Module 3
Alternative Port
Management
Structures and
Ownership
Models
World Bank Port Reform
Alternative Port Management Structures
and Ownership Models
• Objectives and Overview
• Evolution of Port Institutional Framework
• Port Functions, Services and Administration
Models
• Port Finance Overview
• Port Reform Modalities
• Reform Tools
• Marine Services and Port Reform
World Bank Port Reform
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Module 3
Overview
• Evolution of Port Institutional Framework : respective
roles of the public and private sectors
• Port Functions, Services and Administration Models :
typical management structures
• Port Finance Overview : funding for infrastructure
development, management impacts
• Port Reform Modalities : strengths and weaknesses of the
different options
• Reform Tools : managing the shift in public/private sectors
balance of power
• Marine Services and Port Reform : description of marine
services and possible reform approaches thereof.
World Bank Port Reform
3
Module 3
Alternative Port Management Structures
and Ownership Models
• Objectives and Overview
• Evolution of Port Institutional Framework
• Port functions, services and administration
models
• Port Finance Overview
• Reform Tools
• Marine Services and Port Reform
World Bank Port Reform
4
Module 3
Why did Private Sector Participation emerge?
•
Supply/distribution chains : ports as bottlenecks
•
Labor Practices : labor unions often ignored the need to
reduce the labor force and upgrade skills implied by the
modernization of port-handling equipment.
•
Centralized government control was too rigid and slowed
down the pace of planning, control and command structures,
limiting responsiveness to market demand.
•
Public investment in port infrastructure was often insufficient
or inadequate, and implied heavy reliance on state budget.
World Bank Port Reform
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Module 3
Appropriate division of responsibilities
between the Public and the Private Sectors
•
Public Sector : planner, facilitator and regulator
•
Private Sector : service provider, operator and developer
•
Shifting the boundary line : results rather than ideology
 Increased service levels for infrastructure users
 Increased efficiency in operations
 Improved allocation of limited public funds
World Bank Port Reform
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Module 3
Ports integrated in global logistics chains
•
Local benefits also have global and regional attributes
•
Private port services providers are increasingly global in
scope and scale
•
Globalization will challenge the protection of “public”
and local interests
World Bank Port Reform
7
Module 3
Alternative Port Management Structures
and Ownership Models
• Objectives and Overview
• Evolution of Port Institutional Framework
• Port functions, services and administration
models
• Port Finance Overview
• Port Reform Modalities
• Reform Tools
• Marine Services and Port Reform
World Bank Port Reform
8
Module 3
Port functions, services and administration
models : table of contents
1. Port activities and new trends
2. Choosing a framework to operate public intervention
3. Interaction with port cities
4. Role of a Port Authority
5. The delicate function of planning
6. Role of a Transport Ministry
7. Port administration models : the four categories
8. Globalization of port operation
9. Port management and Port competition
10. Value-added services : a means to attract clients
World Bank Port Reform
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Module 3
Ports activities and new trends
Ports produce :
•
Public Goods : create positive externalities that justify
public intervention. Ex : coastal protection works.
•
Private Goods : generate direct economic benefits that can
be captured in market transactions.
•
The mix of public and private goods can create economic
multiplier effects
New trends in activities :
•
•
Clustering of activities : heavy industries, manufacturing
Development of value-added services
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10
Module 3
Choosing a normative framework
for public intervention
•
Market surrogate framework : remedy market imperfections
and capture non-market externalities (ex: competition “for the
market”).
•
Public interest framework : pursue explicit goals designed to
satisfy the demand for public goods
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Module 3
Interaction with port cities : two major trends
•
Increasing space intensity of ports takes them away from
urban centers.
•
Abandoned urban industrial zones close to deep water
show a potential for redevelopment by…
- Retaining the surplus of port land within the Port Authority
for redevelopment (Barcelona)
- Transferring it to the local authority (Baltimore)
- Creating a special development corporation for this specific
purpose (London Docklands)
World Bank Port Reform
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Module 3
Objectives of a Port Authority
• Definition : State, Municipal, public or private body, which
is largely responsible for the tasks of construction,
administration and sometimes operation of the port facilities
• Objectives :
- Fully recover all port-related costs
- Attract outside investment
- Stimulate innovation
- Generate internal cash-flows to replace and expand
infrastructure
- Compete according to market rules
- Limit cross-subsidization
- Avoid dissipation of the Port Authority’s asset base.
World Bank Port Reform
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Module 3
Role of a National Authority
•
•
Statutory powers :
- Approval of proposals for port investment
- Setting of financial objectives for ports
- Regulation of rates and charges
- Definition of a labor policy
- Establishment of principles for licensing
- Facilitation of data collection and research about
the port
- Legal advice to local port authorities
Parallel roles :
- Regulation of shipping and port operations
- Oversight of nautical operations
- Port marketing and promotion
- Strategic planning …
World Bank Port Reform
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Module 3
The delicate function of planning
Planning requires the Port Authority and the municipality to
coordinate and to take into account …
• The global context of the proposed investment
•
Investment plans of industrial and commercial port operators
• The integration of individual master plans at the national level
World Bank Port Reform
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Module 3
Role of a Transport Ministry
•
Policy making : planning and development of basic maritime
infrastructure, of ports and of port hinterland connexions
•
Legislation : drafting and implementation of laws, regulations
and decrees
•
International relations : representation of the country,
negotiation of agreements
•
Financial and economic affairs : planning, assessing and
assisting in financing projects of national importance
•
Auditing
•
Executive functions : Maritime Administration Directorate
World Bank Port Reform
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Module 3
Maritime Administration Directorate :
Typical Functions
• Ship safety oversight
• Traffic safety and environment
• Aids to navigation
• Maritime education and training
• Search and rescue
• Execution of national port policy
Moved to local autonomous Port Authorities under
regulatory board oversight
World Bank Port Reform
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Module 3
Port Functions
• Infrastructure landlord
• Regulator of economic activities and operations
• Planning for future development
• Marketing and promotion of port services
• Operation of nautical services
• Supplier of cargo-handling and storage services
• Provider of ancillary facilities
World Bank Port Reform
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Module 3
Port Administration Models : the 4 categories
• Public Service Port : the public Port Authority offers all the
services required for the functioning of the seaport system
• Tool Port : the Port Authority manages the port infrastructure
and heavy superstructure, with private cargo-handling companies
providing commercial services
• Landlord Port : the Port Authority acts as a regulatory body and
as a landlord. Port operations are carried out by private companies.
• Fully Privatized or Private Service Port : the port is privately
owned, operated and sometimes self-regulated.
World Bank Port Reform
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Module 3
Basic Port Management Models
World Bank Port Reform
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Module 3
Globalization of Port Terminal Operations
• The major global container trades are increasingly dominated by :
- a few major carriers alliances, aiming at controlling the
full chain of logistics
- a few independent terminal operators, aiming at making a
profit only by offering terminal services
• Relationships between ports and carriers :
- traffic volume / transshipment / competitive pressure
- common user facilities / dedicated terminals
World Bank Port Reform
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Module 3
Port Management and Port Competition
• The Port Authorities aim at stimulating intra-port competition,
with the objectives to…



•
Ensure fair competition among operators in the port
Control monopolies and mergers
Prevent anti-competitive practices
Inter-port competition depends on a port’s…
 Geographical location
 Financial resources
 Institutional and socio-economic climate
 Efficiency and price
 Image
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Module 3
Value-added services : a means to attract clients
World Bank Port Reform
23
Module 3
Alternative Port Management Structures
and Ownership Models
• Objectives and Overview
• Evolution of Port Institutional Framework
• Port functions, services and administration
models
• Port Finance Overview
• Port Reform Modalities
• Reform Tools
• Marine Services and Port Reform
World Bank Port Reform
24
Module 3
Financing Port Projects
•
Ports are increasingly considered as separate economic entities
•
Who finances what ?
 Basic infrastructure : government-financed
 Operational infrastructure :
- government-financed under the Service and Tool port scheme,
- concessionaire- or lessee-financed under the Landlord port
scheme.
 Superstructure : usually financed and owned by the operator under
the Landlord port scheme
 Compensation payment for the personnel : triangular and direct
financing
 Port operations : debt financing or flotation of equity shares
World Bank Port Reform
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Module 3
Securities for lenders
• Guarantee from the State or the Municipality (if the Port
Authority is the borrower)
• Concession or lease contracts to private operators
• Other assets, above all when they can be used in other ports
• Cash flow generated by the port or terminal
• Governmental guarantee against political risk
• Provision of additional governmental support
• Land’s value can vary significantly and its use as a security
be complicated
• Public-Private partnerships can be set up : sharing risks and
rewards
World Bank Port Reform
26
Module 3
Alternative Port Management Structures
and Ownership Models
• Objectives and Overview
• Evolution of Port Institutional Framework
• Port functions, services and administration
models
• Port Finance Overview
• Port Reform Modalities
• Reform Tools
• Marine Services and Port Reform
World Bank Port Reform
27
Module 3
Definitions
•
Modernization : introduction of more suitable systems, working
practices, etc. within the existing system of bureaucratic constraints.
•
Liberalization/de-regulation : reform or partial elimination of
government rules, enabling private companies to operate in a
previously publicly-operated area.
•
Commercialization : the public port is given more autonomy,
made accountable for its decisions and overall performance, and
applies private sector management accounting principles.
•
Corporatization : the public port is given the legal status of a
private company, although the public sector sill retains ownership
•
Privatization : transfer of ownership of assets from the public to
the private sector, or the application of private capital to fund
investments in port facilities, equipment and systems. It can be
comprehensive or partial.
World Bank Port Reform
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Module 3
Modernization
Possible improvements not implying any legal or policy changes:
•
Adoption of corporate planning practices
•
Application of Human Resources Development planning
•
Development of tools to improve port administration and
communication, such as…




World Bank Port Reform
Computer applications
Management Information Systems
Electronic Data Interchange
Information and Communication Technology
29
Module 3
Liberalization
• Temporary advantage : the public operator may continue to
exist as a form of insurance against disruption in service, while
unsuccessful private port operators can be replaced.
• Disadvantages : possibility for remaining internal and external
cross-subsidies, or other unfair practices from the public sector.
• Solution : clear separation of the regulatory and commercial
roles in the port, all the commercial activities being transferred to
the private sector.
World Bank Port Reform
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Module 3
Commercialization
Objectives :
• Transform the port organization into a truly autonomous Port
Authority, whose Board will oversee the organization’s activities
• Give the Port Authority financial independence and responsibility
for the port’s performance
• Enable it to have its own Human Resources management schemes
Common problems :
• Continuing interference of the government in port decisions
• Insufficient market pressure, leading to potential lack of
efficiency
World Bank Port Reform
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Module 3
Corporatization :
positive and negative aspects
Corporatization allows to…
• Give financial autonomy to the port
• Give time for the management to settle into its new role
before contemplating full privatization
• Overcome the reluctance of private capital suppliers to
invest in the company
• Protect the public interest during the transition period
Usual negative aspects
• Monopoly of the new corporate entity
• Lack of efficiency when competition is weak
• Possible politicization from the government
• Need for a port sector regulator to create a level-playing field
World Bank Port Reform
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Module 3
Corporatization : principal steps
•
Preparation and enactment of any needed legislation
• Development of the charter of the corporatized port
enterprise, of a corporate plan, of a business plan
• Capitalization and vesting of part of the assets/liabilities
in the new corporation
• Creation of a new labor statute and retraining of
management and staff
World Bank Port Reform
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Module 3
Privatization
Main advantages
• Removal of trade barriers
• Harnessing of the efficiency and know-how of the Private Sector
• Elimination of political interference
• Reduced demand on the Public Sector budget
• Adjustment of port labor
• Other objectives : raising revenues for State Treasury…
Core features
• Divestiture
• Deregulation / Liberalization
• Competitive tendering
• Private ownership of operational assets with market-based
contractual arrangements
World Bank Port Reform
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Module 3
Alternative Port Management Structures
and Ownership Models
• Objectives and Overview
• Evolution of Port Institutional Framework
• Port functions, services and administration
models
• Port Finance Overview
• Port Reform Modalities
• Reform Tools
• Marine Services and Port Reform
World Bank Port Reform
35
Module 3
Spectrum of Port Reform Tools
Public Management and Operations
Outsourcing
Management Contracts
Lease and Rent Contracts
}
Concessions
Full Concession including BOT/BOOT/etc.
Build, Own, Operate (BOO)
Divestiture by license
Divestiture by Sale
Private Supply and Operations
World Bank Port Reform
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Module 3
Contracting out and Use of Management Contracts
World Bank Port Reform
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Module 3
Concession Arrangements : Leasehold
The lessee (a shipping line, an operating company…) has the right
to use a fixed asset for a specific period of time, in exchange for
periodic payment of an amount of money which is :
• Fixed for flat rate lease
• Variable with minimum and
maximum payments for minimaxi lease (risks and rewards
of investments and operations
are shared).
• Variable with only a
minimum payment for shared
revenue lease
World Bank Port Reform
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Module 3
Concession Agreements (1/2)
Benefits 



Better and more efficient port operations management
Diminished reliance on State budget
Transfer of commercial risk to the private sector
Attraction and use of foreign investment and technology
Difficulties  Need for continuing close government regulation
and oversight
 Need for an effective legal framework to handle
transfer of property rights
 Sustainability of the agreement may be endangered
by unrealistic financial projections
 Possible improper maintenance of the facilities,
disagreements between the Port Authority and the
concessionaire
World Bank Port Reform
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Module 3
Concession Agreements (2/2)
Documents that may be
included in the agreement :
•
•
•
•
•
•
•
•
Leasehold agreement
Terminal access agreement
Port service agreement
Sponsor’s direct agreement
Design contract
Building contract
Financing documents
Management contract
World Bank Port Reform
Subjects to be dealt with :
• Land, facilities and equipment
included in the concession
• Functional requirements,
proposed designs, construction
program and time schedule
• Rights and responsibilities
regarding the construction program
• Human resource development
• Activities to be carried out
• Equal access to common areas
• Payment to the Port Authority
• Termination of the concession
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Module 3
BOT Arrangements
• Definition : specialized form of concession designed to increase
private financial participation in the creation of port
infrastructure/superstructure without changing the landlord structure
of the port.
• Parts of the Port to be concessioned :  Fairways/channels
 Terminals
 Entire Port Complexes
• Variants :
World Bank Port Reform





Build-Own-Operate (BOO)
Equip-Operate-Transfer (EOT)
Build-Transfer-Operate (BTO)
Build-Own-Operate-Transfer (BOOT)
Wraparound-BOT (WBOT)
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Module 3
Comprehensive Privatization
• Necessary steps : enactment of new laws
• Claimed benefits : revenue for the Treasury, diversification
of business of privatized companies, new industrial relations
practices, more commercial and entrepreneurial management,
greater competition
• Actual disadvantages and risks :
 Formation of a private monopoly
 Threat to macro-economic benefits
 Discriminatory treatment of customers
 Undermined competition
 Over-investment or bad investment
 Neglect of the port’s public service function
 Reluctance of labor unions and public authorities
 Under-evaluation of the port’s market value
 Self regulation
World Bank Port Reform
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Module 3
Ports as Transport Chain Facilitators
Possibilities :
 Complementary terminal facilities
 Supply chain management
 Facilitation and/or co-financing of terminal facilities
outside the port area (ICDs)
 Use of the Port Authority’s operational expertise and
management
Risk :
 Conflict of interests
World Bank Port Reform
43
Module 3
Alternative Port Management Structures
and Ownership Models
• Objectives and Overview
• Evolution of Port Institutional Framework
• Port functions, services and administration
models
• Port Finance Overview
• Port Reform Modalities
• Reform Tools
• Marine Services and Port Reform
World Bank Port Reform
44
Module 3
Marine Services
Definition : Port related activities undertaken to ensure the safe
and expeditious flow of vessel traffic in port approaches and
harbors and the safe stay at berth when moored or at anchor
World Bank Port Reform
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Module 3
The Harbormaster’s functions
• Management of port activities relating to maritime safety
and the protection of the marine environment, in particular :
Efficient traffic flow through port and coastal waters

Coordination of all marine services

Management of the port police

Management or coordination of the Pilotage service

Regulatory oversight of the carriage and storage of
dangerous goods in the port area and of the proper use of
port reception facilities

• The harbormaster should not have his function privatized, and
should have freedom of action to carry out his public tasks in an
unimpeded manner
World Bank Port Reform
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Module 3
Pilotage
• Pilots have a strong bargaining power and can greatly influence
port reform
• Retaining pilots in Port Authority’s Marine Department may be
desirable
•
Two ways of privatization remain possible :
 Self-employment of pilots, who are overseen,
regulated and licensed by a Maritime Authority
 Organization of a private company, regulated by
the Port Authority or Maritime administration
World Bank Port Reform
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Module 3
Tugboat Operations
•
Tugboat operations are typically carried out by private firms.
• In the case of a single company in the port, the Port Authority
should regulate the service with respect to…





Minimum crew size
Minimum bollard pull
Communication equipment and channels
Coordination with vessel traffic management system
Tariffs
World Bank Port Reform
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Module 3
Mooring Services
•
Mooring services are usually carried out by a specialized
private firm.
•
If there is insufficient competition, the Port Authority may
have to regulate this activity with respect to…




Minimum manning requirements
Communication equipment and channels
Number of mooring boats and their characteristics
Tariffs
World Bank Port Reform
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Module 3
Vessel Traffic Services and Aids to Navigation
• Vessel Traffic Services…
- Usually are part of a Port or a Maritime Authority
- When outsourced, should be regulated with regards to :





System functions
Types and specifications of radars and tracking software
Manning level and qualifications
Reporting duties
Tariffs
• Aids to Navigation…
- Usually rest with a national Maritime or Port Authority
- Are difficult to privatize
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Module 3
Other Marine Services
• Control of dangerous goods is usually performed by a
specialized branch of the Port Authority
• Waste management services are often privatized under strict
control of a Port Authority
• Port patrol services should not be privatized
• Emergency response services are carried out by the Port
Authority, the fire brigade, health services and police
• Control of dredging operations should be performed by a
sufficiently competent personnel employed by the Port Authority
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Module 3
Prevailing Service Providers under
different port management models
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Module 3