Financing of Port Infrastructure: Focus on Container Port Infrastructure. Role of the Government and Role of the Private Sector

The purpose of this paper is to evaluate nature, sources and magnitude of port infrastructure financing (and, particularly, financing of container terminal infrastructure), as well as to show the role of public and private sectors’ financing, to evaluate its viability, to examine the role of deregulation and privatization within the industry, also to review pricing methods of infrastructure and relevant risks of container terminal infrastructure financing, and finally, to emphasize the growing importance of public-private partnerships, and in conclusion to analyze the future of port financing.

Port industry always has been perceived as public sector. The structural changes in international trade, transport and shipping have fundamentally transformed the political and operational environment in which most major world ports carry out their business. Within last three decades due to furious structural transformations within shipping industry, which facilitated rapid port evolution, private parties were greatly implicated in various port activities. This tendency can be observed worldwide: both in developed economies and in the Third World countries.

In the course of time, ports survived countless reformations that brought changes in their operating, management and organization. And as a result, we can observe various forms of port ownership, where private participation evidently plays important role or has certain influence within the sector. Port and logistics operations are more and more carried out by a limited number of international operators, specializing in dedicated market segments, and by a few large shipping lines expanding their maritime networks into inland operations to offer integrated transport services ( Chlomoudis, et al., 2002).

The magnitude of private implication distinctly varies from port to port. But the importance of private sector’s involvement cannot be denied. Moreover, this can be evaluated as a very complicated process. Evaluating structural establishment of European ports, we can distinguish both: entirely private ports and entirely public ports. European philosophy regards the port as a part of the transport infrastructure of the country – to be supported by direct government subsidy. This criterion applies to many other countries throughout the world, while in the UK and the USA particularly the ports the ports are viewed as individual commercial enterprises which should conform to normal financial criteria (Branch, 1986).

Private sector today is taking part in several activities within port industry. The current paper is devoted to review financing of container terminal infrastructure. The authors will focus on container terminal infrastructure, excluding issues that concerns supra- and superstructures. The determination to pay attention to the role of public and private financing can be based on fact that despite growing importance of private influence within the sector, importance of public funding still remains essential. But on the other hand, considering the principle “user pays”(which, we must say, was supported by majority of port authorities), we can hypothetically affirm that public financing of private container terminal infrastructure is not essential and even can be wasteful for public budget. With respect to super- and suprastructure of container terminal, practice shows that for ages these assets are commonly owned, managed and operated by private companies.

Research Methodology

The use of f following methodology can be mentioned in the course of present research. To gain complete understanding of the problem, various theoretical sources were used: such as relevant analytical publications in scientific journals and other literature on private and public financing. As well as financial reports and researches, World Bank recommendation for port reform implementation.

Thesis Framework

The opening chapter – Introduction – sets up the topic’s background and purpose of the thesis, as well as uncover methodological approach for further research.
Chapter 1 observes nature, sources and magnitude of port infrastructure financing, depending on port ownership, operational, and managerial model. …