The World Bank Sint Maarten Airport Terminal Reconstruction Project (P167974) Project Information Document (PID) Appraisal Stage | Date Prepared/Updated: 09-May-2019 | Report No: PIDA26251 Feb 25, 2019 Page 1 of 10 The World Bank Sint Maarten Airport Terminal Reconstruction Project (P167974) BASIC INFORMATION OPS_TABLE_BASIC_DATA A. Basic Project Data Country Project ID Project Name Parent Project ID (if any) St Maarten P167974 Sint Maarten Airport Terminal Reconstruction Project Region Estimated Appraisal Date Estimated Board Date Practice Area (Lead) LATIN AMERICA AND CARIBBEAN 08-May-2019 27-Jun-2019 Transport Financing Instrument Borrower(s) Implementing Agency Investment Project Financing Sint Maarten Government Princess Juliana International Airport Operating Company N.V. Proposed Development Objective(s) The development objective to restore the passenger capacity of Princess Juliana International Airport to pre-Irma levels with improved resilience towards hurricanes. Components Internal reconstruction of the PJIA passenger terminal Project Management and Capacity Building for PJIAE Capacity Building for the Government of Sint Maarten PROJECT FINANCING DATA (US$, Millions) SUMMARY -NewFin1 Total Project Cost 108.00 Total Financing 108.00 of which IBRD/IDA 0.00 Financing Gap 0.00 DETAILS -NewFinEnh1 Non-World Bank Group Financing Counterpart Funding 7.00 Feb 25, 2019 Page 2 of 10 The World Bank Sint Maarten Airport Terminal Reconstruction Project (P167974) Borrower/Recipient 7.00 Trust Funds 51.00 Free-standing Single Purpose Trust Fund 51.00 Other Sources 50.00 EC: European Investment Bank 50.00 Environmental and Social Risk Classification Moderate Decision The review did authorize the team to appraise and negotiate Other Decision (as needed) B. Introduction and Context Country Context 1. Sint Maarten is a high-income constituent country1 of the Kingdom of the Netherlands in the Caribbean. It is the most densely populated country in the Caribbean with a population of roughly 40,000 and a per capita Gross Domestic Product (GDP) of US$27,200 as of 2016.2 Sint Maarten and Curaçao form a currency union with a joint central bank, the Centrale Bank van Curaçao en Sint Maarten (Central Bank of Curaçao and Sint Maarten, or CBCS) and a shared currency, the Netherlands Antillean guilder (NA f.), which maintains a fixed exchange rate to the U.S. dollar. Sint Maarten is currently rebuilding from damage caused by Hurricane Irma, a category 5 hurricane, that ravaged the island in September 2017, claiming lives and significantly deteriorating the socio-economic environment on the island. 2. Sint Maarten is highly vulnerable to adverse climatic events due to its location within the hurricane belt and has been exposed to high winds and numerous hurricanes. For the past decades, the country has been exposed to high winds and numerous hurricanes, including notably intense storms: Donna in 1960 (Category 3), Luis in 1995 (Category 4), and Irma 2017 (Category 5 on Saffir-Simpson scale). Due to the size of the country, a single storm has the potential to directly impact the entire population. High winds, rainfall and flooding are the principal risk factors while the country is also vulnerable to earthquakes. Coastal areas are exposed to flood risk from storm surge and tsunamis. Increased urbanization along with climate change and limited country capacity to build with resilience adds to its 1 Sint Maarten is one of the four constituent countries of the Kingdom of the Netherlands, along with Netherlands, Aruba, and Curacao 2 From Central Bank of Curaçao and Sint Maarten, based on 2018 estimates. Feb 25, 2019 Page 3 of 10 The World Bank Sint Maarten Airport Terminal Reconstruction Project (P167974) vulnerability to natural hazards. These hazards have had catastrophic impacts on the economy, which relies on tourism. 3. Sint Maarten’s economy highly relies on tourism as tourism accounted for 45 percent of its GDP and 73 percent of its foreign exchange in 2016. The economy is driven by retail and wholesale trade, hotels and restaurants, real estate, transport and communication, yacht repair, and harbor services. Prior to the hurricane, Sint Maarten’s capital, Philipsburg, was the second most visited port in the Caribbean, and its airport served as a hub for several nearby smaller islands. In addition, activities in the transport, storage and communication sector also related to tourism contributed 11 percent of GDP. Between 2012 and 2016, Sint Maarten received a yearly average of 1.8 million cruise passengers and 500,000 visitors arriving by air, who together spent about US$820 million a year.3 Sint Maarten’s nominal GDP was estimated at about US$1.07 billion in 2016. 4. The impact of the Hurricanes Irma and Maria was significant on its economy. While loss of life was limited, total damages and losses were estimated at about US$2.4 billion or 220 percent of 2016 GDP. Of these total damages, approximately 130 percent of GDP in damages were in private housing, tourism and commerce sectors, and the publicly owned airport and harbor. Losses (foregone production and decline in economic flows over 2017 to 2019) were estimated at about 90 percent of GDP, mostly in the tourism sector.4 As a result, Sint Maarten’s economy is expected to contract by 8.5 percent in 2018, following an estimated 4.5 percent contraction in 2017. Growth is projected to rebound in 2019 and the economy is expected to return to its pre-Hurricane Irma real GDP level by 2025. A sharp decline in tax revenue has cut public resource availability, while the need for public expenditure to rebuild public infrastructure and assist the affected population has risen sharply. 5. The Hurricanes have significantly affected the tourism sector. Before the hurricanes there were a total of 4,115 hotel and timeshare rooms on the Dutch side. As of October 2018, the capacity approached 65 percent of this level. Damages to the main airport and hotels have significantly reduced the number of overnight tourist arrivals and the airport is running at 60 percent throughput of the pre-hurricane levels (for both landing slots and passenger throughput), though cruise arrivals are now resuming to pre- hurricane levels. However, as most of the income on the island was derived from overnight stays of tourists arriving by air, the impact has been significant for enterprises and households. Many businesses have closed, and out-migration has increased. 6. The social and economic effects of Hurricane Irma and the disaster’s impact on poverty levels could be further worsen if action is not timely taken. In the absence of a national poverty line for Sint Maarten, a UNDP benchmark for poverty based on minimum wage5 indicates that 26.87 percent of households (approximately 3,762 households) are poor and live on revenues at or below the minimum wage (NAF 1.530.53 or approximately US$850 per month in 2017). Although little is known about the distribution of disaster impacts and their effect on vulnerable groups in Sint Maarten, international experience indicates 3 Data from the International Monetary Fund (IMF) and Statistical Yearbook, 2017, Department of Statistics Sint Maarten. 4 NationalRecovery and Resilience Plan (2018). 5 Developed by UNDP in 2015. Feb 25, 2019 Page 4 of 10 The World Bank Sint Maarten Airport Terminal Reconstruction Project (P167974) that the poorest and most vulnerable groups are likely disproportionately affected by the disaster, including Sint Maarten’s large number of female-headed households (38.7 percent of all households), who depend on the income of women post hurricane. 7. In 2018, the National Recovery and Resilience Plan (NRRP) was prepared based on the Damage and Loss Assessment (DaLA), and prioritized the reconstruction of critical infrastructure including the airport. The NRRP set the following priorities: (a) the basic needs of the people of Sint Maarten—such as food, shelter, health and psychosocial care, education, and livelihoods, (b) the urgent preparations for the hurricane season and (c) the multisectoral approach to restarting and revitalizing the economy. Among priority activities, the NRRP recommended the immediate reconstruction of the airport together with hospital and hotels as island’s critical infrastructure, as well as support to struggling small- to medium-sized enterprises in their recovery efforts. 8. Rapid economic recovery and reconstruction are critically needed, in particular, for the tourism-related sector as an economy driver of the island, investment needs are greater than currently identified public and private resources. There have been extensive efforts by the public and private sectors to enable tourism recovery, reflected in the recovery of cruise ship arrivals and 65% of accommodation inventory being back in operation. Meanwhile, a sharp decline in tax revenue due to the economic contraction has cut public resource availability while the need for public expenditure to rebuild public infrastructure and assist the affected population has risen sharply. Sectoral and Institutional Context 9. Princess Juliana International Airport (PJIA) is the main international airport serving the entire island of Saint Martin, for both Dutch and French sides. This airport also serves as an important air hub in the region for Saba and St. Eustatius (part of the Kingdom of The Netherlands) as well as other smaller islands such as Anguilla and St. Barthélemy. In 2016 the airport handled over 1.8 million passengers and 62,144 aircraft movements. PJIA is operated by Princess Juliana International Airport Operating Company N.V. (PJIAE). PJIAE is fully owned by the Princess Juliana International Airport Holding Company N.V. (PJIAH), which in turn is owned 100% by the Government of Sint Maarten (GoSM). The GoSM is the Concessor, while PJIAH is the Landlord with PJIAE being the tenant, operator, and concessionaire of the airport and all its facilities. 10. PJIA’s terminal building and facilities were severely damaged during Hurricane Irma and Hurricane Maria, and have not been fully functional since then. The passenger airport terminal, a four-story building with an area of 30,500 square meters, and the air traffic control tower were severely damaged by strong wind and rainwater. The roof of the terminal building was destroyed, the entrance doors were blown out. Due to the roof damage, salty water (mix of rainwater and salt spray from the large breaking waves at sea) entered the building, resulting in significant damage to equipment and the facilities inside and subsequent mold growth. The entire terminal, except a part of the luggage handling section on the runway side where the damage was not significant, has not been functional since then. However, the main steel structure of the building and the building foundation survived the storm well. The current building structure is 12 years old, quite solid, and has sustained practically with no damages other than the roof and the entrance doors. The windows (except one) also withstood the category 5 impact. Feb 25, 2019 Page 5 of 10 The World Bank Sint Maarten Airport Terminal Reconstruction Project (P167974) 11. Since the Hurricanes, the passenger demand has dramatically dropped and as a result, PJIAE’s revenues have lowered too. As the passenger terminal was not functional due to the damage, PJIA resumed operating using temporary tents on October 10, 2017. Passenger demand recovered to 30% by the end of 2017 compared to the pre-Irma level in 2016. The demand has slowly increased during 2018 and is around 60% of pre-Irma level in January 2019. In December 2018, right before the high season started, the part of the ground floor of the terminal was re-opened to passengers so that the terminal could accommodate around 60% of the original peak capacity. Meanwhile, the hotel industry is recovering steadily and the GoSM estimated that 67% of room capacity will be available by the end of March 2019. As the reconstruction works require at least 18-month duration, without the immediate start of the works, such a limited airport capacity will become a serious bottleneck of the tourism industry recovery, which will, in turn, impede the economic recovery of the island. 12. The reconstruction of the PJIA terminal was prioritized in the NRRP as one of the most critical activities for economic recovery. An estimate of direct damage to all airport facilities currently amounts to approximately $173 million. The NRRP recommended to focus on repairing and rebuilding the airport and related facilities to higher standards to ensure resilience of critical infrastructure to future disasters. 13. Reconstruction of the airport terminal with improved resilience to hurricanes is a high priority for the GoSM to promote a swift recovery process given the importance of tourism to the Sint Maarten economy as well as the sustainability of the airport operation. Restoring airport capacity is vital to economic recovery considering high economic dependency of the tourism sector on passengers travelling through the airport. The terminal reconstruction will promote more tourists to come back to the islands and improve financial situation of PJIAE through receiving more revenues from passengers as well as terminal venders most of which are currently closed. A more resilient airport will ensure sustainable airport operation as well as disaster relief and emergency activities during the future natural disaster events. In the long-term, the reconstruction will contribute to sustainable economic growth of Sint Maarten. C. Proposed Development Objective(s) Development Objective(s) (From PAD) The development objective to restore the passenger capacity of Princess Juliana International Airport to pre-Irma levels with improved resilience towards hurricanes. Key Results • Passenger handling capacity of the terminal (Number) • Resistance of terminal building to Irma-level hurricanes (Yes/No) D. Project Description 14. The proposed project will contribute to the reconstruction program of the Princess Juliana International Airport (PJIA) through restoring the passenger terminal function. PJIA’s reconstruction program aims at restoring the airport function with improved resilience to the future hurricanes and safety of the airport. The program includes the reconstruction of the passenger terminal as well as the other key airport facilities such as air traffic tower, firefighter facilities, fuel farm relocation, runway Feb 25, 2019 Page 6 of 10 The World Bank Sint Maarten Airport Terminal Reconstruction Project (P167974) rehabilitation. As requested by the GoSM, the project will focus on the terminal reconstruction, which is the most critical and the biggest work to recover the passenger capacity of the PJIA. 15. The project will reconstruct the terminal facilities damaged by hurricanes while keeping the existing building structure. While the terminal facilities inside the building were seriously damaged by wind and rain intruded through destroyed doors and roof, the building structure6 itself has sustained practically with no damage except the roof. Accordingly, PJIAE is implementing a series of the works, including: (i) Preliminary internal cleaning and demolition (completed); (ii) Terminal roof emergency repair (completed) and betterment to enhance resilience (completed in April 2019); (iii) Partial terminal reconstruction (Package 1) to reopen the limited area of the ground floor of the terminal (completed in December 2018); and (iv) mold remediation of the entire terminal for Package 2 (to be completed by October 2019); and (v) full terminal reconstruction (Package 2). The works under (i)-(iv) are fully financed from PJIAE’s own financing resources and concluded before the (v) Package 2 starts. 16. The project will support PJIAE in implementing the Package 2 of the terminal reconstruction works. The project is a US$108 million operation financed by a US$51 million World Bank managed Trust Fund (WB TF), US$50 million European Investment Bank (EIB) loan, and US$7 million of counterpart funds. The proposed project includes the following two components. Component 1: Reconstruction of the PJIA passenger terminal facilities (US$107 million, of which US$50 million will be financed by the World Bank managed Trust Fund, US$50 million European Investment Bank loan and US$7 million counterpart funds) 17. The component supports the reconstruction of the passenger terminal facilities of the Princess Juliana International Airport to restore the airport function and to improve its resilience to future hurricanes and safety. The component will support, among others, the Package 2 works of the terminal reconstruction, consisting of terminal facility restoration and equipment reinstallation. The planned works will rebuild the terminal facilities, including, among others, jet bridges, entrance doors, dry walls, furniture/counters, electrical and IT systems, baggage handling system, security installations, firefighter facilities and etc. Jet bridges and entrance doors will be re-installed with better resilience to hurricanes. Component 2: Project Management and Capacity Building for PJIAE (US$0.5 million financed by the World Bank managed Trust Fund) 18. The component supports project management and capacity building for PJIAE. The component will support, among others, operating costs required for meeting the Bank’s requirements on environmental and social safeguard and fiduciary. Furthermore, the component will finance capacity building activities such as resilience and air traffic safety management, based on the need assessment during the implementation. 6 The original building was designed according to the Dutch building codes. Feb 25, 2019 Page 7 of 10 The World Bank Sint Maarten Airport Terminal Reconstruction Project (P167974) Component 3: Capacity Building for the Government of Sint Maarten (US$0.5 million financed by the World Bank managed Trust Fund) 19. The component will support, among others, capacity building activities for the Government of Sint Maarten, including airport management and governance, based on the need assessment during the implementation. . . Legal Operational Policies Triggered? Projects on International Waterways OP 7.50 No Projects in Disputed Areas OP 7.60 No Summary of Assessment of Environmental and Social Risks and Impacts The risks are rated as moderate. Note: To view the Environmental and Social Risks and Impacts, please refer to the Appraisal Stage ESRS Document. . E. Implementation Institutional and Implementation Arrangements 20. PJIAE will be the executing agency of the Components 1 and 2 of the project and be responsible for implementation of all the technical tasks under the two components, such as preparation of designs, bidding documents, work supervision and contract management. PJIAE has mobilized a technical team to implement works and has already initiated some works such as cleaning and demolition, temporary terminal opening, and design preparation for the Package 2 terminal reconstruction. PJIAE has hired an engineering firm for the design preparation, supervision of the works, and coordination with various contractors under the Package 2. The technical team of PJIAE are considered sufficiently qualified to implement technically the proposed works and supervise the planned works. 21. PJIAE is primarily responsible for safeguard and fiduciary aspects of the project following the Bank’s procurement policy. PJIAE will ensure compliance with financial management guidelines and procedures, procurement guidelines, social and environmental management. PJIAE, with a technical support of an engineering company or consultants, will manage safeguard and procurement process for the proposed work. PJIAE will manage and monitor the flow of the TF proceeds to ensure that the fund flow is made following the procedures acceptable to the Bank, including payments to contractors. Since this is the first World Bank engagement in PJIAE, their implementation capacity is limited in terms of complying Bank policies and producers on fiduciary and safeguards. Accordingly, the Bank team will be providing guidance to PJIAE through supervision. Feb 25, 2019 Page 8 of 10 The World Bank Sint Maarten Airport Terminal Reconstruction Project (P167974) 22. The National Recovery Program Bureau (NRPB) will be responsible for implementation of Component 3 and coordination with the relevant government agencies. NRPB, a newly established agency under the GoSM in 2019, will implement all activities under Component 3, including fiduciary aspects under the component. NRPB will closely coordinate for the entire project implementation with the Ministry of Tourism, Economic Affairs, Transport and Telecommunication (TEATT) and other governmental agencies in the areas of civil aviation safety, customs, immigration, and quarantine, as well as, if necessary, the French government as PJIA also serves as a main airport for the French side of the island. NRPB will be the owner of all bank accounts for this project and be a co-signatory (with PJIAE) on the release of payments from such project bank accounts to contractors, suppliers and consultants. 23. The project provides a grant to the GoSM, then the GoSM will on-lend proceeds to PJIAE. The on-lend term will be agreed with the Bank prior to the project approval. The key element of the term, such as maturity and interest rate, will be the same as the EIB loan or more concessional. As the TF proceeds will be on-lent to PJIAE, PJIAE will need to repay to the GoSM under the agreed on-lend terms. The use of the reflow money from PJIAE will be agreed between the GoSM and the Bank before the project approval. . CONTACT POINT World Bank Satoshi Ogita Senior Transport Specialist Borrower/Client/Recipient Sint Maarten Government Abel Knottnerus Treaty Lawyer/Senior Policy Advisor Abel.Knottnerus@sintmaartengov.org Implementing Agencies Princess Juliana International Airport Operating Company N.V. Brian Mingo Chief Executive Officer – PJIAE N.V. bmingo@sxmairport.com Feb 25, 2019 Page 9 of 10 The World Bank Sint Maarten Airport Terminal Reconstruction Project (P167974) FOR MORE INFORMATION CONTACT The World Bank 1818 H Street, NW Washington, D.C. 20433 Telephone: (202) 473-1000 Web: http://www.worldbank.org/projects APPROVAL Task Team Leader(s): Satoshi Ogita Approved By Environmental and Social Standards Advisor: Practice Manager/Manager: Country Director: Michelle C. Keane 13-May-2019 Feb 25, 2019 Page 10 of 10