WORLD BANK PORT REFORM TOOL KIT MODULE 3 ALTERNATIVE PORT MANAGEMENT STRUCTURES AND OWNERSHIP MODELS The Port Reform Toolkit could be elaborated thanks to the financing contributions of the following organizations: The Public-Private Infrastructure Advisory Facility (PPIAF) PPIAF is a multi-donor technical assistance facility aimed at helping developing countries improve the quality of theirinfrastructure through private sector involvement.For more information on the facility see the web site:www.ppiaf.org. The Netherlands Consultant Trust Fund The French Ministry of Foreign Affairs The World Bank The Port Reform Toolkit Modules have been prepared with the contributions of the following organizations,under the management of the World Bank Transport Division: International Maritime Associates (USA) Mainport Holding Rotterdam Consultancy (formerly known as TEMPO),Rotterdam Municipal Port Management (The Netherlands) The Rotterdam Maritime Group (The Netherlands) Holland and Knight LLP (USA) ISTED (France) AXELCIUM – Ingenierie et Regulation Financiere (France) Nathan Associates (USA) United Nations Economic Commission for Latin America and the Caribbean (Chile) PA Consulting (USA) Comments are welcome. Please send them to the World Bank Transport Help Desk. Fax:1 202 522 32 23.Internet:[email protected] MODULE 3 STRUCTURES & OWNERSHIP MODELS OBJECTIVES AND OVERVIEW tions. Examples have been included illus- trating approaches that have been suc- This Module, the third of seven compris- cessful as well as those that have been ing the World Bank’s Port Reform Toolkit, less than fully successful. This Module lays out an array of alternative port man- also notes how ports have adjusted agement and control structures, and organizational and administrative explains for each structure the respective arrangements as a result of the strategic roles most likely to be filled by the public shifts and competitive pressures affecting and private sectors. It provides a frame- the maritime sector. These developments work for all of the Modules by defining are described in Module 2 in detail. the characteristics of specific management Module 3 is organized into seven sec- structures and the tasks and responsibili- tions, including this overview. ties to be performed by private and public sector entities. In particular, it identifies The section titled “Evolution of Port the problems facing port managers when Institutional Frameworks” provides basic adapting their organizations to the chal- terms of reference and a conceptual lenges of today’s global market place. framework for defining the respective The solutions and "tools" suggested in roles of the public and private sectors in this Module are adapted as much as pos- port management. The section also sible to the port manager’s specific situa- describes a number of public interest 1 issues affecting port planning, port oper- describes the strengths and weaknesses ations and infrastructure development. of each. There are many ways to change the institutional structure of a port. The section titled “Port Functions, Traditional methods of operating and Services and Adurinis-fration Models” management structures have been aban- defines a number of typical manage- doned, with ports increasingly operating ment structures that ports use around as commercial entities in the global mar- the globe. This section spells out the ket place. The process of structural kinds of tasks that public ports under- change can be a painful one, with the take and defines for each of the alterna- potential for costly mistakes to be made. tive management structures ways in However, increasingly the international which discrete elements of these tasks port community agrees on the structural are assigned to various parties. role and function of port authorities. The global market has had a unifying The next section focuses on the impor- influence on emerging institutional tant subject of port finance, a topic that structures. The increasing influence of is dealt with at greater length in Module International Finance Institutions on 5. Here, the private sector plays an port development also facilitates the increasingly important role in providing introduction of efficient models and funds for infrastructure development, in structures all over the world. Although addition to paying for superstructure, there still is a large diversity of port equipment and systems. This has not management and organizational struc- only a profound impact on management tures, the trend towards several success- structures, but also on long-term public ful port management models is strong. participation in port development. The analysis assesses various aspects of pub- The next section analyses the reform lic versus private investments in infra- tools that port managers can use. The structure including: which components role of governments in financing port of infrastructure are paid for by the development is eroding and the private Government or by the Port Authority; sector has assumed more responsibility which investments should be made by not only in port finance but also in port the terminal operator; and how operations. This causes a gradual shift in Governments with limited funds can the balance of power between govern- harness private funding for port-related ments and the private sector. It is not investments. This section also analyzes clear how far this shift will go, but it is the role global terminal operators -- both evident that the balance is likely to be shipping lines and stevedoring compa- different from port to port and from nies -- play in today’s maritime sector country to country. and assesses their impact on port man- agement and finance. The final section analyzes traditional marine services in the context of port The section titled “Port Reform reform. Such services include activities Modalities” presents an overview of that are carried out by both the public various port reform options and and private sector. Marine services 2 ensure the safe and expeditious flow of transformed and renegotiated to adjust vessel traffic in port approaches and to modern bulk handling methods, unit- harbors and a safe stay at berth or at ized handling and containerization. All anchor. In every port the Harbormaster of these developments resulted in a (or Port Captain) is responsible for nau- rapid modernization of port handling tical safety and often also for the protec- equipment. At the start of this process, tion of the environment. Other services labor unions often refused to accept such as vessel traffic management, reductions in the labor force, and pilotage, and dangerous goods control ignored the need to upgrade skills. are described as well. Finally, the sec- Later, however, unions realized that port tion describes several possible reform reform was a necessity. Enlightened approaches that can be applied to labor leaders accepted moderate marine services. reforms. As Module 7 describes in greater detail, it is no longer realistic for Upon completing this Module, the read- dockworkers and their trade unions to er should have attained a better under- oppose institutional reform and the standing of the various types of port technological advances that frequently management and ownership alterna- precede and accompany it. tives, their respective strengths and weaknesses, and which alternatives The second reason why many ports might best fit a port’s particular circum- failed to respond adequately to the stances. increased demands imposed on them was centralized government control in EVOLUTION OF PORT INSTITUTIONAL the port sector. Particularly between FRAMEWORKS 1960 and 1980, central planning (in the port sector as well as in other sectors) Private sector investment and involve- prevailed not only as a norm in socialist ment in ports emerged as a significant economies, but also as in many western issue in the 1980s. By this time, many and developing countries where nation- ports had become bottlenecks to efficient al port authorities were often promoted distribution chains of which they are an by international development banks. essential component. Three main prob- Slow paced and rigidly hierarchical lems contributed to the gradual deterio- planning, control and command struc- ration of service quality (illustrated by tures often accompanied central plan- port congestion and consequent chronic ning. Only in the 1980s did the disman- service failures) during this period. tling of communist systems and the increasing introduction of market-ori- The first was restrictive labor practices. ented policies on a worldwide basis Increasingly after World War II, anti- open the way for decentralized port quated work practices and methods for management and for reduced govern- matching available labor with occasional ment intervention in port affairs. work -- practices that developed during a previous era characterized by break- The third main reason for a lack of port bulk cargo handling -- needed to be service quality was the inability or 3 unwillingness of many governments to Box 1 invest in expensive port infrastructure or the "mis-investment" in infrastructure "White Elephants" in Port (i.e., to provide facilities that were badly Development matched with the needs of foreign trade During its early years, the container terminal of the and shipping). During this period a Port of Damietta in the Arab Republic of Egypt was number of beautifully constructed port often cited as a "white elephant" in port develop- ment. The terminal