considered within the Bay based on operational, engineering, environmental, social and cost factors. The site was selected as the preferred site based on its operational suitability, lower environmental and social impacts, and cost effectiveness. Port facilities are likely to consist of a 26.9ha container terminal, 2.7ha general cargo area and 11.6ha for offices and workshops.The direct, cumulative and induced potential social and environmental impacts of the Port PPP are expected to be significant. The port will require the creation of a 200m wide approach channel through the western side of the reef across the mouth of the bay, establishing a 600m diameter turning circle within the bay, construction of a wharf, land reclamation and some landside developments. The site will require the removal of around 20ha of marine habitat, most notably consisting of approximately 18ha of seagrass bed, up to 1ha of live coral and between 1 and 3ha of mangrove, depending upon the final design.Potential social impacts will include land acquisition and resettlement (although this is expected to be largely public land with only moderate direct impacts on private land), business and employment impacts (at the site and at the existing Dili port), livelihood impacts on fishing communities, cultural heritage sites, restricted access to the water, shoreline and marine area, safety and visual impacts. Substantial indirect and induced impacts on adjoining and nearby land uses and environments are also likely if not managed effectively.Borrower’s Institutional Capacity for Safeguard ManagementThe Concessionaire, Bolloré Logistics, is generally recognized as having the capacity to identify, assess and manage environmental and social risks. The company’s Timor Leste operations are certified under ISO 9001 (Quality Management Systems), 14001 (Environmental Management) and 18001 (Occupational Health and Safety Standard). For the preparation of the Environmental and Social Impact Assessment (ESIA), Bolloré has appointed a major international consulting firm with a very strong track-record in undertaking large and complex assessments such as required for this project.During project preparation, the legal and institutional framework of relevant stakeholders (particularly NDPCEI, Ministry of Lands, MoF – the Loan and PPP Unit) will be assessed, along with their capacity. If needed, a program to strengthen the safeguards implementation arrangements will be designed. Special attention will be paid to identifying an implementation structure and process to effectively interact with the social and environmental consultants appointed by the concessionaire for the preparation of the safeguard documents and for project supervision and monitoring.The PMU will be staffed with experienced professionals that will combine the backgrounds needed to manage the Concession Agreement (technical, concession/licensing, HSE, social safeguards, legal and financial). The staffing process will be done in several phases to fit the needs, and is expected to be completed before commencement of operations. The staffing plan was proposed under the previous PPIAF assistance. The PMU has already appointed one International and one National Safeguards specialist to add capacity to better manage safeguards. In addition to this, this proposed PPIAF Grant is being processed to support GoTL to set up and operationalize the PMU and build its capacity for the management of the first PPP concession contract in Timor-Leste. This support is envisaged to encompass capacity building and transfer knowledge from international experts to local staff for long-term contract management.Environmental and Social Safeguards Specialists on the TeamNicholas John Valentine (GSU02)Ross James Butler (GSU02)Safeguards Policies that Might ApplyPerformance Standards (please explain why)YesNoTBDPS 1: Assessment and Management of Environmental and Social Risks and ImpactsXSee ISDS For the main Tibar Bay port infrastructure investment project P155202PS 2: Labor and Working ConditionsXSee ISDS For the main Tibar Bay port infrastructure investment project P155202PS 3: Resource Efficiency and Pollution PreventionXSee ISDS For the main Tibar Bay port infrastructure investment project P155202PS 4: Community Health, Safety, and SecurityXSee ISDS For the main Tibar Bay port infrastructure investment project P155202PS 5: Land Acquisition and Involuntary ResettlementXSee ISDS For the main Tibar Bay port infrastructure investment project P155202PS 6: Biodiversity Conservation and Sustainable Management of Living Natural ResourcesXSee ISDS For the main Tibar Bay port infrastructure investment project P155202PS 7: Indigenous PeoplesXSee ISDS For the main Tibar Bay port infrastructure investment project P155202PS 8: Cultural HeritageXSee ISDS For the main Tibar Bay port infrastructure investment project P155202Will an Appraisal stage ISDS be required? No ................
................

In order to avoid copyright disputes, this page is only a partial summary.

Google Online Preview   Download