public-private port management and service contracts are reported each month.

Such
developments are particularly prevalent in East and Southeast Asia and now also
throughout Latin America, whereas Africa begins to follow suit.
8.
Justifiable port investment and recovering the costs of providing port services
remains a principal concern worldwide. Many of the currently observed inefficiencies in
ports can be traced to underlying weaknesses in financial management. But it would be
unfair to exclusively blame port managers for such state of affairs. Very often their
freedom to charge for port services on a cost basis was curtailed by central government
decisions concerning the level and structure of port charges. Such predetermined charges
frequently bear little relation to costs incurred, and thus ports run sometimes huge annual
deficits. Conversely, port income statements may display apparently healthy financial
results, when most of it stems from inadequate assets depreciation policies or
systematically deferred maintenance, which will finally result over time in additional
unwarranted outlays and add to transit costs. Eventually, ports still in natural monopoly
positions can sometimes extract from their customers higher incomes than justified by the
services they provide, and therefore balance their operating costs, again at the expense of
final customers, national shippers and consumers. The incentives for facility managers to
cut costs by streamlining the provision of services was usually undermined, either because
they could count on their governments to provide subsidies if and when their annual
performance record shows deficits, or because of their ability to raise tariffs without
having to fear market retaliation. However, the growing fiscal crisis in numerous countries
seems to dictate an end to these practices, harmful in terms of budget deficit or of economic
hardships. Ports are thus losing their accustomed source of financial relief and have no
other choice but to look internally for ways to cut costs, and to explore other sources of
income.
9.
Since the early 1990s, private sector participation in financing port improvement
and expansion schemes in developing and transitional economies has greatly expanded.
Substantial private funds are now flowing into port modernization programs in many Asian
and Latin American economies. Actually, the amount of private capital directed at
developing ports worldwide since January 1996 only approaches US$10 billion. These
developments were facilitated through decisive deregulatory measures by local
governments which were conducive to creating transparency and thus reduced perceived
risks--stimulating private capital flows. The returns on private investment in ports have
been attractive in many instances, particularly in the case of container terminals located in
high growth markets. But even for smaller ports with still limited cargo volumes cases
could be made for private sector involvement. The essential prerequisite was to give
private parties freedom in decision-making as regards marketing and organization.
B.

A New Public/Private Balance

10.
The issue of effectively delimitating public/private boundaries in port activities is
likely to be the prominent question in any reform process, since the intrication of public
and private players tends to be greater here than in other transport modes. It involves a
clear definition of the public sector mandate and of its relationships with its private