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

5 Ownership of Terminal

6 Finance System for Port Infrastructure

7 Finance System For Port Infrastructure DIRECT REVENUE INDIRECT BENEFIT PUBLIC WORKCOMMERCIAL FINANCE DEVELOPMENT FINANCE REPAYMENT BY TAX REPAYMENT BY REVENUE BREAK WATER NAVIGATION CHANNEL QUAY & WHARF RECLAMATION CRANE WAREHOUSE HANDLING EQUIPMENT

8 Private Sector Participation in Port Operation

9 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 )

10 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

11 Feature of PSP in Terminal Operation

12 Contract Term

13 Build Operate Transfer Law Republic 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

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

15 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

16 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

17 Image 25years （ after inauguration) Kitakyshu Port Hibiki Container Terminal Construction and Operation Project

18 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 事業者 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

19 Basic Port Management Models

20 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

21 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.

22 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

23 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

24 Which is Profitable? $ $ Private operator Port authority

25 Thank for your attention !