1

PORTS AND HARBOUR ENGINNERING

PRIVATIZATION AND FINANCIAL ASPECTS
OF PORTS IN DEVELOPING COUNTRIES
2
Process of Study
The 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.

3
Presentation Points
1. Finance System For Port Infrastructure
2. PSP in Terminal Operation
3. Regulation on Private Investment
4. Recent Movement of PSP in Ports
5. Remarks for PSP in Ports


4
Sampling Study of
World Terminals
Australia 1 El Salvador 1 Philippines 2
Bangladesh 2 Estonia 1 Syria 2
Brunei 1 Indonesia 3 Taiwan 2
Cambodia 1 Iran 1 Thailand 1
Canada 1 Japan 2 Tonga 1
China 1 New Zeeland 1 USA 1
Egypt 2 Peru 1 Vietnam 2
5
Ownership of Terminal
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
land owner terminal owner
private
both
public
6
Finance System for Port
Infrastructure
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
channel
dredging.
berth const. yard const. h'dling
equpment
inst.
private
both
public
7
Finance System For Port
Infrastructure
PUBLIC WORK COMMERCIAL
FINANCE
DEVELOPMENT
FINANCE
R
E
P
A
Y
M
E
N
T

B
Y

T
A
X

R
E
P
A
Y
M
E
N
T

B
Y

R
E
V
E
N
U
E

BREAK WATER
NAVIGATION CHANNEL
QUAY & WHARF
RECLAMATION
CRANE WAREHOUSE
HANDLING EQUIPMENT
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Private Sector Participation in
Port Operation
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
m antainace
dredging
tug/Pilot Term inal
operation
private
both
public
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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
JO JV Lease Consession BOT
12
Contract Term
0
1
2
3
4
5
6
less than
5
5years 10years 20years 25years 30yeas more
than 50
13
Build Operate Transfer Law
Republic Act No.7718
of 1994 in Philippines
Malaysias Port (Privatization) Act
of 1990 (Act 422)
Korean Act 5654 on Private Participation
in Infrastructure of 1998
Examples of Laws on
Private Investment
14
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 method
including 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 PSP
1. 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.B
Constructed
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
Company
B
Company
C


Port Administration Building
Company
A
Shipping Company
Y
Shipping Company
Z

CFS
owned by B and C

Contract
(Current) (Future)
Port Management by Private Sector
Comprehensive Operation by Private Sector
Constructed
by Private Sector
Contract
Company
C
Company
B
Warehouse
owned by A
Warehouse
owned by B
Company
A
Shipping Company
Y
Shipping Company
Z
Contract


CFS
Port Management by Public Sector
Conceptual Image of Effective Port Operation
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Basic Port Management Models
I nfrastructure Superstructure Port Labor Other Functions
Public Service Port Public Public Public Majority Public
Tool Port Public Public Private Public/Private
Landload Port Public Private Private Public/Private
Private 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?

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Which is Profitable?
$
$
Private
operator
Port authority
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Thank for your attention !