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Implementation Completion Report (ICR) Review - Transport Project I

1. Project Data:   
Project ID:
Project Name:
Transport Project I
Other Transportation, Transportation
L/C Number:
Partners Involved:
Japan's Export Import Bank
Prepared By:
Hernan Levy, OEDST
Reviewed By:
Robert van der Lugt
Group Manager:
Roger H. Slade
Date Posted:

2. Project Objectives, Financing, Costs, and Components:

The project, supported by a loan for US$80.8 million, was approved in FY90 and closed in FY97, two and one-half years behind schedule. The loan was fully disbursed.

Objectives: a) reorganize the ports subsector, and stimulate private sector involvement and competition; b) improve transport regulations in ports and roads; c) strengthen roads management and planning, d) support rehabilitation, capacity expansion and maintenance of road and port infrastructure.
Components: i) Road investments: Montevideo-Colonia section (149 km, replacing old section); road rehabilitation (66 km) and maintenance(routine maintenance maximum 10,000 km, periodic 2,000 km); ii) Road Institutional Development: improving road planning and management organization at the National Directorate for Roads (DNV); iii) Port Investment, in Montevideo and small craft ports: improvement to infrastructure and provision of container equipment and dredging; iv) Port Institutional Development: institutional strengthening of : National Port Administration (ANP) for improving management, planning, operations, financing, construction supervision and training, and of Ministry of Transport and Public Works (MTPW) for seeking private sector participation in tourist ports and reorganizing dredging services.
Cost: appraisal estimate: $ 257 million; actual: $ 222 million
Co-Financing: Japan's Eximbank: $70 million disbursed (loan for $74 million estimated at appraisal)

3. Achievement of Relevant Objectives:

Due to shortage of counterpart funds and changed priorities, project scope was amended 3 times, resulting in elimination of small ports investments, reduced construction of Colonia-Montevideo route, and addition of 7 bridges and of maintenance of 470 km of national roads. Nearly all the revised physical components were completed. Roads: construction of 70 km of main roads, construction of 7 bridges, rehabilitation and maintenance of 470 km of primary roads and maintenance of about 10,000 km of gravel roads. Ports: remodelling of loading and container terminal in Montevideo port, and improvements to three small craft ports. The economic return on these investments was estimated at 17 percent (28 percent at appraisal). On the institutional side, transport laws and regulations were revised, ANP was substantially strengthened, road planning and maintenance systems were improved, and the system of road user charges was reviewed.

4. Significant Outcomes/Impacts:

Port reform, although only started in 1992, has transformed ANP from port operator to port owner outsourcing all major operations to the private sector: container handling, tugboat services, loading, unloading and internal movement of general cargo, passenger handling and equipment services. Major efficiency gains were achieved, including staff reduction from 4,400 employees in 1992 to 1,350 in 1998 aided by compensation packages to personnel made redundant.

5. Significant Shortcomings (include non-compliance with safeguard features):

As a result of substantial overstaffing at DNV and of budget constraints, funds for road works were scaled down for most of the 1990s, resulting in an increase in the percentage of roads in poor condition from 10 percent in 1990 to 44 percent in 1996. This situation appears to have been reversed in 1997 and 1998. The increasing outsourcing of highway maintenance operations and the capacity expansion of congested highways being done mainly through concessions to private operators should help ensure that budgetary funding is allocated for maintenance as a priority.

6. Ratings:ICROED ReviewReason for Disagreement/Comments
Institutional Dev.:
    The significant reforms in the ports warrant a substantial rating in OED's 4-level rating scale.
Bank Performance:
Borrower Perf.:
Quality of ICR:

7. Lessons of Broad Applicablity:

A well selected 'lead' agency for privatization coupled with staff reductions prior to privatization supported by compensation packages to redundant staff, as in the case of Montevideo ports, can help gain support for reform in next-in-line agencies in the same sector, as it happened with the extension of reforms to the road sector.

8. Audit Recommended?  Yes

          Why?  Learn from successful port privatization.

9. Comments on Quality of ICR:

The ICR is of good quality, with a comprehensive and clear presentation of project implementation issues and outcomes. The economic analysis covers all project investments. The section on future operations includes a list of intended government activities; this section could have been strengthened with the inclusion of target performance indicators and dates.

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