Module 3

Alternative Port
Management
Structures and
Ownership
Models
World Bank Port Reform
 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

2 Module 3
 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

3 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
• Reform Tools
• Marine Services and Port Reform

World Bank Port Reform

4 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

5 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

6 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

7 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

8 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

9 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

10 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

11 Module 3
 Interaction with port cities : two major trends

• Increasing space intensity of ports takes them away from

urban centers.

• Abandoned urban industrial zones close to deep water

show a potential for redevelopment by…
- Retaining the surplus of port land within the Port Authority
for redevelopment (Barcelona)
- Transferring it to the local authority (Baltimore)
- Creating a special development corporation for this specific
purpose (London Docklands)

World Bank Port Reform

12 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
13 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
14 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

15 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

16 Module 3
 Maritime Administration Directorate :
Typical Functions

• Ship safety oversight

• Traffic safety and environment
• Aids to navigation
• Maritime education and training
• Search and rescue
• Execution of national port policy
Moved to local autonomous Port Authorities under
regulatory board oversight

World Bank Port Reform

17 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

18 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

19 Module 3
 Basic Port Management Models

World Bank Port Reform

20 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

21 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

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

World Bank Port Reform

23 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
24 Module 3
 Financing Port Projects

• Ports are increasingly considered as separate economic entities

• Who finances what ?
 Basic infrastructure : government-financed
 Operational infrastructure :
- government-financed under the Service and Tool port scheme,
- concessionaire- or lessee-financed under the Landlord port
scheme.
 Superstructure : usually financed and owned by the operator under
the Landlord port scheme
 Compensation payment for the personnel : triangular and direct
financing
 Port operations : debt financing or flotation of equity shares

World Bank Port Reform

25 Module 3
 Securities for lenders
• Guarantee from the State or the Municipality (if the Port
Authority is the borrower)
• Concession or lease contracts to private operators
• Other assets, above all when they can be used in other ports
• Cash flow generated by the port or terminal
• Governmental guarantee against political risk
• Provision of additional governmental support

• Land’s value can vary significantly and its use as a security

be complicated

• Public-Private partnerships can be set up : sharing risks and

rewards

World Bank Port Reform

26 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

27 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
28 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

29 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

30 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

31 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
32 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

33 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
34 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
35 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
36 Module 3
Contracting out and Use of Management Contracts

World Bank Port Reform

37 Module 3
 Concession Arrangements : Leasehold

The lessee (a shipping line, an operating company…) has the right

to use a fixed asset for a specific period of time, in exchange for
periodic payment of an amount of money which is :

• Fixed for flat rate lease

• Variable with minimum and
maximum payments for mini-
maxi lease (risks and rewards
of investments and operations
are shared).
• Variable with only a
minimum payment for shared
revenue lease

World Bank Port Reform

38 Module 3
 Concession Agreements (1/2)

Benefits  Better and more efficient port operations management

 Diminished reliance on State budget
 Transfer of commercial risk to the private sector
 Attraction and use of foreign investment and technology
Difficulties  Need for continuing close government regulation
and oversight
 Need for an effective legal framework to handle
transfer of property rights
 Sustainability of the agreement may be endangered
by unrealistic financial projections
 Possible improper maintenance of the facilities,
disagreements between the Port Authority and the
concessionaire
World Bank Port Reform
39 Module 3
 Concession Agreements (2/2)
Documents that may be Subjects to be dealt with :
included in the agreement :
• Land, facilities and equipment
included in the concession
• Leasehold agreement
• Functional requirements,
• Terminal access agreement
proposed designs, construction
• Port service agreement
program and time schedule
• Sponsor’s direct agreement
• Rights and responsibilities
• Design contract
regarding the construction program
• Building contract
• Human resource development
• Financing documents
• Activities to be carried out
• Management contract
• Equal access to common areas
• Payment to the Port Authority
• Termination of the concession
World Bank Port Reform
40 Module 3
 BOT Arrangements
• Definition : specialized form of concession designed to increase
private financial participation in the creation of port
infrastructure/superstructure without changing the landlord structure
of the port.

• Parts of the Port to be concessioned :  Fairways/channels

 Terminals
 Entire Port Complexes

• Variants :  Build-Own-Operate (BOO)

 Equip-Operate-Transfer (EOT)
 Build-Transfer-Operate (BTO)
 Build-Own-Operate-Transfer (BOOT)
 Wraparound-BOT (WBOT)
World Bank Port Reform
41 Module 3
 Comprehensive Privatization
• Necessary steps : enactment of new laws
• Claimed benefits : revenue for the Treasury, diversification
of business of privatized companies, new industrial relations
practices, more commercial and entrepreneurial management,
greater competition
• Actual disadvantages and risks :
 Formation of a private monopoly
 Threat to macro-economic benefits
 Discriminatory treatment of customers
 Undermined competition
 Over-investment or bad investment
 Neglect of the port’s public service function
 Reluctance of labor unions and public authorities
 Under-evaluation of the port’s market value
 Self regulation
World Bank Port Reform
42 Module 3
 Ports as Transport Chain Facilitators

Possibilities :

 Complementary terminal facilities

 Supply chain management
 Facilitation and/or co-financing of terminal facilities
outside the port area (ICDs)
 Use of the Port Authority’s operational expertise and
management

Risk :
 Conflict of interests

World Bank Port Reform

43 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
44 Module 3
 Marine Services

Definition : Port related activities undertaken to ensure the safe

and expeditious flow of vessel traffic in port approaches and
harbors and the safe stay at berth when moored or at anchor

World Bank Port Reform

45 Module 3
 The Harbormaster’s functions

• Management of port activities relating to maritime safety

and the protection of the marine environment, in particular :
 Efficient traffic flow through port and coastal waters
 Coordination of all marine services
 Management of the port police
 Management or coordination of the Pilotage service
 Regulatory oversight of the carriage and storage of
dangerous goods in the port area and of the proper use of
port reception facilities
• The harbormaster should not have his function privatized, and
should have freedom of action to carry out his public tasks in an
unimpeded manner

World Bank Port Reform

46 Module 3
 Pilotage

• Pilots have a strong bargaining power and can greatly influence

port reform

• Retaining pilots in Port Authority’s Marine Department may be

desirable

• Two ways of privatization remain possible :

 Self-employment of pilots, who are overseen,
regulated and licensed by a Maritime Authority
 Organization of a private company, regulated by
the Port Authority or Maritime administration

World Bank Port Reform

47 Module 3
 Tugboat Operations

• Tugboat operations are typically carried out by private firms.

• In the case of a single company in the port, the Port Authority

should regulate the service with respect to…

 Minimum crew size

 Minimum bollard pull
 Communication equipment and channels
 Coordination with vessel traffic management system
 Tariffs

World Bank Port Reform

48 Module 3
 Mooring Services

• Mooring services are usually carried out by a specialized

private firm.
• If there is insufficient competition, the Port Authority may
have to regulate this activity with respect to…

 Minimum manning requirements

 Communication equipment and channels
 Number of mooring boats and their characteristics
 Tariffs

World Bank Port Reform

49 Module 3
 Vessel Traffic Services and Aids to Navigation

• Vessel Traffic Services…

- Usually are part of a Port or a Maritime Authority
- When outsourced, should be regulated with regards to :
 System functions
 Types and specifications of radars and tracking software
 Manning level and qualifications
 Reporting duties
 Tariffs
• Aids to Navigation…
- Usually rest with a national Maritime or Port Authority
- Are difficult to privatize

World Bank Port Reform

50 Module 3
 Other Marine Services

• Control of dangerous goods is usually performed by a

specialized branch of the Port Authority
• Waste management services are often privatized under strict
control of a Port Authority
• Port patrol services should not be privatized
• Emergency response services are carried out by the Port
Authority, the fire brigade, health services and police
• Control of dredging operations should be performed by a
sufficiently competent personnel employed by the Port Authority

World Bank Port Reform

51 Module 3
 Prevailing Service Providers under
different port management models

World Bank Port Reform

52 Module 3