ECONOMIC ANALYSIS

ECONOMIC ANALYSIS

KARACHI PORT IMPROVEMENT PROJECTCost-benefit analysis The economic analysis was carried out forThe civil works Equipment necessary to operate the terminals. It comprised an assessment of B/C of the project investments for berths 15-17a and covered a period of 20 years.

The flow of costs consisted of investment and operating costs of berths 15-17A. Investment costs included: Project costs, with physical contingencies, supervision and The costs of the necessary equipment. The main benefits considered in the analysis include: A reduction in the cost of queuing for berths as a result of the additional berths, anReductions in the costs of ship time at berths as a result of faster handling equipment that will be installed by the new private operators.

Main assumptionsInvestment will take place in 2010-2011 and have a 40-year life; residual value is 20-year using a linear depreciation rate;Investment costs for berths 15-17a are estimated at USD 158.8 million including civil work, operation of consultants, andenvironmental managementthe cost of equipmentA standard conversion factor of 0.9 has been applied for converting the financial costs into economic values.

In the baseline scenario, the number of berths available at the KPT are assumed to be 10 - i.e. berths 2, 3, 4, 5, 12, 13, 14, 18, 20 and 21.In the with project scenario, the number of berths available are assumed to be 13 - i.e. 2, 3, 4, 5, 12, 13, 14, 15, 16, 17, 18, 20 and 21.Growth rates of the cargoes handled at KPT are forecast to average 8.1% per annum in the period 2009-2015, 4.4% per annum in the period 2015-2020 and 3.7% per annum in the period 2020-2030. The addition of berths 15-17A to the berths will raise capacity about 10%ResultsBased on the above described assumptions the project is estimated to yield a net present value (NPV) of USD 118 million (at an economic discount rate of 12%) and an economic internal rate of return of 23.2%. Economic viability from the investment is high.

Detailed AnalysisTransport Demand

Forecast of Cargoes handles in Karachi Port

BenefitsReduction in Cost of queuing of Berths

Reductions in the costs of ship time at berths as a result of faster handling equipment that will be installed by the new private operators.

ResultsBased on the made above assumptions, the project is estimated to yield a net present value (NPV) of USD 118 million (at 12% discount rate) and an economic internal rate of return (EIRR) of 23%.