Professional Documents
Culture Documents
To help develop trade and transport in borrow- Compared with earlier projects, recent projects
ing countries, the World Bank has lent about $8 concentrate less on civil works and more on
billion for ports since 1950. Port projects reduce equipment and information and computer sys-
transport costs by improving facilities, equip- tems. And, responding to the development of
ment, and services. Typically they seek to: container traffic-which calls for the integration
of the links in the transport chain (including
I expand port capacity or modernize existing road and rail services, port operations, customs
facilities, to permit improved modes of clearance)-they have broadened their scope
operation; into land transport facilities, equipment, and
I make port operations, generally dredging facilitation systems. Increasingly, the Bank has
Public Disclosure Authorized
and cargo handling, more efficient; lent for port subprojects that are planned and
improve the financial position of port implemented within the framework of broader
institutions; transport sector projects. This approach encour-
I develop port institutions, especially as ages a better understanding of costs at points
regards finance, accounting, cost-based all along the transport chain, and results in a
tariffs, management, and training; and better integration of port issues in overall trans-
I help port authorities gain more autonomy port policy discussion and formulation.
from government, to encourage decision-
making based on commercial principles. Lessons from the Bank's experience
Other common goals include better mainte- Out of 57 port projects completed between
nance of facilities, reduced pilferage of cargo, 1980 and 1992,35 were analyzed for this issue
more developed marketing of port services, of Lessons G. Practices. Criteria for selection
Public Disclosure Authorized
J U N E 1996
NUMBER 9
five had a substantial impact on institutional
development, and benefits were considered
Figure 1: Regional distribution of 35 likely to be sustained in only 19 projects.
port projects reviewed
Few of the projects recorded their progress
Latin America and toward their stated efficiency goals, such
as reductions in freight rates or in cargo han-
Sub-Saharan Africa (11)
dling costs, or easily measurable increases in
South Asia (3) -1 productivity. Project goals were often consid-
ered reached when intermediate goals were
achieved-for example when civil works were
completed, studies reviewed, accounting
improved, training completed, or a reasonable
rate of return recomputed on the basis of wait-
and North Africa (8)
ing lines and/or cargo-handling productivity
over a short period. And it is not known
to whom the benefits accrued-whether port
cal facilities and rehabilitated old. They sup- operators, shipping lines, or port authorities
ported engineering or planning and economic themselves.
studies; technical assistance for operations,
accounting, finance, and project supervision; Economic returns
and training. Ten supported the establishment The average economic rate of return (ERR) of
of management information systems. the 35 projects, re-estimated at the completion
of Bank loan disbursements, was 17 percent,
All but one (Sheva Nhava in India) were against the 28 percent projected at appraisal.
implemented in existing ports, but a few Five projects had higher returns than pro-
extensions (such as the El Dikheila bulk and jected. Seven had ERRS below 10 percent.
container berths at Alexandria, Egypt, or the
Rades container port at La Goulette, Tunisia) Implementation times and costs
were new ports physically if not administra- Almost all projects took longer to implement
tively. Many of the projects helped with the than expected. (On average, implementation
development of containerization; in 6 cases, took 50 percent longer than projected.) The
general cargo facilities were upgraded to con- most common reason was overoptimistic civil
tainer standards, and in 15, new container works schedules, as well as delays in procure-
facilities were built. ment and in the appointment of consultants
for studies. Projects that deviated the most
Project performance from projections were those that were poorly
Of the 35 projects reviewed, 27 had substan- prepared or whose processing seemed to have
tially achieved their main objectives at the been hurried.
time the Bank completed its loan disburse-
ments. Most of the ports assisted have per- The projects took large amounts of Bank staff
formed adequately; none has suffered conges- time. On average, each absorbed 225 staff-
tion. But while projects achieved their physical weeks (minimum and maximum 126 and 415,
and operational goals relatively easily, only of which 104 were for supervision. This com-
Experience suggests that staff time invested at The causes of project failure were inadequate
the identification through appraisal stages traffic (in five cases, attributable to macroeco-
may save time needed for supervision. Of the nomic conditions), borrowers' lack of commit-
Bank staff time spent per project in the sample ment to the project or poor implementation
reviewed, an average of 42 percent was spent performance (five cases, two being among
prior to appraisal. In six of the seven projects those where traffic was deficient).
whose outcomes were rated unsatisfactory, the
proportion of staff time spent prior to Experience emphasizes the need for sound
appraisal was lower than the average, at project design based on adequate information,
between 6 and 35 percent. By contrast, in pro- and in particular for:
jects that were especially successful, such as
those in Dakar, Senegal or Pusan, Korea, Good preliminary engineering. Port projects
the proportions of staff time spent prior to rest on physical targets, which can be met
appraisal were well above the average. only if adequate facilities are built. The
most successful projects were those for
In an increasingly competitive market for port which engineering studies were com-
civil works, with many contractors pleted well before appraisal. Borings
overequipped following the period of intense before dredging and final engineering
port construction from 1950-80,the costs of of structures are especially important if
many projects were lower than expected, some cost estimates are to be accurate and if
by as much as 50 percent. Had the original civil works are to be completed without
cost estimates proved right, many of the pro- delays. It is better to delay a project than
jects would have had negative economic rates to take risks in the preparation of civil
of return because traffic was generally lower engineering and in design. But design
than expected. and tender documents should permit bid-
ders to propose alternative solutions for
Factors in success and failure construction, which may prove both
The main reasons for success in the projects innovative and economical.
reviewed were the borrower's commitment to Good analysis at appraisal: Many projects
success (16 projects out of 35); the quality of did not live up to their optimistic expecta-
preparation and appraisal (11 and 9 projects); tions. Their rates of return were lower
and the quality of the Bank's supervision, than expected, and/or their execution
including flexibility in adjusting project com- took longer than expected. In the sample
ponents and objectives to changing circum- of 35 projects, contrary to what had hap-
stances (13 projects). pened in port projects implemented in the
1970s, future traffic was overestimated at
The main causes of difficulty in implementation appraisal, sometimes by as much as 50
were the lack of autonomy of port authorities percent. Project preparation based its pro-
(13 projects); civil works problems, due espe- jections on past trends and failed to cap-
cially to poor soil conditions that were not ture economic fundamentals or exogenous
identified during preparation and appraisal shocks such as the oil crisis and the drop
in commodity prices. Reflecting these interests related to the port sector.
developments and the increasing competi- In service ports, which are typical of
tion from air transport, international sea anglophone countries, all operations are
traffic in dry cargo grew 63 percent in the integrated and conducted by the port
1970s but only 34 percent in the 1980s. authority itself on force account.
Thorough knowledge of the different aspects of
port operations. The most successful pro- Six of the 35 projects involved landlord ports
jects were those conducted by balanced in which publicly owned facilities are leased
teams of professionals, including port to private operators in competition with one
operations specialists. The latter were fre- another. Six others involved landlord ports
quently missing in early projects. where government or port-owned subsidiaries
own the facilities and operate them as monop-
Institutional issues olies. Twenty-three of the projects involved
service ports.
Many of the straight failures and many of the
disappointing institutional results can be Comparisons of operational performance,
attributed to borrowers' unwillingness or inca- for example on the basis of cargo and con-
pacity to modify inadequate institutional tainer handling rates, work schedules, size
arrangements. and composition of gangs, showed that the -
performance of service ports in cargo handlir
Institutional structure and efficiency and storage was, with few exceptions, poorer
Most of the ports that have been supported than that of landlord ports where third parties
by Bank projects are managed by port authori- conducted operations independently.
ties. Virtually all these public institutions Information from other sources, such as
perform essential regulatory functions, such as reports from the shipping industry, corrobo-
control of ship traffic and light-buoys, marks, rates this finding.
lighthouses, and buoyage (other devices for
support of shipping). But the scope of their Experience shows that basic institutional choices
commercial activities, such as cargo handling should be made as soon as possible in the project
and storage, varies from one type of authority cycle. To define a path for institutional
to another: improvement requires a prior choice as to the
type of port and port management policy. The
In landlord ports, port authorities limit decision to run a port as a landlord or a ser-
their role to building and owning infra- vice port has implications for taxation, owner-
structure, leaving superstructure, pilotage, ship of land, the regulatory environment for
cargo operations, and towage to be con- private operators, the exercise of police pow-
ducted by private operators, usually in ers, and the distribution of charges between
competition. This is the typical model in cargo and ships. The choices should be clari-
the United States, continental Europe, and fied early on, so that a clear and coherent pol-
some developing countries, such as those icy orientation can be worked out.
in francophone Africa. Most landlord
ports are participatory institutions, with Institutional development
managing boards that include representa- Institutional goals were limited in the projects
tives of government agencies and private reviewed. Few fundamental reforms were pro-
The World Bank's port sector laan to menting it throughout its operations. It
Morocco, completed in 1993 (and audited successfully established the main elements
too recently to be included in the sample of an effective port management frame-
for this issue), supported dramatic institu- work: a rational organizational structure,
tional change with substantial effects on using a participatory approach for decision
the produtivity of ports. It supported the making; a new tariff system, based on cost
creation of a new part authority, Office of services; and a modern management
&Exploitations Poshnaires-an autono- information system.
mous publie corporation-to replace the
public enterprise that had managed the The project substantially improved the
ports under the minbtry of publk works. operational performance of the Casablanca
The project also financed physical and Mohammedia ports. It raised the pro-
improvements in the ports of Casablanca ductivity of cargo handling by 25 percent,
and Mohammedia and strengthened the and cut the time that cantainers spent in
separate pub& agency, the Directorate of port by 40 percent. By 1994, the port
Ports, responsible for maintaining port authority's revenues amply covered direct
infrastructure. operating costs and exceeded total costs,
including finance charges, And several
Statting with the busiest, Casablanca, the neighboring countries were entering twin-
new port ituthority set out to improve the ning arrangements with the Moroccan
management and operatianal efficiency of authority for assistancein installing simifar
alf 3 1 commercial ports. Guided by an management infomation systems. In hind-
organizational study, it piloted and refined sight, the project could have been stronger
a new organizational structure in three in one area: promoting greater competition
ports over a two-year period before imple- and a bigger role for the private sector.
posed or implemented, even where circum- vision, and periodic maintenance of civil
stances called for change. Except in a few pro- works. The longer the Bank was associated
jects in the sample (in Ghana, India, and with a borrowing entity (through two projects
Zaire), the Bank did not challenge the status or more), the better the results. (See Box 2.)
quo but limited its institution building efforts
to improving existing systems. (See Box 1.) Projects helped ports adapt their pricing struc-
tures to the development of containerization.
This said, projects made real improvements in Traditional covenants on finances, audits, and
borrower authorities' accounting, training, training were usually adhered to, albeit with
and planning, and in the organization, super- delays. But recommendations from the Bank's
Box 2: Series of projects strengthen port authorities
8 LESSONS &PRACTICES
Figure 2: Growth of international sea and air cargo traffic, 1970-92
600
0
0
7 400
.'0
r
2
-
1970 1973 1976 1979 1982 1985 1988 1991
tional schemes that are likely to succeed to open their equity to other public sector
within the country's culture and legal system. entities.
Close contact with port users is necessary dur-
ing the elaboration of institutional reforms. Opening to private capital should come next,
but few companies' statutes at present autho-
Working with the private sector rize this. Considerable potential exists in the
Private sector involvement is essential for the area of privatization but, as recent studies and
future of ports in developing countries, but international seminars have shown, complex
must be carefully planned and organized. political, legal, organizational, social, and
staffing issues need to be addressed. For ports
Among the 35 port authorities assisted, to make the best use of private investment,
32 were wholly government-owned entities. port managers need to be excellent public
They were without share capital and enjoyed administrators and planners.
some degree of autonomy. Two others were
branches of railway corporations, and one was Privatization covers many different modes of
a government department. management, from the simple lease of equip-
ment to the outright sale of facilities. There is
In today's ports the traditional statutory no necessary relation between ownership and
company is gradually giving way to the competition. Privatization of port assets may
share company. Still 100 percent government- lead to monopolies that are difficult to control
owned, these share companies are expected and likely to cause political disputes. Existing
publicly owned landlord ports-such as those facilities and heavy port equipment (such as
in the United States, where physical facilities container cranes) and to share the risks and
are publicly owned but leased to private rewards of financing these lumpy and massive
cargo handlers competing with one another- investments through build-operate-transfer
successfully combine public and private schemes and concessions. Leases of public
jurisdictions and should help to provide facilities, and management contracts, may be
a model. used as initial steps towards fuller privatiza-
tion of port operations and physical assets,
In many service ports, cargo handling and existing and planned.
storage are likely to be more efficient if taken
over by the private sector. Though service Several ongoing projects supported by the
ports derive surpluses from their monopolies Bank are helping to develop suitable privatiza-
on stevedoring, which allow them to overprice tion schemes. And the International Finance
their handling and storage of cargo, their rates Corporation is supporting a second build-
of return on revalued assets, at 7-9 percent, operate-transfer scheme for container and
are little higher than those of landlord ports, roll-on/roll-off terminals in Karachi (Pakistan)
whose revenues come only from the use of and a first in Manzanillo (Panama).
infrastructure. Service ports often undercharge
for the use of infrastructure, and suffer from Safeguarding the environment -
inflated payrolls and low productivity. The need for environmental protection and tl-
Transforming them into privately operated implementation of new international agree-
landlord ports is likely to change this: a new ments on pollution, discharge of dredging
landlord port will need to offset its loss of sur- spoils, and related matters call for a new
pluses from cargo operations by raising ship awareness among port managers and supervi-
dues and charging adequately for leases of sory ministries in areas where talents are still
port land and premises, and therefore will scarce. Training, especially of harbormasters
probably need to restructure tariffs. At the and marine personnel; new equipment, appro-
same time, private companies are unlikely to priately priced; and changes in port legislation
tolerate overstaffing or to be satisfied with and by-laws will be necessary.
low productivity.
Integrating the port community
Where the institutional environment is favor- One of the main institutional challenges for
able, as it has been in Hong Kong, Mexico, and the future is to replace the organization of the
Panama, for example, private investors may be port authority with that of the port commu-
persuaded to finance port infrastructure. nity. Door-to-door transport calls for closer
Significantly, in all these cases private integration between government agencies
investors have insisted on a long-term monop- (such as customs), port authorities, and users
oly on cargo handling and storage, which are than is still the norm. It leads to changes in
the profitable parts of port operations, so that facilitation procedures and to the development
they can cover the costs of infrastructure and exchange of ship and cargo information,
investments. Broadly speaking, the private upsetting commercial arrangements between
A
sector should be encouraged to invest in port operators and affecting many vested interest.
=-
a t
3
Amold, J. (1988).Port Ten'fi. Waskhgton, We Poky, CrosLjidier de Wtom, 1, (1H3Fr.&fic
, Port
Phming and b a r & Department, WWbrld Bank. Administrntion and PriimfeSector I-fiotr in Ports
and in the Bvt Indwfy. Le Ham:IPXIR.
W # a n , E. and A.A. Wdtm (I!&%).Part Pricing
and 1ne-t PaIicyfar Dm&a$ng CounS*. New ~~, %%
. a&D. HilJirtg, eds, (1Sk). $&port Systems
York and London: Oxford University PieEls. and Spatial ~kwe: Technology,1dwtryand
DeaeIopment Sfrategies. Chich&q W i l y and Sans.
Commonwalth d Amtralia, b e a u af Tram-
and CommunicationsEconomics (1989). %Pticirrg of Herksmam, M,J., d.41988)~B h n PMs ati$&bor
Port Services. Canberra: Government Printing OfTim?. &~gi??nent. NEW YO*: ?'dYtoras$ Frmds.
Doban, A.J.and J. Van EWger (19921.Ports as Nodal J-, J.O. and U. Shneerson (19821.Port Economics.
Paints in a Gl&d Traagoff Systm. Oxford: Pergmon Cambridge, Mass.:h%RPress. L.
Press. '
Frank&E-1. (1987). Port Pianning and Deetelopmf. World Bank (1994). 'Wvate Sedor Participation in
New York: Wiey. the Indonesian PublicPurts."~ashington,iX2East
M a and fa& Regional Internal Discussion Paper
No, 150.
Lessons b Practices is produced by the Operations Evaluation Department to help disseminate the World Bank's develop-
ment experience. This issue was written by Jean Grosdidier d e Matons. The views here are those of the Operations
Evaluation Department staff and should not be attributed to the World Bank or its affiliated organizations. Please address
comments and enquiries to the managing editor, Rachel Weaving, G-7137, telephone 473-1719,