Over the last decade, the rise of free trade agreements, deregulation of many economies and expanding volumes have all helped increase private investment in the ports’ sector, but there are pitfalls to be wary of.
According to research commissioned by Holman Fenwick Willan (HFW), the traditionally state-owned sector has, globally, seen 195 separate private participations in projects over the last decade, worth a total investment of US$38 billion. Even the recent financial woes, says Alistair Mackie of HFW, haven't dampened investors' appetites, “as there are advantages in having asset-based projects on the books at a time of inflationary uncertainty and currency volatility”.
However, despite more private sector involvement there are difficulties to be negotiated, especially in places that previously kept their ports as state-owned enterprises for both strategic as well as commercial reasons.
Matthew Gore of HFW explains that HFW’s research highlights the legal complexity which includes stringent rules pertaining to foreign investment, “not least because some ports are considered integral to the country’s transport policy”, so concessions may be limited to certain sections of a port, or there might be a prerequisite for a majority domestic shareholder - for example, despite India’s concerted drive toward private funding, the complete privatisation of major ports is still not allowed.
Further, environmental policy is playing a greater role – a point that has led to many projects facing delay or even cancellation. The report warns that investors generally have to take on a more proactive approach – but how to pay for things like waste reception and oil residue facilities remains a major issue.
In addition there are also a few wild-cards – the widening reach of piracy for example has already contributed to a delay in DP World’s expansion plans for the port of Aden – and as yet there seems to be no answer to the problem.
