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PORTS AND HARBOUR ENGINNERING

PRIVATIZATION AND FINANCIAL ASPECTSOF PORTS IN DEVELOPING COUNTRIES

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Process of StudyThe Manila Meeting focused on laws and regulations related to private investment. (BOT, PPI, PFI, Port Privatization Law)

At the Brisbane Meeting, we explained the standard terms and contents in concessions and /or contracts for private investment in ports.

The Singapore Meeting was cancelled.

This time we will examine the recent situation of PSP in the development and operations of ports based on results of questionnaires and discuss how to introduce PSP to the development and management of ports.

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Presentation Points

1. Finance System For Port Infrastructure 2. PSP in Terminal Operation 3. Regulation on Private Investment4. Recent Movement of PSP in Ports5. Remarks for PSP in Ports

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Sampling Study of World Terminals

Australia 1 El Salvador 1 Philippines 2Bangladesh 2 Estonia 1 Syria 2

Brunei 1 Indonesia 3 Taiwan 2Cambodia 1 Iran 1 Thailand 1Canada 1 Japan 2 Tonga 1China 1 New Zeeland 1 USA 1Egypt 2 Peru 1 Vietnam 2

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Ownership of Terminal

0%10%

20%30%40%50%

60%70%80%

90%100%

land owner terminal owner

private

both

public

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Finance System for Port Infrastructure

0%10%20%30%40%50%60%70%80%90%

100%

channeldredging.

berth const. yard const. h'dlingequpment

inst.

private

both

public

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Finance System For Port Infrastructure

DIRECT REVENUE

INDIRECT BENEFIT

PUBLIC WORK COMMERCIALFINANCE

DEVELOPMENTFINANCE

RE

PA

YM

EN

TB

Y T

AX

RE

PA

YM

EN

TB

Y R

EV

EN

UE

BREAK WATERNAVIGATION CHANNEL

QUAY & WHARF RECLAMATION

CRANE WAREHOUSEHANDLING EQUIPMENT

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Private Sector Participation in Port Operation

0%10%20%30%40%50%60%70%80%90%

100%

mantainacedredging

tug/ Pilot Terminaloperation

privatebothpublic

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Private Sector Participation in Terminal Operation (1)

2. Joint Venture (Companies pool resources to share risks. Management company can be a fully owned subsidiary of PMB)

1. Joint Operation (PMB maintains the employment of his workers and takes advantage of the efficiency of private companies )

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3. Lease Lease holder takes operation risks.

4. Concession (superstructure and cargo handling) Concessionaire has rights to finance, build and

operation

Private Sector Participation in Terminal Operation

5. BOT (including infrastructure development)

After the limited period of time, the facility and its

equipment will be transferred free of charge to the

grantor

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Feature of PSP in Terminal Operation

0

1

2

3

4

5

6

7

8

9

J O J V Lease Consession BOT

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Contract Term

0

1

2

3

4

5

6

less than5

5years 10years 20years 25years 30yeas morethan 50

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Build Operate Transfer LawRepublic Act No.7718 of 1994 in Philippines

Malaysia’s Port (Privatization) Act of 1990 (Act 422)

Korean Act 5654 on Private Participation in Infrastructure of 1998

Examples of Laws on Private Investment

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Privatization Movement In Thailand

2) In Leam Chabang port, PAT prepared infrastructures including facilities of Terminal B1-B4 and leases them to the private sector.

3) B5 terminal was developed by the BOT methodincluding berth construction.

1) The old Bangkok port has been operated as a service port using personnel of PAT.

4) Privatization of PAT itself is underway despite protests from the labor union

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Japanese Examples for PSP1. Enforcement of the PFI Law (Sept. 1999) Cargo handling facilities at container terminals Low interest loan by DBJ 　 Exemption of the special land ownership tax

2. Effective Port Management Scheme (Dec. 2002)

Provision of Public Berths to Private Sector Long-term Concession Effective Operation and Flexible Tariff Setting by Private Sector

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Gantry Crane

Transfer Crane

Yard

PFI Project Promoter

Public Use

Constructed by the public(State)→Controlled by P.M.B committed by the State

P.M.BConstructed by the public

Wharf

Control House

PFI

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Image

25years （ after inauguration)

Kitakyshu Port Hibiki Container Terminal Construction and Operation Project

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Utilization License (Yard: per 1 year, Wharf: per 12 hours)

Long-term (30 years) Contract (Lease/Concession)

Utilization License from Public Sector Lease from Public Sector

CompanyB

CompanyC

Port Administration Building

CompanyA

Shipping CompanyY

Shipping CompanyZ

事業者

CFSowned by B and C

Contract

(Current) (Future)Port Management by Private Sector

Comprehensive Operation by Private Sector

Constructed by Private Sector

Contract

CompanyC

CompanyB

Warehouse owned by A

Warehouse owned by B

CompanyA

Shipping CompanyY

Shipping CompanyZ

Contract

CFS

Port Management by Public Sector

Conceptual Image of Effective Port Operation

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Basic Port Management Models

Infrastructure Superstructure Port Labor Other FunctionsPublic Service Port Public Public Public Majority PublicTool Port Public Public Private Public/ PrivateLandload Port Public Private Private Public/ PrivatePrivate Service Port Private Private Private Majority Private

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Strong and Weak Points of Port Management Models

(Public Service Port)

Strength:•Unity of Command

 

Weakness:

Labor Problems•Lack of Internal Competition•Lack of innovation

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Strong and Weak Points of Port Management Models (Fully Privatized Port)

Strength: Maximum Flexibility of Investments and Port Operations No Direct Government Interference Market Oriented Port Development and Tariff Policies. High Price for the Sale of Port Land Weakness: Monopolistic Behavior Lack of Economic and Regional Development Policy Considerable Amounts of money is necessary to buy back

the port land Serious Risk of Speculation with port land by private

owners.

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Conditions for Successful Privatization

• Access to the international trade route• Sufficient traffic – sufficient revenue• Profit with sufficient safety margin• Stable economy with less government

intervention

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Fear and Expectation• Public

– If no applicant appears?– Operator generates

enough revenue?– Operator operates

efficiently?– Operator helps

development of economy?

– Can avoid monopoly situation?

• Private– Is government

regulation too strict or not transparent?

– Any risk involved in the contract:- stability of social, economic and regulatory rules?

– Sufficient traffic guaranteed?

AUTHOR

ITY

COMPANY

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Which is Profitable?

$$

Privateoperator

Port authority

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Thank for your attention !