Don’t go it alone

The country is focused on transhipment but key port infrastructure, particularly channel access, has suffered from a lack of investment in recent years, which has restricted access for the larger ships. There has also been inadequate investment in ship-to-shore cranes and other container handling equipment.

The latter is OK from an investor standpoint but implementing a multi-million dollar capital dredging programme has the potential to limit investor interest. But even more off-putting from the investor standpoint is that the country concerned is giving serious consideration to offering a major coastal area to China to develop maritime sector businesses in and one of these could be a brand new container transhipment port. There is no certainty that this project will go ahead but the idea is floating ‘out there’ which is enough to make the majority of investors think twice about participating in the bidding for the existing container terminal.

And so it proved: the concession process ran its course and a number of potentially interesting investors retired from the process with the outcome being that the concession was awarded to a shipping line which happened to be the container terminal’s major customer.

This investor is now ‘in residence’ but there is no major evidence as yet of the roll-out of the investment programme that the terminal needs. In fact, the investor has said it will not initially take the whole area of the terminal.

The moral of the story is that governments can and will frequently get it wrong. This is a classic case of where an expert technical advisor is needed alongside financial and legal advisors to ensure the best conditions exist for a concession process and the best deal is sealed. Port authorities in the main do not have the expertise in-house to shape a good concession agreement. When I say good, I mean good for the port, good for importers and exporters, good for transhipment business and ultimately good for the country as a whole.