™xHSKIMBy350461zv,:&:!:/:' Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized 42705_MOD1_COVER_AGS 5/27/03 8:20 AM Page 1 PORT REFORM TOOLKIT MODULE 1 FRAMEWORK FOR PORT REFORM THE WORLD BANK 42705_MOD1_TEXT_AGS 5/27/03 7:23 AM Page 1 MODULE 1 FRAMEWORK FOR PORT REFORM INTRODUCTION AND OBJECTIVES The complex reform process through which the Toolkit navigates policy makers The process of institutional reform is com- is a worthwhile journey. While the rea- plex. Most countries undertake the kinds sons for engaging in port reform are of fundamental institutional reforms that many and varied (as discussed in Module shift boundaries between the public and 3), the benefits are real and can be quanti- private sectors less than once in each gen- fied as they accrue to exporters, con- eration. Hence, the knowledge necessary sumers, shippers and entrepreneurs. A to carry the reform process forward needs successful reform program may free gov- to be built up in most countries from a ernments of unnecessary expenditures, near zero base. The Port Reform Toolkit releasing funds for high priority social (Toolkit) is designed to shorten the learn- programs, ease bottlenecks to trade and economic development, and motivate the ing curve for institutional review and adoption of new regulations that protect renewal by providing background infor- the environment and improve workman mation, concrete examples of successful and navigational safety. More broadly, and unsuccessful reforms, and specific the benefits the main stakeholders can tools and methods that policy makers and expect from port reform include: reformers require to proceed with the confidence that genuine knowledge • Governments: at the macroeconomic affords. level, improvement of external trade 1 42705_MOD1_TEXT_AGS 5/27/03 7:23 AM Page 2 competitiveness by reducing trans- • Consumers: lower prices for con- port costs, and in particular the cost sumer goods and better access to a of port services, and improving port wider range of products through efficiency at the sea/land interface; improved access and increased com- at the microeconomic level, easing petition between suppliers. the financial burden on national In Colombia, for instance, the liberaliza- budgets by transferring part of port tion of port labor practices along with investments and operating costs to the transfer of most port services to the the private sector, and incidentally, private sector has resulted in large and raising revenues from asset divesti- rapid improvements in productivity, tures; lowers fees for port users, and very • Transport and Terminal Operators: attractive returns for the concessionaires more cost-effective port operations (see Box 1). Similarly, in Argentina, the improvements following the concession- and services, allowing for more effi- ing of terminal operations in Buenos cient use of transport assets and bet- Aires have been dramatic: port charges ter competitive positions in transport and shipping tariffs have declined markets, and more business opportu- sharply, labor productivity has nearly nities in growing sectors (e.g., con- quadrupled, and cargo volumes have tainer operations); jumped by more than 50% (see Box 2). • Shippers, Exporters/Importers: The objective of the Port Reform Toolkit reduced port costs and, potentially, is to provide support for policy makers lower maritime freight rates, allow- in undertaking sustainable and well- ing lower costs of imported goods considered reforms to public institutions and intermediate products and that provide, direct and regulate port enhanced competitiveness for services in developing countries. In par- exports; and Box 1 COLOMBIA: OPERATING PERFORMANCE BEFORE AND AFTER REFORM Indicator Before 1993 1996 Average vessel waiting time (days) 10 No wait or in hours, depending on the port Working days per year 280 365 Working hours per day 16 24 Tons per vessel per day Bulk cargo 500 2,500 minimum General cargo 750 1,700 Containers per vessel per hour (gross) 16 25 Source: Puertos (Colombia General Port Superintendent; July 1997). 2 42705_MOD1_TEXT_AGS 5/27/03 7:23 AM Page 3 Box 2 ARGENTINA: SELECTED PERFORMANCE INDICATORS FOR THE PORT OF BUENOS AIRES Indicator Before 1993 1996 Cargo (thousands of tons) 4,000 6,000 Containers (thousands of TEUs) 300 540 Capacity (thousands of containers per year) 400 1,000 Operational area (hectares) 65 95 Productivity (tons per worker per year) 800 3,000 Average stay for full containers (days) 2.5 1.5 Cost for container imports (US$ per ton) 450 120 Port tariff for exports (US$ per ton) 6.7 3.0 Port tariff for imports (US$ per ton) 2.1 1.5 Source: Puertos (Colombia General Port Superintendent; July 1997). ticular, the Toolkit offers public officials available. The Toolkit is designed to fill with support in: this knowledge gap and to provide port reformers with decision support tools, • Understanding the need for and tested and proven institutional reform challenges associated with sector tactics, and guidelines that represent reform and institutional redesign in "best international practice." light of the changing business envi- ronment affecting port operations; The Toolkit draws together practical institutional designs and alternative • Choosing among options for private approaches for increasing private sector sector participation and analyzing involvement without compromising the their implications for redefining public interest. It presents "best interna- interdependent operational, regula- tional practices" in a manner that is rele- tory and legal relationships between vant to decision makers, and is designed public and private parties; to be easily understood by non-special- ists. It supplements general points with •Preparing legislation, contracts and specific examples drawn from recent institutional charters to govern pri- port reform activities around the world. vate sector participation; and While the main audience for the Toolkit • Managing the transition to increased is public officials in developing coun- private sector involvement. tries who are responsible for port sector Resources that address port institutional reform, the Toolkit should also be of reform in a comprehensive and system- interest to other government officials, to atic way or that clearly explain the executives with port service companies, processes involved in re-engineering shipping companies, port consultants, public port institutions are not readily and companies that use port services. 3 42705_MOD1_TEXT_AGS 5/27/03 7:23 AM Page 4 In addition to this introduction, the consequences associated with each Framework Module includes the follow- option based on recent international ing sections: experience. The framework is presented in the form of a "decision tree" that pro- • Context for the Framework vides a context for understanding the Module subsequent modules, which are: • The Port Business Environment • Module 2: The Evolution of Ports in a Competitive World: The roles and •ARoad Map for the Port Reform Process functions of ports; forces shaping port dynamics in the 21st Century. •Implementing Port Reform: Pulling Readers of this module should be It All Together able to place their ports in the con- text of current and historic port CONTEXT FOR THE FRAMEWORK developments and to understand the MODULE major trends shaping the ports of the future. The Toolkit is made up of eight mod- ules. The first of these, the Framework • Module 3: Alternative Port Module, sets the stage for all of the Management Structures and other modules that follow. It provides a Ownership Models: Description of unifying "decision framework" that poli- different port structures and owner- cy makers can use to guide them step- ship models and identification of the by-step through the processes of reform- strengths and weaknesses of each. ing and re-inventing port institutions. It Readers of this module should be also provides a common language and a able reach a decision about the most set of concepts that are used throughout effective, efficient, and feasible struc- the Toolkit and that represent the com- ture for their ports, given each coun- mon language port reformers use in try’s/community’s unique economic, communicating with their various con- political, and social environment. stituencies. Importantly, the Framework Module also includes a road map for the • Module 4: Legal Tools for Port other modules that follow. It explains Reform: Description of legal and the interrelationship of these modules contractual options and the identifi- with one another and their relevance to cation of the strengths and weak- the framework presented here. nesses of each. Readers of this mod- ule should be able to understand and The Framework Module lays out an take steps to develop specific port ordered set of decisions that are linked reform measures and legal frame- together functionally as well as tempo- works based on the port’s/govern- rally. For each decision, the Toolkit ment’s economic, financial, political, attempts to articulate the principle and social goals and objectives. options and alternatives available to pol- icy makers and to assess the expected 4 42705_MOD1_TEXT_AGS 5/27/03 7:23 AM Page 5 • Module 5: Financial Implications advice on how to take the many ele- of Port Reform: Risk allocation ments of port reform and put them among port stakeholders; potential into a procedurally logical and politi- sources of funding for the reform cally feasible sequence of steps that process;