 in northeastern Africa, with a 1200 km coastline on the Red Sea.

Massawa and Assab

are the two major ports. For centuries, Massawa has been the center of trade between
Africa and the Middle East. The port of Massawa suffered greatly as a result of
damage incurred during the Liberation War, and both Massawa and Assab have
suffered from lack of maintenance over the past 15-20 years. The port of Massawa,
which serves as the major port for import/export of Eritrean cargo, as well as for an
increasing volume of traffic for northern Ethiopia (Tigray), suffers from relatively
slow cargo handling rates (especially for containers), and long dwell times. It has also
been hampered by the collapse in 1978 of about 40 meters of the blockwork quay wall
at the junction of Berths 5 and 6. Given the current traffic volumes handled through
Massawa and Assab (780,000 tons and 2,800,000 tons, respectively - highest on record
for Massawa), as well as the condition of infrastructure and superstructure in the two
ports, they are already experiencing severe capacity constraints. Furthermore, they do
not have the right type of facilities for the traffic they are presently handling: container
traffic is growing rapidly and the facilities currently in place are inadequate for such
traffic.
 2. Both ports are owned by the Government. The Government has, recently decided to
restructure the port industry and place the two ports within a commercialized
framework. A Department of Maritime Transport (DMT) has been established in the
Ministry of Transport to be responsible for national ports and shipping policies, safety,
environment, and navigational aid along the coastline, and to actas the link between
the owner (Government) and the ports of Massawa and Assab. Both ports will be
given sufficient autonomy under their own boards of directors to make investment and
operational decisions on a commercial basis.
 3. Project Objectives. The proposed project, for the rapid rehabilitation of the existing
port of Massawa and the re-equipment of Assab, is the first phase of the Government's
program for development of the port sector. (The second and third phases will be the
subject of a Development Study to be carried out under the project.) It supports the
economic recovery program contained in the Government's Policy and Sector Strategy
Papers (Macro-Policy), and in the Country Assistance Strategy. The Government's
long term goal is to build a modern, technologically advanced, exportoriented
economy based on self-reliance, technology transfer and private investment, which
will capitalize on Eritrea's strategic position and natural resources. The strategy seeks
to accomplish this objective by: (i) creating an environment to support private sector
development; (ii) reducing infrastructure constraints; and (iii) investing in human
resources. The ports will play a critical role in the future expansion of the economy.
 Project Description. The Ports Rehabilitation Project is designed to assist the two ports
at Massawa and Assab to address urgent capacity requirements up to the year 2005. It
would: (i) optimize the use of existing facilities; (ii) substantially increase their
productivity and capacity; and (iii) raise their level of services to international
standards. The project would have five primary components: (a) a civil works program
at Massawa (399 of total project cost) comprising: (i) repairs, rehabilitation and
extension of berths 5 and 6, (ii) dredging in front of the new berth 6 to 12 m depth, (iii)
 reclamation of land behind berth 6, (iv) heavy duty pavement for the new container
stacking yard, (v) clearing of the apron and storage areas adjacent to berths 5 and 6,
(vi) storm drainage system, and (vii) an administrative building for the customs
authorities; (b) a cargo handling equipment component (47T) comprising for
Massawa: (i) a mobile ship-to-shore crane; (ii) a mobile crane; (iii) reach stackers for
full and empty containers, (iv) tugmasters and trailers, (v) fork lift trucks for stripping
and stuffing of containers, (vi) repair of shore cranes and fork lift trucks, and (vii)
spare parts; and for Assab, (viii) 2 mobile cranes to carry out ship-to-shore handling of
containers, (ix) heavy duty lift trucks for full and empty containers at the stacking
yard, (x) tugmasters and trailers, (xi) small fork lift trucks for stripping and stuffing
containers and for operating in the ship's hold, and (xii) a replacement tugboat; (c) an
environment component (3w) including: (i) facilities and equipment to improve
operating practices at the two ports regarding control of discharge of bilge water and
solid waste from ships, and (ii) oil spill combat equipment, including support in
institutional building and training, to comply with the National Oil Spill Contingency
Plan presently under preparation; (d) training (1w) programs in the fields of port
operations and equipment maintenance, including provision of overseas training at
recognized international institutes and/or overseas ports, as well as short term technical
assistance; and (e) consultancy services (6%) comprising (i) supervision of the civil
works, (ii) short term experts to assist in drafting technical specifications and bidding
documents for equipment procurement, (iii) specific studies in the field of MIS, cost
accounting, tariff analysis and commercialization of port activities, (iv) technical
assistance and training, and (v) a study of the long term development of the port sector
(Phases II and III).
5. Project Financing. Total project cost is estimated at US$57.6 million, with a foreign
exchange component of US$51.3 million (89 percent). IDA would contribute about
US$30.3 million and Italy will co-finance 21.0 million (an untied Grant to be
administered by IDA). The Government of Eritrea will provide about US$6.3 million
equivalent in local costs.
6. Implementation Arrangements. The project will be implemented over a four year
period from 1998 to 2002. The borrower will be the Government of Eritrea (GOE ).
Implementation of the project will be the responsibility of DMT. A Project Coordination
Unit will be established at DMT headquarters to support preparation and implementation,
and provide overall coordination of the project. The unit will be set up for the duration of
the project, with its members recruited from the two ports and assisted by short term
consultants if necessary. For the important coordination between the project and the
ongoing port operations, a meeting of port users (port authorities, customs,
representatives of the trucking industry, oil industry, shipping and clearing and
forwarding agencies, etc.) will be convened regularly at each port to report on project
progress and discuss issues which may affect the port users in the course of project
implementation. A Project Implementation Plan (PIP) will be prepared and discussed
during negotiations.
7. Project Sustainability. The project would ensure adequate cost recovery from users for
maintenance, amortization, and replacement of equipment. The two ports would generate
sufficient cash flow to sustain their operations. To this end, financial covenants would
ensure adequate tariffs and cost containment measures to maintain port profitability and
competitiveness with comparable ports in the region. Restructuring of the ports, the
provision of training and TA and placing them within a commercial framework will
enhance project sustainability.
8. Lessons Learned. As this would be the first IDA operation in Eritrea's transport sector
involving substantial infrastructure rehabilitation, there are no lessons learned from past
experience in the country. IDA has, however, funded port projects in the region, and the
main lessons learned from these are that major improvements are unlikely unless: (i) the
Government is fully committed to reform and prepared to support the actions that will be
necessary; and (ii) adequate motivation and accountability is established within the
implementing agency. These lessons have been taken into account in the preparation and
design of the project, and the Government's commitment will be spelled out in a Letter of
9. Environmental Aspects. The project is rated "A" as it comprises dredging and
reclamation, and handling of hazardous material. An environmental impact assessment
has been carried out which has established that the level of contamination of the material
to be dredged is very low, and should not require any special precaution for the dredging
and reclamation. Furthermore, the material is suitable for filling and will be used for
reclaiming land behind Berth 6. A survey of the area to be dredged will be carried out as
part of finalizing the bidding documents to determine the potential risk of underwater
hazard from unexploded ordnances. The final design and bidding documents for all civil
works will ensure that appropriate measures will be taken by the contractors to mitigate
potential adverse environmental effects. The two ports' operating practices regarding
control of discharge of pollutants in the port, including collection of garbage and oily
ballast, bilge water and sewage, will be improved under the project as a first step for
Eritrea to eventually sign and ratify the MARPOL 73/78. Operational changes to improve
the handling of hazardous materials in the two ports will also be included in the project.
An Environmental Assessment Study is available in the Public Information Center.
10. Program Objective Categories. The proposed project is an integral part of Eritrea's
post-conflict reconstruction effort.q It would rehabilitate and expand trade and
commerce, improve infrastructure for private sector development and thereby support
IDA's private sector development (PV). Improved operational practices and efficiency
would support environmentally sustainable development (ENV).
11. Project Benefits. The project has considerable quantifiable and non-quantifiable
benefits. Without the project, ships' waiting and service times would rise to unacceptable
levels, and the already high freight cost would increase. Speeding up ship-to-shore
movement of containers would substantially enhance the attractiveness of Assab as a
container port and make it much more likely that Assab would be served directly by the
container lines, rather than through transshipment at other regional ports and feeder
services. This direct service could significantly reduce container freight rates, and once
direct services are established to Assab, it is possible that transshipment for Massawa
would shift to Assab. The environmental improvements would result in safer port
operations and considerably reduce the risk of oil pollution.
12. Risks. During implementation of the civil works component (a period of about two
years), berths 5 and 6 in Massawa will at different times be out of commission and
handed over to the civil contractor. There is a risk during this time that the port area will
be so heavily congested that the contractors work will be hampered. To minimize the risk
of delays and cost escalation of the civil works, the bidding/contract document(s) will
include specific and detailed clauses on phasing of the works, and modalities for
coordination and liaison between the contractor and the operations department. There are
also risks and uncertainty as to the local capacity and lack of experience of DMT to
implement and manage the project. Flexible overall project design, the early
establishment of a Project Coordination Unit, technical assistance and training, and
frequent project supervision and reviews have been included to manage these risks.
 LESSONS LEARNED FROM ASSAB PORT CONSTRUCTION PROJECT
IMPLEMENTATION

In any construction project at the Implementation phase the project may consider the following:

 current traffic volumes handled through

condition of infrastructure and superstructure in the two ports, they are already
experiencing severe capacity constraints. Furthermore, they do not have the right type of
facilities for the traffic they are presently handling: container traffic is growing rapidly
and the facilities currently in place are inadequate for such traffic.
 Project Objectives. The proposed project, for the rapid rehabilitation of the existing port
of Massawa and the re-equipment of Assab, is the first phase of the Government's
program for development of the port sector. (The second and third phases
The strategy seeks to accomplish this objective by: (i) creating an environment to
support private sector development; (ii) reducing infrastructure constraints; and (iii)
investing in human resources. The ports will play a critical role in the future expansion
of the economy.
 Project Description. The Ports Rehabilitation Project is designed to assist the two ports at
Massawa and Assab to address urgent capacity requirements up to the year 2005. It
would: (i) optimize the use of existing facilities; (ii) substantially increase their
productivity and capacity; and (iii) raise their level of services to international standards.
 Project Financing. Total project cost is estimated at US$57.6 million, with a foreign
exchange component of US$51.3 million (89 percent).
 Implementation Arrangements. The project will be implemented over a four year period
from 1998 to 2002.
 Optimization of resources
 Project Sustainability. The project would ensure adequate cost recovery from users for
maintenance, amortization, and replacement of equipment. The two ports would generate
sufficient cash flow to sustain their operations. To this end, financial covenants would
ensure adequate tariffs and cost containment measures to maintain port profitability and
competitiveness with comparable ports in the region
 : (i) the Government is fully committed to reform and prepared to support the actions that
will be necessary; and (ii) adequate motivation and accountability is established within
the implementing agency.