C é sar Queiroz, Ph.D. Transport Infrastructure Consultant World Bank Klaipeda, Lithuania

1. InterBaltic Final Conference: “A Future Transport Policy for the Baltic Sea Region” Public Private Partnerships as an Option to Speed Up Investmentsin Intermodal Infrastructureand Services César Queiroz, Ph.D. Transport Infrastructure Consultant World Bank Klaipeda, Lithuania 19-21 November 2007

2. 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

3. World Bank Lending for Transport Lending (US$million)

4. 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

5. Klaipeda Port: Reconstruction and Extension of Breakwaters

6. Klaipeda Port: Reconstruction and Extension of Breakwaters

7. Dredging of Channel Entrance

8. Wreck Removal from Channel Entrance

9. Development of World Maritime Transport Total transport (billion tons) Source: UNCTAD Review ofMaritime Transport 2006

10. World Port Container Traffic Million TEU Source: Containerisation International

11. Major Container Routes (mio TEU) 2005 9.3 3.5 Europe – Far East 4.9 Transatlantic 12.9 2.4 5.1 Trans - Pac Trans - Pac Total East/West 50.3 Total North/South 20.3 Total Inter-Regional 45.3 World Total 115.9 Source: Drewry

12. World Top 10 Container Ports Throughput (million TEU) Source: Yearbook Containerisation International

13. Relative Growth: Top 10 World Container Ports Relative Growth (2003 = 100) Source: Yearbook Containerisation International

14. 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

15. 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

16. 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

17. 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

18. 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

19. 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

20. 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

21. 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)

22. 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)

23. 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

24. 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

25. 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)

27. 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

28. 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

29. 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

30. Toolkit Availability • Second Edition: Available since 2007 • Free of charge • http://web.worldbank.org/WBSITE/EXTERNAL/TOPICS/EXTTRANSPORT/EXTPRAL/0,,contentMDK:20517158~menuPK:1221870~pagePK:148956~piPK:216618~theSitePK:338594,00.html • Also available as a CD ROM

31. The Landlord Model State Subsidy Loans Lease Port Authority OPEX Dues Fixed Assets

32. Port Management Models

33. Public-Private Roles in Port Management Public Private

34. A Good Example of Landlord Port -- Klaipeda

35. 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,,contentMDK:21514122~menuPK:515440~pagePK:148956~piPK:216618~theSitePK:515434,00.html

36. 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

39. LPI in Selected Countries

40. LPI in Selected Countries

41. 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?

42. Private Sector Risk High Private Service Port Landlord Port Tool Port Public Service Port Low Low High Importance of Regulation

43. Allocation of Risks High Public Service Port Landlord Port PBC RISK TO PUBLIC SECTOR Concessions Decreasing Public Risks, Increasing Private Risks Low High RISK TO PRIVATE SECTOR

45. Thank you!

46. WB PPP-related Sites • World Bank Port Reform Toolkit http://web.worldbank.org/WBSITE/EXTERNAL/TOPICS/EXTTRANSPORT/EXTPRAL/0,,contentMDK:20517158~menuPK: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

47. 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/economyrankings/?direction=Asc&sort=1

48. 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

49. 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

50. 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