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Concessioning, Privatization & Financing

Overview

Concessions involve transferring all or parts of port functions to the private sector. Key questions that need to be addressed in this process include:

  • The financial requirements of to-be-established Port Authorities?
  • The financial elements required to successfully manage or monitor the concessioning of commercial port operations?
  • How to help implement an equitable scheme for ports staff reduction, when necessary?

Links to Useful Websites

  • Labor Issues in Infrastructure Reform: A Toolkit (2004) provides practical tools and information to help policymakers handle labor issues arising from infrastructure service reforms.
  • World Bank Private Sector Development: Private Participation in Infrastructure Projects Database.The PPI Projects Database tracks trends in private infrastructure business in the developing world since 1984. Its versatile structure allows it to provide aggregated data such as investments by sector, region, or type of contract as well as project specific information such as services provided, project size, project name, and sponsors.
While we hope that that the followiing website is of interest, the World Bank is not responsible for the content of external Web sites
  • IAPH (International Association of Ports and Harbors) is a worldwide association founded in 1955, based in Tokyo. It is sometimes referred as the "United Ports of the World" in which players in the port community are represented to promote and advance the common interest of their community.

Useful Documents

Measuring Port Performance (PDF 100 KB)
Patrick Fourgeaud, World Bank, August 2000
This note proposes a more customized approach of indicators used to monitor port performance, forecast development and set targets in port sector projects. The main points are that, in most cases, it is not possible to determine benchmarks which would be applicable for any port, and that all expressions of port performance do not address the same requirements. Therefore, carefully identifying problems to be monitored and taking into account the main characteristics of the commercial activity should lead to more accurate indicators and targets.
Is Public Authority Necessary After Privatization? (PDF 20 KB)
Dr Jean Grosdidier De Matons, June 1999
The author examines two points; (i) to find out why port authorities have a public character, and (ii) to determine what can be left now of their public character, if such a public character is justified.
Modernization of Ports (PDF 198 KB)
The course entitled "Port Modernization: A Pyramid of Interrelated Challenges" (presented by the UN Economic Commission for Latin America and the Caribbean, ECLAC, LC/G.2031, April 1999) seeks to encourage participants to analyze a series of factors affecting the administration and operation of ports. Its central aim is to generate a consensus among the port community on the need to restructure the port system.
Private Infrastructure: A Bibliography (PDF 539 KB)
Omer Karasapan, World Bank. World Bank Viewpoint Note No. 81, June 1996
The World Bank has well over 100 projects involving private participation in infrastructure (PPI) in its pipeline, the IFC has participated in 100 more PPI projects, and MIGA provides guarantees in support of such projects. In the course of this work, the Bank Group is amassing information on the legal, regulatory, institutional, and transactional issues confronting PPI projects in developing countries. Omer Karasapan provides a guide to the English-language publications and documents on PPI issues that the Bank Group has produced since 1992.
Restructuring Morocco's Port Sector (PDF 140 KB)
World Bank Operations Evaluation Department, Precis No. 118, June 1996
The World Bank's first port sector loan to Morocco helped the newly created autonomous public corporation, Office d'Exploitations Portuaires (ODEP), turn Casablanca's busy but inefficient port into a productive facility. The project's main achievement, however, was in helping ODEP itself develop into an efficient, financially viable operation. The project's success derived mainly from effective use of technical assistance and sector studies, which helped the corporation adopt a new organizational structure; establish a modern management information system; and introduce a tariff structure to cover the cost of port services. A recent OED audit notes, however, that in one area the project could have been stronger: promoting greater competition and a bigger role for the private sector in operating and managing port services. That task still remains, posing the next challenge for ODEP's management.
Capital Market Pressures and Management Incentives (PDF 539 KB)
Timothy Irwin and Ian Alexandar. World Bank Viewpoint Note No. 93, October 1996
Timothy Irwin and Ian Alexander propose a number of good privatization rules to ensure that management will improve after privatization. Governments should ensure that the privatized sector has several firms operating in it so that if one operator goes bankrupt, another can readily take over. Governments should also permit concentrated ownership and foreign ownership, and profits should not be guaranteed through regulation.
Privatization Defined; Is it the Universal Panacea? (PDF 36 KB)
Alfred Baird, Napier University, June 1999
Defining port privatisation is seldom easy and requires careful analysis. This is normally because the extent of private sector involvement within ports can vary. In this paper, a framework is proposed which aids analysis and understanding of the different models of port privatisation. These models take account of, and are based on, the various essential elements involved in the effective functioning of ports. Privatisation of each of these elements influences the extent of private sector influence within a given port. Each model represents a possible alternative option as far as state decision-makers are concerned, and the framework as a whole should therefore be of value, particularly to policy makers, as an aid in the decision making process.
The WB Approach to Risk Management (PDF 25 KB)
Marc Juhel, World Bank, June 1997
Today, there is practically no such things as purely public infrastructure projects any more in countries organized under liberal market economy principles. In most cases, so called " public projects " include a strong dose of private intervention. For instance, infrastructure is built by private contractors; operational equipment is fumished or sold by private firms. Symetrically, purely private projects are still constrained, controlled, regulated by public organisations or entities. which retain the rights of approving lay-outs, prescribing norms, imposing levels of service. enforcing competition rules, or safety standards, setting or approving fares and rates. or tolls, and so on..
Outside Contractors for Port Maintenance (PDF 39 KB)
John R. Lethbridge, World Bank. World Bank Infrastructure Note No. PS-2, November 1990
The use of outside contractors for some port maintenance tasks offers an attractive alternative to port managers seeking to improve their equipment availability and faced with a poorly staffed and equipped workshop and serious shortages of spare parts. The decision to adopt this approach, however, must be carefully evaluated to avoid subsequent problems and to realize the full benefits. Procurement arrangements must be well thought out, financed, cost-controlled and supervised for the results to be successful. Good management is the key.
Competing Private Ports: Lessons from Argentina (PDF 539 KB)
Antonio Estache and José Carbajo, World Bank. World Bank Viewpoint Note No. 100, December 1996
Port reforms in Argentina have sought to deregulate, decentralize, and privatize. And they have sought to introduce competition not only among ports but also for the ports—by inviting operators to bid for port concessions—and within the ports—by dividing large ports into terminals and offering each as a separate concession. Bidders were asked to set their own charges, subject to a maximum price cap for cargo, and concessions were awarded on the basis of the highest rental offered for the infrastructure and equipment. The results have been generally positive, with increased productivity, higher cargo volumes, and big reductions in tariffs. Antonio Estache and José Carbajo look at the lessons from the reform and set out the remaining challenges.
Port Administration: Public vs Private Sector (PDF 33 KB)
John Lethbridge and Zvi Ra'anan. World Bank Infrastructure Note No. PS-5, November 1991 
Governments around the world are improving the operational efficiency of national ports through institutional reform, changing the role of port authorities and increasing use of the private sector.
Private Sector Involvement in East and Southeast Asian Ports: An Overview of Contractual Arrangements (PDF 50KB)
Hans J. Peters, World Bank. World Bank Infrastructure Note No. PS-10, March 1995
More than US$ 8 billion of private capital has been pledged for capacity expansion and service modernization in Far Eastern and Southeast Asian ports. The contractual arrangements vary but in most cases the private financiers remain involved in port operations and management upon completion of the investments. This note presents an overview of key developments in the region.

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