Public Private Partnerships as an

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Public Private Partnerships as an
Option to Speed Up Investments

in Intermodal Infrastructure

and Services

C
é
sar Queiroz, Ph.D.

Transport Infrastructure Consultant

World Bank

Klaipeda, Lithuania

19
-
21 November 2007

InterBaltic Final Conference:

“A Future Transport Policy for the
Baltic Sea Region”

Presentation Outline


The World Bank Lending for Transport


World Maritime Traffic


World Port Container Traffic


Major Container Routes


World Top
-
10 Container Ports


Global World Port Capacity


Performance Based Contracts (PBC)


From PBC to Concession


World Bank Port Reform Toolkit


Logistics Performance Index (LPI)


Concluding Remarks


References

World Bank Lending for Transport


0
500
1000
1500
2000
2500
3000
3500
4000
FY04
FY05
FY06
FY07
FY08*
Year
Aviation
General Transport
Ports and Waterborne
Transport
Railways
Roads and Highways
Lending (US$million)

World Bank
-
Financed Klaipeda Port
Project Includes


Rehabilitation and extension of
breakwaters


Dredging of the channel entrance


Training of port pilots


Improved navigation systems, wave
current monitoring, wreck removal


Construction of a confined disposal
facility for storage/treatment of
contaminated dredging masses

Klaipeda Port: Reconstruction and
Extension of Breakwaters

Klaipeda Port: Reconstruction and
Extension of Breakwaters

Dredging of Channel Entrance

Wreck Removal from Channel Entrance

Development of World Maritime Transport

0
1
2
3
4
5
6
7
8
1990
1992
1994
1996
1998
2000
2002
2004
Year
Other cargo
Dry bulk
Crude and
products
Source: UNCTAD Review of

Maritime Transport 2006

Total transport (billion tons)

World Port Container Traffic

0
100
200
300
400
500
600
1973
1977
1981
1985
1989
1993
1997
2001
2005
2009*
Year
Source: Containerisation International

Million TEU


Major Container Routes (mio TEU) 2005




Transatlantic

2.4

3.5

9.3

4.9

Trans
-

Pac

5.1

Trans
-

Pac

12.9

Total East/West


50.3

Total North/South


20.3

Total Inter
-
Regional

45.3

World Total


115.9

Source: Drewry

World Top 10 Container Ports

24.8
23.2
21.7
18.5
12
9.8
9.6
8.9
8.9
8.5
0
5
10
15
20
25
30
Singapore
Hong Kong
Shanghai
Shenzhen
Busan
Kaohsiung
Rotterdam
Hamburg
Dubai
Los Angeles
2003
2004
2005
2006
Source: Yearbook Containerisation International

Throughput (million TEU)

Relative Growth: Top 10 World
Container Ports

0
20
40
60
80
100
120
140
160
180
200
Singapore
Hong Kong
Shanghai
Shenzhen
Busan
Kaohsiung
Rotterdam
Hamburg
Dubai
Los Angeles
2003
2004
2005
2006
Source: Yearbook Containerisation International

Relative Growth (2003 = 100)

Global Container Port Capacity


Container port capacity is reaching critical
levels


Development of new port capacity in
countries like China is fast, but in other
regions (like USA and Europe) much
slower, due to many procedures (e.g.,
public inquiry, EIA, inefficient hinterland
connections)


Example: Le Havre and Yangshang
Offshore Terminal in Shanghai



Le Havre and Yangshang


2000 project in Le Havre: First Phase of
4 berths took 3 years




Yangshang Offshore Terminal in
Shanghai: Phases 1 and 2 (9 berths)
and 32.5 km long bridge took 5 years

PPPs are not new
!


Toll road at Wadesmill in Hertfordshire, UK,
established in 1663 by Act of Parliament


19th century concessions: toll roads,
bridges, tunnels in US; railways in France;
subway in London


Suez (1860) and Panama (1880) canals


Decline around 1930 (great depression)


Resurgence in the 1980s: collapse of the
state
-
owned monopoly paradigm

Public
-
Private Partnership
(PPP)

A sustained collaborative effort
between the public sector
(government agencies) and private
enterprises to achieve a common
objective (e.g., a container terminal
project) while they pursue their own
interests

Performance Based Contracts for
Dredging


a Form of PPP


Also known as draught guarantee contracts


The contractor bears sedimentation risks
over longer periods and is paid for services
with monthly fixed amounts (or alternative
financing such as toll


then a concession)


Most ports and waterways have carried out
maintenance dredging by two types of
contract: Dredging paid by volume, or
Charter contracts


Before: directly by the government

Where to Apply Performance Based
Contracts for Dredging?


Where a stable level of policy is to be
expected


Where sedimentation can be evaluated
within reasonable assumptions of risk


Where other risks are covered with
reasonable contractual limits (for
example, extreme weather conditions)


Sufficient volume to allow competitive
bidding

Example of Performance Based
Contract (PBC) for Dredging


BAHIA BLANCA , Argentina


A 5
-
year PBC for maintenance dredging


Phase 1: Capital dredging; Opening Volume
preset at 1 million m3; when real opening
volume is measured the contract value was
adjusted accordingly


Phase 2: Maintenance dredging during
remained of 5
-
year period


The bid price was comprised of 60 equal
monthly payments, plus the initial dredging

From Performance Based Contract
to Concession


A Typical Case


PBC: The contractor bears
sedimentation risks over longer periods
and is paid for services with monthly
fixed amounts


Concession: In addition to
sedimentation risks, the contractor also
bears demand risks, as payments are
made by the users (e.g., toll)

Example of Concession for Dredging


Hidrovia Waterway Concession, Argentina


Concession contract for 18 years: 1995


2013


Rio Parana and Rio de la Plata from Santa
Fe to the Atlantic Ocean


Mainly for oceangoing traffic, but also
river barges use the waterway


800 km of main waterway for Argentine
exports (> 80% of export)

Hidrovia Waterway Concession


Risk of sedimentation and traffic born by
the concessionaire


The works include: Capital dredging and
installation of buoys in 1995
-
1996;
Deepening works from 9.8 m 10.4 m
navigation channel; 800 km maintenance
dredging


about 22 million m3/year;
Maintenance of the buoys and beacons;
Toll system


Contract clause includes guaranteed
depths and safety all year round, 24 hours
per day

Hidrovia Waterway Concession


Contractor has to provide sufficient equipment


Three hopper dredges of 3400 to 6000 m3 holds
are constantly working


Additional hopper dredges assist during
sedimentation seasons


Additionally a large Cutter Suction Dredge
maintains a sedimentation trap in the Rio de la
Plata estuary on a 2 yearly basis


Contractor places and maintains buoys


Survey: 5 survey vessels for constant mapping
of draft situation

Hidrovia Waterway Concession


Tolls: paid by all commercial vessels per
tonnage (NRT) and used stretch


Toll level is revised on regular basis with
state to find equilibrium between costs
and income


End costs for typical users: about 1
USD/ton of grain exported; 16 USD/TEU


Concessionaire: Jan De Nul Group (DJN)


World Bank and Port Reform


World Bank is and has been catalyst
in reforming the Port Sector in
Emerging Economies


Service Port to Landlord Governance
model has found wide application


The Landlord Model has resulted in a
clear separation between public and
private responsibilities and returns,
embedded in a concession contract:
investments, tasks, revenues, and
risks

World Bank Port Reform Toolkit


A decision support tool to undertaking
reforms of public institutions that provide,
direct, and regulate port services in
developing countries


Helps to choose options for private sector
participation


Assists in the analysis of the relationships
between public and private parties


Suggests legislation, contracts, and
institutional charters to govern private sector
participation

Toolkit’s Main Modules


A Framework for Port Reform


The Evolution of Ports in a Competitive
World


Alternative Port Management Structures and
Ownership Models


Legal Tools for Port Reform


Financial Implications of Port Reform


Port Regulation: Overseeing the Economic
Public Interest in Ports


Labor Reform and Related Social Issues


Implementing Port Reform

Toolkit Availability


Second Edition: Available since 2007


Free of charge


http://web.worldbank.org/WBSITE/EXTE
RNAL/TOPICS/EXTTRANSPORT/EXTPR
AL/0,,contentMDK:20517158~menuPK:1
221870~pagePK:148956~piPK:216618~t
heSitePK:338594,00.html


Also available as a CD ROM

The Landlord Model

Lease

Dues

State
Subsidy

Port
Authority

Fixed
Assets

Loans

OPEX

Port Management
Models

Type

Infra
-

structure

Super
-

structure

Stevedoring
labor

Other
functions

Public Service
Port

Public

Public

Public

Mainly
public

Tool Port

Public

Public

Private

Mainly
public

Landlord Port

Public

Private

Private

Mainly
private

Private
Service Port

Private

Private

Private

Mainly
private

Port

Adm

Infra

Equi
pm’t

Build
ing

Carg
Hand

Moor
ing

Dred
ging

Pub

Serv

Tool

Land

Lord



Priv

Serv

Public
-
Private Roles in Port
Management

Public


Private

A Good Example of Landlord
Port
--

Klaipeda

Logistics Performance Index


Scale of 1 to 5


lowest to highest performance


Joint effort: World Bank, Turku School of
Economics, Global Facilitation Partnership for
Transportation and Trade (GFP), International
Federation of Freight Forwarders Associations
(FIATA), Global Express Association (GEA)


Available, since November 2007, for 150
countries on the World Bank website


http://web.worldbank.org/WBSITE/EXTERNAL/
TOPICS/EXTTRANSPORT/EXTTLF/0,,contentM
DK:21514122~menuPK:515440~pagePK:14895
6~piPK:216618~theSitePK:515434,00.html

LPI assesses the performance of
countries in seven areas of the
logistics environment


Infrastructure


Customs and border crossing


Logistics competence


Domestic costs


Timeliness


Tracking and Tracing


Ease of arranging international shipments

LPI in Selected Countries

4.19
3.82
3.32
3.02
2.95
2.78
2.55
2.37
2.11
1.21
1
2
3
4
5
Sin
Fin
Chi
Lat
Est
Lit
Ukr
Rus
Taj
Afg
LPI in Selected Countries

Country

LPI

Custo
ms

Infra

Ease
of Int
Ship.

Logist.
Comp.


Track
Trace

Dom.
Logist.
Costs

Time
liness

Fin

3.8

3.7

3.8

3.3

3.8

4.2

2.2

4.2

Chi

3.3

3.0

3.2

3.3

3.4

3.4

3.0

3.7

Lat

3.0

2.5

2.6

3.3

2.9

3.1

2.9

3.7

Est

2.9

2.8

2.9

2.8

3.0

2.8

3.3

3.3

Lit

2.8

2.6

2.3

3.0

2.7

2.6

3.0

3.4

Ukr

2.5

2.2

2.3

2.5

2.4

2.5

3.2

3.3

Rus

2.4

1.9

2.2

2.5

2.5

2.2

2.4

2.9

Some Concluding Considerations


Since 2006 there has been increasing interest of
investment banks and other financial
institutions to invest (in particular) in the
container terminal business


A few examples


Investment Bank Goldman Sachs purchased a 49% stake
in operator SSA Marine


Insurance conglomerate American International Group
(AIG) bought the US terminals of Dubai Ports World


A unit of Deutsche Bank bought Maher Terminals (New
York and New Jersey)


The long
-
term Rate of Return is high, secure
and stable


Will this trend continue?

High

Low

High

Low

Importance of Regulation

Private Sector Risk

Public
Service
Port

Private
Service
Port

Landlord
Port

Tool
Port

Allocation of Risks

Public Service Port

High

RISK

TO

PUBLIC
SECTOR

Low

RISK TO PRIVATE SECTOR

High

Landlord Port

PBC

Concessions

Decreasing
Public Risks,
Increasing
Private Risks

Thank you!

WB PPP
-
related Sites


World Bank Port Reform Toolkit
http://web.worldbank.org/WBSITE/EXTERNAL/TOPICS/E
XTTRANSPORT/EXTPRAL/0,,contentMDK:20517158~me
nuPK:1221870~pagePK:148956~piPK:216618~theSitePK:
338594,00.html


How to Hire Expert Advice on PPP
http://rru.worldbank.org/Toolkits/Documents/Advisors/Full_Toolkit.pdf


Labor Issues in Infrastructure Reform
www.ppiaf.org/Reports/LaborToolkit/toolkit.html


World Bank (2006). “Resource Guide for Performance
-
based Contracting.” Washington, D.C.
http://www.worldbank.org/transport/roads/resource
-
guide/index.html

The Doing Business Project


provides objective measures of business
regulations and their enforcement


ranks economies on their ease of doing
business, from 1 (Singapore) to 178 (D. R.
Congo)


includes 10 dimensions: Starting a Business,
Dealing with Licenses, Employing Workers,
Registering Property, Getting Credit,
Protecting Investors, Paying Taxes, Trading
Across Borders, Enforcing Contracts, Closing a
Business


http://www.doingbusiness.org/economyranking
s/?direction=Asc&sort=1

Lithuania, Pop 3,396,862

GNI US$7,870/capita


ranks (26) above the regional and income group
averages in six dimensions


three most problematic factors for doing
business: tax rates, inefficient government
bureaucracy, and tax regulations


among the top five countries in the Registering
Property indicator, but it ranks in the bottom
10% of countries in non
-
wage labor cost and
rigidity of hours index


labor regulations are listed among the top 10
obstacles to firm investment


http://rru.worldbank.org/besnapshots

Estonia, Pop 1,341,042

GNI US$11,410 /capita


ranks (17) above the income group and regional
averages


three most problematic factors for doing
business: an inadequately educated workforce,
inefficient government bureaucracy, and poor
work ethic in national workforce


among the bottom 25 countries in the
Employing Workers indicator


labor regulations are ranked as the most
significant obstacles to firm investment


annual GDI growth has been above 10% for the
last two years


http://rru.worldbank.org/besnapshots

Latvia, Pop 2,286,633

GNI US$8,100/capita


ranks (22) above the regional and income group
averages in six dimensions


in the political risk rating, the primary declines
were in external conflict, internal conflict, and
government stability


three most problematic factors for doing
business: inflation, tax rates, and corruption


top constraints to firm investment: tax
administration, tax rates, and economic and
regulatory policy uncertainty


annual GDP growth has been above 10% for the
last two years


http://rru.worldbank.org/besnapshots

Major Port Functions


Administration


Infrastructure


Superstructure: Equipment and Buildings


Cargo Handling


Mooring


Dredging


Regulatory function


Planning function


Nautical function


Port marketing and promotion function


Ownership of infrastructure


Ownership of superstructure

(in particular ship
-
shore
handling equipment)


Employment of stevedoring
labor

Main Distinctions in Port
Management Models

Cesar Queiroz

Transport Infrastructure Consultant

World Bank, 1818 H Street NW

Washington DC 20433 USA

Tel +1 202
-
473 8053

Mob +1 301
-
755 7591

Email: cqueiroz@worldbank.org

http://www.worldbank.org/transport


Cesar Queiroz is an international consultant on transport
infrastructure, with main interest in public
-
private partnerships (PPP)
in infrastructure, performance
-
based contracts, road management
and development, port rehabilitation and reform, improving
governance, quality assurance and evaluation, research, teaching
and training. Between 1986 and 2006, he held several positions with
the World Bank in Washington, D.C., including principal highway
engineer, lead highway engineer, and highway advisor. Prior to
joining the World Bank, Cesar was the deputy director of the
Brazilian Road Research Institute in Rio de Janeiro. He holds a Ph.D.
in civil engineering from the University of Texas, USA, a M.Sc. in
Production Engineering from the Federal University of Rio de
Janeiro, and a B.Sc. in civil engineering from the Federal University
of Juiz de Fora, Brazil. Cesar was awarded the Maua Medal for his
contribution to transport development in Brazil, and is an elected
member of the Russian Academy of Transport. He has published
more than 130 papers and articles, including being a co
-
author of two
World Bank main publications on PPP and performance
-
based
contracts, respectively the “Toolkit for PPP in Highways” and the
“Resource Guide for Performance
-
based Contracting.” He has
participated actively in several international organizations and
conferences.