Port Sector Policy of Asian Development Bank 5 March 2002 Makoto Mizutani Transport Economist Asian Development Bank

“ADB is preparing Transport Policy including ports and maritime sector. This presentation is based on the draft Policy paper and the views of the presenter, which does not always reflect views of ADB."

1.Asian Development Bank Multilateral financial institution Started operation in 1966 Aimed at improving the welfare of the people of Asia and Pacific Owned by 59 member countries (43 Asia and Pacific; 16 Other Region) HQ: Manila; 15 resident missions; 4 other offices Staff: 2,000 from nearly 50 countries

2.ADB’s Performance in 2001 Lending totaled $5.3bn for 76 loans in 60 projects Major borrowers: India, PRC, Pakistan, and Indonesia Transport and Communications Sector: 27% Technical Assistance (TA) Grants totaled $146.4million for 257 projects Major recipients of TA grants: Indonesia, PRC, Viet Nam, India, and Philippines Transport and Communications Sector: 9%

3.Port Sector Overview in Asia and Pacific Region Massive investment for the past 10 years Sustained high growth rates in cargo throughput, particularly for containerized traffic 35m TEU (1990) to 100m TEU (2000) Significant increase in ship size, particularly in container vessel Emergence of global alliances of mega-carriers with a consequent increase in the market power

Changing technology in terms of the application of computerized management and operational system Greater involvement of private sector in port operation and development, and reduction of public sector involvement Increased focus on competition, inter-modalism, and logistics Growing awareness of the need for integrated planning and services of port and land transport Importance of managing environmental impacts both of port operation and port development

4.ADB Assistance to Port Sector 57 loan projects totaled $1.8bn in 20 developing member countries since 1969 Focused on (i) rehabilitation, expanding and improving existing port facilities (ii) developing new ports to stimulate regional socio-economic development (iii) institutional strengthening and capacity building

ADB’s Lending Operations in the Port and Maritime Sector __________________________________________________________________ Country Loan Nos. Loan $ million Approval _______________________________________________________________________ Mekong 4119 Myanmar Thailand , 81 Vietnam _____________________________________________________________________________ South East Asia Indonesia Malaysia Philippines Singapore , 71 _______________________________________________________________________ East and Central Asia 7325 PRC Korea , 80 Taipei,China ______________________________________________________________________________ South Asia Bangladesh India Maldives Pakistan Sri Lanka ,01 _______________________________________________________________________ Pacific PNG Fiji Solomon Islds , 87 Kiribati , 84 Vanuatu , 91 _______________________________________________________________________ Total 57 1,838 _______________________________________________________________________

1960’s and 1970’s: rehabilitation and expansion of port facilities in the Newly Industrialized Countries (Korea, Singapore) and ASEAN countries (Indonesia, Malaysia) Late 1970’s: shift to Pacific (Fiji, Solomon) and Bengal Bay countries (Myanmar, Bangladesh) 1980’s: rehabilitation of smaller ports in island countries (Indonesia, PNG, Solomon, Vanuatu) Late 1970’s to 1980’s: container terminals (Manila, Penang) and specialized bulk cargo terminals (Qasim, Bintulu) 1990’s: strong trend to private sector investment and decrease of ADB’s involvement; greater emphasis on achieving sector reform, and private sector development, and public-private partnerships

5. Policy Issues (i) Poverty Reduction Poverty Reduction: Overarching policy goal of ADB (October 1999) Economic growth and poverty “Growth can reduce poverty by generating employment and incomes.” How ports contribute to poverty reduction Facilitate export growth and reduce import costs ->Increase production, revenue, and job opportunities ->Reduce poverty

Alleviate remoteness ->Provide better access to the market by reducing supply-chain costs ->Reduce poverty Possible areas of intervention Ports that could contribute to reduce supply- chain costs Inland waterways to improve accessibility with low costs Challenges Detailed analysis on distribution of benefits accrued by port development: operators, carriers, shippers, and the people themselves

Ports as engine of economic growth: -> Gateway for international and domestic trade -> Node point in supply chain -> Employment generator Conflicts Large work force in the port may increase operational costs ->Hamper operational efficiency ->Reduce competitiveness ->Decline the port (ii) Sustainable Economic Growth

(iii) Private Sector Development ADB’s private sector development strategy (March 2000) “Experience has shown that when properly regulated and operating under competitive market conditions, the private sector can generally use resources more efficiently than the public sector.” Private sector development in port sector Port business is generally profitable. Private sector development is justified. Role of private sector in port operation, port management, and port development increased dramatically (concession, lease, contract out). Involvement of private sector increased efficiency and productivity.

(iv) Governance Change in role of public sector Decrease of public sector involvement in port operations and development (corporatization, decentralization) Role of public sector (regulation, management, operation, development) needs to be agreed in the Government Role of the Government Establishing policy and regulatory framework, including competitive environment and pricing structure Reserving land for port development Developing port facilities that do not generate profits Developing ports with high economic benefit and low financial returns

(v) Sub-regional Cooperation Ports could play a critical role in sub-regional cooperation initiatives to facilitate trade, particularly to and from land-locked countries Greater Mekong Subregion (GMS) [since 1992]: Port of Da Nang to central Thailand through East-West Corridor South Asia Sub-regional Economic Cooperation (SASEC) [since 2001]: Port of Chittagong and Kolkata to Nepal and Bhutan through India and Bangladesh

(vi)Environmental and Social Impacts Major impacts: Discharge from vessels and oil spillage Noise, dust, water pollution caused by port operation and generated traffic Change in marine ecology due to port development, particularly dredging and reclamation Resettlement caused by port development ADB operations: Require IEE or EIA according to the magnitude of potential environmental impacts Require Resettlement Action Plan

(vii)Operational Efficiency Operational improvements and new technology could increase efficiency and productivity without need for further infrastructure development. There are a range of operational and technology improvements to cargo handling operations: Equipment upgrading Operator training Terminal layout modifications Computer-based terminal operations Management measures to improve labor productivity

6. Toward Sustainable Maritime Transport Primary role of ports: Trade Facilitation Provide efficient, reliable, and costless supply-chains Approach: (i) Establishing transport corridor Integrate land transport network Remove impediments to trade (infrastructure, operation, management, regulation) Consider under sub-regional cooperation initiative (ii) Promoting private sector involvement Establish private sector development policy and its implementation program

Challenges: (i) Optimal capacity of infrastructure development based on a long-term strategy, together with staged program (ii) Regulatory framework to invite private sector and to ensure competition (iii) Sector reform of the Government (iv) Regulation for safety control (v) Consideration to poor affected people due to unemployment and resettlement (vi) Environmental sustainability

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