ICHCA CONFERENCE 2008 ICHCA CONFERENCE 2008 BUSAN, REPUBLIC OF KOREA

28TH – 30TH MAY, 2008

NEW PARTNERS AND ALLIANCES RESULTING FROM CHANGES TO DEVELOPING AND DEVELOPED

ECONOMIES

BY

NESTOR GALLEYDIRECTOR OF PORT TAKORADI , GHANA

OUTLINEOUTLINE

I. DEFINITIONS AND CLARIFICATION OF MAIN ISSUES

a. PARTNERSb. ALLIANCESc. CHALLENGES

II. EXAMPLES OF PARTNERSHIPS AND ALLIANCES IN DEVELOPING AND DEVELOPED COUNTRIES

III. CONCLUSION

Partners/Partnership - DefinitionsPartners/Partnership - Definitions

According to the Oxford Advanced Learners Dictionary “a Partner is a person who takes part in an activity with another or others especially one of the owners of a business. It could also mean a country or an organisation that has an agreement with another or others such as Britain and its European Union Partners:

Partnership could therefore be on three levels:

- International Partners among nations e.g. ECOWAS, European Union (EU), ASEAN Countries, etc.

- Global Partnerships under the United Nations and its specialised agencies looking at specific issues of concern e.g. Coalition for Rain Forest Nations and its specialised agencies

looking at specific issues of concern e.g. Global mapping etc.

Partners/Partnership – Definitions …. 2Partners/Partnership – Definitions …. 2

• There is also commercial Partnerships between two or more persons who join together to carry on a trade or business. Each party contributes money, property, labour or skill, and experts for shares in the profits and losses of the business.

• Partnerships normally do not limit liabilities of the partners so in case of the venture failing, the organisers and promoters of the partnership could lose their personal assets to the creditors of the business.

Partners/Partnership – Definitions …. 3Partners/Partnership – Definitions …. 3

Partnerships do not suffer double taxation since the profits of the venture are not taxed and there is no dividend tax to the partners.

• Over time however, other forms of Partnerships have been developed, viz.:

– General Partnerships, Limited Partnership and Limited Liability Partnerships with various forms of limitations and operating under various legal regimes in various countries.

Main AdvantagesMain Advantages

• Availability of large resources for the partnership to draw upon from various partners.

• Better decisions because partners pool together their knowledge, skills and experiences in running the partnership.

• Flexibility in operations – Partners can decide to change the size and nature of the business or area of operations

Main AdvantagesMain Advantages

• Sharing risks – the partners share the risks as they share the capital contributions

• Protection of interest of each partner – every partner’s interest must be taken into consideration in decision making

DisadvantagesDisadvantages

Unlimited LiabilityUnlimited Liability – All partners are jointly liable for the debt of the firm. If this is not limited as in the Limited Partnership or Limited Liability Partnership, personal properties of partners could be sold to pay off liabilities of the firm.

• Lack of HarmonyLack of Harmony – Since every partner has an equal right to participate in the management and can take their view points up to management, conflicting view points could cause disharmony in the company

DisadvantagesDisadvantages

Limited Capital• Total number of partners cannot exceed

20 and therefore the Partnership cannot go on the stock market to raise capital.

• Difficulty in transferability of shares – A Partner cannot transfer his shares without the consent of other partners.

STRATEGIC ALLIANCESSTRATEGIC ALLIANCES

Alliances (Strategic Alliances) are formal relationships formed between two or more parties, organisations or countries to pursue a set of goals agreed upon to meet critical business or political needs while remaining independent.

There are several types of alliances which are inter-governmental, set up to achieve specific objectives such as Cocoa Producers’ Alliance (COPAL) which was instituted in January 1962 by representatives of the governments of five cocoa producing countries which promote scientific research activities on cocoa.

STRATEGIC ALLIANCES … 2STRATEGIC ALLIANCES … 2

• Strategic Alliances are partnerships which provide resources such as products, distribution channels, manufacturing capability, project funding, capital equipment, knowledge, expertise or intellectual property

• In effect, strategic alliance is a co-operation or collaboration which aims for synergy, where each partner hopes that the benefits from the alliance will be greater than those of individual efforts.

• The alliance often involves technology transfer, economic specialization, shared experiences and shared risks.

STRATEGIC ALLIANCES … 3STRATEGIC ALLIANCES … 3

• Organisation of the Petroleum Exporting Countries (OPEC) is an intergovernmental organisation made up of 12 oil producing nations formed in 1965 to safeguard the interest of petroleum exporting countries. It is It is an alliance but which works as a cartel.an alliance but which works as a cartel.

CHALLENGES AND OPPORTUNITIESCHALLENGES AND OPPORTUNITIES

• Developing countries face a lot of challenges ranging from lack of capital to lack of basic social amenities such as food and shelter.

• However, most of these developing countries have a lot of raw materials needed by the developed countries for their industries and to maintain their economic growth.

CHALLENGES AND OPPORTUNITIESCHALLENGES AND OPPORTUNITIES

The products from the developed countries need markets and some of these markets are in the developing countries, even though they are depressed.

Capital markets in developing countries, despite the risks, offer better returns on investment than those in the developed countries. In certain parts of the developing world, returns on investment can yield as much as 30% or even more.

CHALLENGES AND OPPORTUNITIESCHALLENGES AND OPPORTUNITIES

Most developing countries are rich in natural resources which are untapped and their biggest problem is lack of capital, technology and sometimes knowledge and expertise to develop these resources.

NEW PARTNERSHIPS AND ALLIANCESNEW PARTNERSHIPS AND ALLIANCES

New Partnerships and alliances have and are still developing as a result of the globalization and the need of some of the developed and emerging countries for raw materials for industrialization.

• In the realm of the maritime industry, alliances have developed in Liner Shipping to foster operational synergy and achieve efficiency and cost effectiveness especially in Container shipping.

NEW PARTNERSHIPS AND ALLIANCESNEW PARTNERSHIPS AND ALLIANCES

• Consolidation in liner shipping which started in 1994, saw internal growth with the launch of large expansion capacity plans such as building of 95 post-PANAMAX ships during 1995-1999.

• There were also mergers and acquisitions and through external co-operation, the establishment of strategic alliances. One of such alliances was Maersk/Sealand.

Figure 1: generation of strategic alliances on East-West Trades

1995 1999

NEW WORLD ALLIANCE APL/NOL. (USA/Singapore) Mol (Japan) Hyundai (Coree du sud)

GLOBAL ALLIANCE OOCL (Hong Kong) MOL (Japan) Nedlloyed (Pays-Ban)

GRAND ALLIANCE P&O (UK) Hapag-Lloyd (Allemagne) NYK (Japon) NOL (Singapour)

GRAND ALLIANCE P&O/Nedlloyd (UK/Pays-Bas) Hapag-Lloyd (Allemagne) NYK (Japon) MISC (Malaisie)

MAERSK/SEA-LAND Maersk (Danemark) SeaLand (USA)

MAERSK/SEA-LAND Maersk (Danemark) SeaLand (USA)

TRICON DSR-Senator (Allemagne) Cho Yang (Corée du Sud)

Hanjin

UASC

Cosco

K Line

Yang Ming

MISC

TRICON Hanjin/DSR-Senator (Corée/All.) Cho Yang (Corée du Sud) UASC (Koweit)

Sino-Japonese Alliance Cosco (Chine) K Line (Japon) Yang Ming (Taiwan)

Hyundai

Source: Alphaliner, (2000)

NEW PARTNERSHIPS AND ALLIANCES … 6NEW PARTNERSHIPS AND ALLIANCES … 6

- Operating synergies (the ability to achieve a better allocation of vessels)

- Market control (ability to increase market power)

These alliances were developed on the East-West Trades.

NEW PARTNERSHIPS AND ALLIANCES … 7NEW PARTNERSHIPS AND ALLIANCES … 7

In developing countries, especially in Africa, some of the strategic alliances and partnerships have positively influenced the continent with Public Private Partnerships (PPP) initiated under the influence of the World Bank during the Structural Adjustment Programmes.

One of the earliest PPP’s was the privatisation, in Tanzania, of the Port of Dar es Salaam through granting of a 10 years concession in 2000 to Tanzania International Container Terminal.

NEW PARTNERSHIPS AND ALLIANCES … 8NEW PARTNERSHIPS AND ALLIANCES … 8

Services (TICTS) a company backed by the Hong-Kong-based Hutchison Group.

The company invested US$7m in 4 gantry cranes as well as a computer system for managing the terminal. The work force was reduced from 600 to 400 and retrained. Ship calls increased as a result of this as well as through put and moves per hour. Two years after the privatisation throughput increased from 100,000 TEUS to 165,000 TEUs.

MITTAL STEEL IN LIBERIAMITTAL STEEL IN LIBERIAMittal Steel, the world’s largest steel maker entered into a mineral development agreement (MDA) with Liberia on August 17, 2005 granting it a 25 years concession to build railroad tracks and to rehabilitate the deep water port at Buchanan. The new rail road tracks would link Grand Bassa, Bong and Nimba counties. The total project cost was about US$ 900 million.

MITTAL STEEL IN LIBERIAMITTAL STEEL IN LIBERIA

This Agreement was revised in 2007 with Arcelor Mittal and over US$1 billion is expected to be invested and to boost the Company’s iron ore production by 15 million a year.

DAKAR PORTDAKAR PORT

• Dakar Port has a Container Terminal with 424 metres of berth and an eight hectare yard area.

• In December 2007, D.P. World signed a 25-year concession to develop, manage and operate the Port of Dakar.

• Dubai Ports World will invest EU 500 million in two new gantry cranes by 2009 to facilitate container handling and build a new port termed “Port of the Future,” an extension to the existing port by 2010. DP World aims at handling 1.5 million containers per year as against the current number of 350,000 containers.

GHANAGHANA

In Ghana, a consortium called Meridian Port Services (MPS) Limited was granted a 20-year concession to operate the Container Terminal in Tema Port.

MPS Ltd. is a joint venture between Ghana Ports and Harbours Authority (GPHA) Bollore and APM Terminals, structured into Meridian Port Holdings (MPH) & GPHA as main shareholders with the following shares:

• MPH 70%• GPHA 30%

EquipmentEquipment

3 ZPMC STS Gantry cranes (2004 built)

• 2 more STS Gantries to be procured in 2009

• 12 Reach Stackers (45 tonnes), 5 high stacking currently in use.

• 8 Reach Stackers have just been delivered

• 4 RTGs

• 4 Empty Handlers (6 high stacking)

EquipmentEquipment

• 30 terminal tractors and 35 terminal chassis on order

• 24 Utility vehicles and fork-lift trucks

• 8 lane gate complex

• 1 administrative office and 1 workshop

• 336 reefer plugs (expandable to 496)

TechnologyTechnology

• TOS: NAVIS• Full LXE coverage• Wireless Internet coverage• Radio communication equipment

OperationsOperations

• MPS occupies 24 hectares of land in the Tema Port. Currently 2 berths are utilised with the following characteristics:

– Berth : 574 meters– Draft : 11.5 meters– Capacity : 550,000 TEUInvestment made so far is about US$160 million.

PRODUCTIVITY OF CONTAINER TERMINAL - AVERAGE MOVES PER CRANE HOUR

GPHA Jan-07 6 GPHA Jan-06 6 Feb-07 6 Feb-06 6 Mar-07 6 Mar-06 6

MPS Apr-07 8 Apr-06 6 May-07 8 May-06 6 Jun-07 10 Jun-06 7 Jul-07 10 Jul-06 7 Aug-07 12 Aug-06 6 Sep-07 11 Sep-06 7 Oct-07 13 Oct-06 6 Nov-07 14 Nov-06 7 Dec-07 13 Dec-06 7

PRODUCTIVITY OF CONTAINER TERMINAL PRODUCTIVITY OF CONTAINER TERMINAL

AVERAGE MOVES PER CRANE HOURAVERAGE MOVES PER CRANE HOUR CONTAINER TERMINAL PRODUCTIVITY - AVERAGE MOVES PER CRANE HOUR - 2007

6 6 6

88

10 10

12 11

13

14

13

0

2

4

6

8

10

12

14

16

Jan-07 Feb-07 Mar-07 Apr-07 May-07 Jun-07 Jul-07 Aug-07 Sep-07 Oct-07 Nov-07 Dec-07

GPHA MPS

YEAR

AV

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AG

E M

OV

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S P

ER

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CONCLUSIONCONCLUSION• Partnerships & alliances create a win-win

situation both for developing & developed economies.

• For the developed economies it gives them the opportunity to invest in the developing economies where the cost of production is very low and therefore they can maximise their profits.

• It also affords them the opportunity to get the raw materials they need to keep their industries and services running thus maintaining/sustaining their economies.

For developing economies these partnerships and For developing economies these partnerships and alliances offer the opportunity for the injection of alliances offer the opportunity for the injection of foreign direct investment(FDI) into their weak and foreign direct investment(FDI) into their weak and ailing economies. ailing economies.

Such investments help in improving revenue Such investments help in improving revenue generation in the developing countries and generation in the developing countries and therefore of socio-economic benefit to the therefore of socio-economic benefit to the developing countries. developing countries.

In all these endeavours transparency, equity and In all these endeavours transparency, equity and fair play must guide the transactions to avoid fair play must guide the transactions to avoid future controversies.future controversies.

THANK YOU FOR YOUR ATTENTION.