A fit of conscience
'Social conscience' is now a must have in sought after concessioning deals. Credit: APM Terminals
Stevie Knight asks how important social awareness is in today's tighter tender processes
Forget ‘green credentials’ and ‘new normal’ investing, today it’s all about social conscience in on-trend concessioning lingo.
It should go without saying that if a government or public body is aiming to award a concession to a private company, it is going to be looking for some net gains.
As this could be seen as handing over a state asset to the machinery of private business, they may want to be helped out in their dealing with the workforce and unions by giving it to a company which exhibits a social conscience.
APM Terminals is one company that has become less shy over recent years about outlining what the partnership can do on a social level. “Firstly we talk about the safety issues, then about the environment – which also has an impact on worker’s health. In some parts of the world these are still new ideas,” says Henrik Kristensen of APM Terminals, adding, “It’s not just bringing in new technology, it’s bringing in a culture. After winning a concession, you have to win over the workforce: obviously it helps that we have both the tools and the experience, so we can say ‘Don’t be afraid of the changes, see how the economy in other places has grown’. This people usually understand.”
Alistair Mackie of Holman Fenwick Willan, adds: “PPI projects help to provide the financial support and expertise that many ports might need for both their commercial and social objectives. My experience is that governments do have to justify a particular concession grant. So it’s partly a political judgement for one party, and a financial judgment for the other, both of which have to be taken as a ‘snapshot’ at the time, while keeping an eye to the future.”
However, Mr Mackie says: “The relative importance of issues tend to change over time; for example environmental issues are becoming increasingly important in certain jurisdictions, and antitrust and merger rules, have all recently risen in concession process priorities.”
Both Mr Mackie and Mr Kristensen agree that rising in the agenda is the empowerment of local people: if an incoming operation isn’t sensitive and floods the area with foreign construction workers, there’s often tension between the two cultures.
So operators may find they have conflicting objectives to the region’s government.
There’s another side to this. In some jurisdictions, public enquiries have put a near stranglehold on development and high profile projects have been simply walked away from - ABP from Dibden Bay for example. But in other places, although a plan still has to go through the governmental approvals process it is actually much simpler: a government might be more supportive because it conforms to its stated objectives (although the divide isn’t simply between emergent and mature markets).
To balance this, some of the countries which have the greatest growth potential are also the riskiest for long term investment. Mr Mackie explains: “In many jurisdictions it’s important to have a good local partner. So what is needed is someone who’s well connected with the regime, able to understand the local system and dynamics, and will help educate the investor.”
However, he adds, that in itself creates an inherent risk as a local partner can fall out of favour, or lose their connections.
But it’s not just a matter of incidents taken in isolation: a company with global reach becomes very visible. Mr Kristensen says, “There are times, with a regime we are not certain of, when we say we can’t participate – we have to evaluate our associations. We are a big company, our principles are established, and we don’t want to sacrifice any of this for the sake of one deal. Sometimes it’s just easier to say to the guys, ‘If you are in doubt, if you are involved in something you wouldn’t want to tell your mother about – just don’t do it!”
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