Module 3

Alternative Port
Management
Structures and
Ownership
Models
World Bank Port Reform
 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

2 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

3 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

4 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

5 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

6 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

7 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

World Bank Port Reform

8 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

World Bank Port Reform

9 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
10 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
11 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

12 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

13 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

14 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

15 Module 3
 Basic Port Management Models

World Bank Port Reform

16 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

17 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

World Bank Port Reform

18 Module 3
 Value-added services : a means to attract clients

World Bank Port Reform

19 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

20 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
21 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…

 Computer applications
 Management Information Systems
 Electronic Data Interchange
 Information and Communication Technology

World Bank Port Reform

22 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

23 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

24 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
25 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

26 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
27 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
28 Module 3
 Spectrum of Port Reform Tools

Public Management and Operations

Outsourcing
Management Contracts
Lease and Rent Contracts
Full Concession including BOT/BOOT/etc. } Concessions

Build, Own, Operate (BOO)

Divestiture by license
Divestiture by Sale
Private Supply and Operations
World Bank Port Reform
29 Module 3