Public-private partnerships in Spanish Ports: Current status and future prospects
Introduction
Spain's coastline is the longest of any state within the European Union (EU). In addition, its location, close to the axis of one of the major Motorways of the Sea (MoS)1 routes, underpins its establishment as a strategic area in international shipping, as well as a logistics platform for southern Europe. The economic impact of port facilities in the country is such that 53% of external trade with the EU goes in and out of the country through ports, while the figure is 96% for flows to and from other countries. Moreover, port activity represents around 20% of GDP in the Spanish transport sector and 1.1% of national GDP, generating direct employment totalling more than 35,000 jobs directly and a further 110,000 indirectly, according to the Spanish Ministry of Public Works.
Legislation has provided for the improvement of the Spanish port system's competitive position in an open and globalized market, establishing a system of self-managed Port Authorities (PA). These are required to operate according to business criteria under the coordination of Puertos del Estado (PdE), a public body dependent on the Ministry of Public Works. Within this framework, it is intended that the management of significant ports corresponds to the so-called “landlord” model, in which the PA is not limited to being a provider of port land and infrastructure and regulating the use of public domain, but also directs port activity. The role of ports now exceeds its traditional role as merely a site for loading or unloading goods and passengers, as they have become business centres that should be integrated in an intermodal logistics chain.
The current Spanish port system is governed by the principle of financial self-sufficiency, both for each of the PAs and for the system as a whole, constituting one of the cases that fully respond to the EU guidelines for funding transport systems and infrastructure. Thus, substantial ports receive no funds from the state, and cover all of their operating expenses2 and capital investment through funds generated from their operations (cash flow), private investment, grants from European funds in certain cases and, exceptionally, external debt (which, according to PdE, has grown from under 10% in early 90s to around 40% over the economic crisis). Regarding private investment, Public-Private Partnerships (PPPs) have proved in recent years to be a quite adequate vehicle in facilitating the development of transport infrastructures, benefitting the public sector in terms of meeting the need for financial capital and risk reduction, and taking advantage of the private sector's skills in managing efficiency.
Besides the UK, Spain is the largest European user of private finance in transport infrastructure (Acerete et al., 2010) and the home country of the leading PPP transportation developers worldwide (Roumboutsos et al., 2013). Given this long-standing use of the PPP delivery model, and given how Spain was particularly hard-hit by the economic crisis, the country is an appropriate case study to investigate the role of PPPs.
Recently, the concession model has received particular attention in Spain, not only from regulators and researchers, as is commonly the case, but also from the media and the general population. The latest wave of economic news with regard to inadequate budgets, incomplete works or public losses has put the concession system in the spotlight. This has particularly affected transport infrastructure, such as road or rail. From 2008 to 2014, the government has paid out €10 bn to cover excess spending on construction projects on roads, rail and ports: €5.12 billion to modify already completed works, €4.1 billion to cover cost overruns, and €900 million for the expropriation of land.3 In some cases even the threat of bankruptcy to operators of infrastructure has been resolved by the state's assuming responsibility for part of the debt. In light of the above, the European Union has recently asked the Spanish government for a more rigorous investment scheme for transport infrastructure.4
With regard to Spanish ports as an example of expansive infrastructure that requires substantial capital investments, almost 30 PPP projects have been registered since the last legislative reform, accounting for an investment of approximately €1200 million. This paper aims to review the theory on port concessions with a focus on concerns about misconduct and possible incentives for misconduct in the Spanish system. The research purpose is to shed light on aspects of the system that require improvement if concession scandals are to be removed from the headlines. With this objective, and from a conceptual and descriptive analysis, our approach is based on the identification of the different risks associated with these projects, such as overcapacity, the increase of market power held by some companies, or the non-specification of risk allocation in contracts, that may be especially important in times when public expenditure accountability is a major concern.
The structure of this paper is as follows: after reviewing the theory and international practice on PPPs, we focus on the Spanish port system, paying special attention to public and private investments and risk allocation in recent decades. From here we analyse the recent PPP experiences in Spanish ports by describing the 26 largest Spanish port or terminal concessions in the last twenty years. We then undertake a current PPP port case study, which leads to the final section in which we discuss challenges that presently should be addressed.
Section snippets
PPP in transport infrastructure: theory and trends
Traditional economic theory acknowledges the existence of some goods and services that should be offered to society even when the market will not do so. Under a public-service economy, public goods and services have been provided by the public sector. However, sometimes the public sector is inefficient in trying to address market failures and actually generates some others nonmarket or governmental imperfections. This is one reason why the presence of the public sector has diminished in some
A brief on the Spanish port system devolution
The desire to open to the global market and improve competitiveness were the motivations for the development of the Spanish Port system. Until 1992, few changes were made from the nineteenth-century port organization and legislation in Spain. Following the Spanish dictatorship, the ratification of the current Constitution and the reorganization of the State in line with autonomy and the decentralization process, and integration into the European Union,9
The Spanish port system: public versus private investment
Port infrastructure is a key element in the transnational commerce and transport network. In recent decades, the building of an integrated multimodal transport network has emerged across the European Union to facilitate consolidation of the internal market. Accordingly, these infrastructures and services have become crucial for the sustainable and competitive development of the maritime sector, and areas of interest for both public and private investment. In this environment, and due to the
An analysis of PPP experiences in Spanish ports
To better understand the context of PPP procurement schemes boosting along the Spanish port system let us briefly review the regulatory evolution and its transforming consequences for the sector. Delivery model of ports in Spain has seen a major change from being strictly public to the transfer of port management and operation service to the private sector. Although the infrastructure always remains property of PAs, three different models were to be found at Spanish ports: Service Port, Tool
Conclusions and policy implications
In 2012, the European PPP market recorded its lowest volume and number of transactions for a decade, which represent a 35% decrease in value compared to 2011 (EPEC, 2013). Financial resources from these transactions have traditionally allowed the expansion of transport infrastructure through the combined activities of the private and public sectors. However, the economic crisis has hardly affected the capacity to develop infrastructure under certain funding schemes.
Spain has traditionally been
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Project risks and regulation in transport infrastructure: A study in Brazilian agencies concessions planning process
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2021, Transport PolicyCitation Excerpt :This wrong strategy indirectly resulted in the subsequent failure of Dandong Port. The failure case of Dandong supports the opinions of Cabrera et al. (2015), that is, accurate prediction of long-term demand in the port project helps the success of PPP port. Abundant liquidity and risk control in long-term investment are the fundamental guarantee to survive in the shipping recession.
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2019, Transport PolicyCitation Excerpt :This is because in any project management, allocating the risks to the parties who are the most capable of handling them contributes largely to the success of the project (Tah and Carr, 2000). Port investment projects, in particular, come with an even higher degree of uncertainty due to their large scale, high capital requirement, long duration, and difficulties in aligning goals and interests among various stakeholders (Mauel, 1996; Cabrera et al., 2015). Critical links can be drawn between PPP contractual risk and the well-established Transaction Cost Economies (TCE).