Concession Agreements As Port Governance Tools

Private parties appear to be reluctant to invest in basic port infrastructure, not only because it becomes more difficult to reward the use of infrastructure so that the concessionaire can obtain a reasonable return on investment, but also because these assets are largely immobile and have no other comparable use. Political instability, changes in control, anti-privatization (nationalization) reactions, unexpected new tax rules, and other government measures could make global BOT systems much less attractive. An oasis of shared income represents true partnerships between the port company and the tenants. As part of this agreement, the port must carefully set the lease payment, taking into account its financial obligations, its own traffic forecasts and its legal and commercial risk tolerances. Once the minimum throughput has been reached, the lessee and the port share the benefits arising from any additional activity. The shared revenue lease is the only approach in which the port authority can maximize revenue, employment levels and throughput. However, with this potential for additional rewards, there are additional risks. Port authorities wishing to become transport chain intermediaries should be aware of potential conflicts of interest and the possible loss of their neutral position. The management of a port area, including the related public functions, is different from the optimisation of a supply chain which can be considered as a support function for the port industry and which, for this reason, is indispensable from the point of view of competition. A concession contract for a Greenfield project is less complicated than taking over an existing terminal or port. In this case, no existing personnel or entity is acquired by the PSA. However, an access agreement to the terminal has yet to be drawn up between the government or port authority and the SSP to cover, for example, the construction of access roads and rails, the supply of water and electricity and other facilities. Other port facilities cannot be easily conceded as individual posts.

The most important assets are breakwaters, wharves, connecting channels, intraport roads and other community areas. However, these assets may be part of a concession framework contract or a large privatization program. Under the “Construction” component, the concession grants the concessionaire the right to design, build and finance the project. A construction contract is required between the concessionaire and a contractor. The contract is often one of the most difficult to negotiate as part of a BOOT project, due to growing conflicts between the concessionaire, the contractor responsible for the construction of the facility and those financing the construction. Privatization legislation may contain additional elements, depending on the local situation, the structure of the former port authority and the specific legal, institutional and socio-economic situation in the country concerned. . . .

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