Workshop On Development of Dry Port through Public Private - - PowerPoint PPT Presentation

Public Private Partnership

Workshop On Development of Dry Port through Public Private Partnership

Background

 Economic Development Policy 2010  Private Participation in Infrastructure Policy 2010  Graduation from LDC and inclusion in triennial review  Building economic resilience  Changing development assistance priorities  Increase in number of infrastructure projects  Disparate initiatives- IT Park, Dry Port, Education City, Agro

Park

 Promoting growth of private sector  Moving beyond basic infrastructure requirements- health,

education, road tunnels

 Opportunities created by hydropower development

Background

Accelerating Bhutan’s Socio-Economic Development- McKinsey:

 Attracting investments and meeting the job gap by

developing priority sectors identified accelerated growth- tourism, ICT, construction, cultural industries, agriculture, and cross-cutting factors which enable/inhibit growth

 Improving the efficiency and effectiveness of public sector

services- health care, education, vocational training and government-to-citizen services

PPPs: Theory and Practice

 Theoretically appealing  Practical implementation a challenge  Promoting privatisation and providing subsidies to

entrepreneurs is not PPP

 Promoting free market development not equivalent to

PPPs- leading to overvaluation/undervaluation of private sector involvement

 Transformation of traditional roles

Transforming Public and Private Sector

 PPPs require shift in Public and Private sector roles and

attitude

 Moving away from client-contractor approach  Public sector- core functions of supervision & regulation  Private sector- greater responsibilities & risks in execution,

• peration & mobilisation of resources

 Sustaining the transformation of roles over the long-term

PPP Readiness

Development of Dry Port in Bhutan

Brief Background

 Landlocked country (between China & India)  Economic growth – Annual average growth of 7.5% for

last 35 years.

 Total Trade growth – About 16% for last 15 years  Trade Openness Index : 60% (1998) to 80% (2015)  Trade liberalization : Bilateral, Regional, and Multilateral  Trade routes: Four major trade routes (Phuntsholing,

Gelephu, Sandrup Jongkhar, and Samtse). Phuntsholing is the main commercial hub and gateway. In 2015, 74% of Bhutan’s Total Trade happened through Phuntsholing.

Challenges

 Underdeveloped trade infrastructure facilities, such as dry

port, cold storage, etc. Logistic Performance Index (LPI) 128/155 in 2010 and 143/160 in 2014.

 High transaction costs ( Muliple CFA, Kolkota port, etc.)  Transportation cost (LL, Narrow road, rugged terrain)  Highly dependent on single export sector (hydro)  Small domestic market (Export is key)

Challenges cont…

Phuntsholing :

 Traffic congestion due to increasing volume of both

cargo and passenger traffic hinders competitiveness, safety and convenience of cross border movement

 There is increasing containerized traffic requiring

demand for container handling requirements.

 Customs inspection is conducted at multiple locations -

mainly at four different locations - due to lack of parking space and cargo handling area.

Dry Ports Projects in Bhutan

 Mini Dry Port (MDP) in Phuntsholing with financial

support of the ADB under the South Asia Sub-regional Economic Cooperation (SASEC).

 Dry Port at Pasakha with financial support of the World

Bank under the Regional Connectivity Project.

Mini Dry Port

• Area is 5.4 acres
• 3-Zones:
• 1. Generalized cargo area

(south).

• 2. Administrative area

(center)

• 3. Container area (north)
• Cost estimate: USD 2.5m

($1.65 for construction)

• Short to medium.
• Feasibility Study Conducted

in 2013 and found feasible

• 10,385 TEU p.a (5000 TEU

initial demand and 20% growth p.a.).

Functions of MDP

 Customs clearance for import and export traffic  Provide storage/warehousing facilities  Loading/unloading facilities for containerised

import/export

 Container stuffing/de-stuffing  Conduct other exports/imports inspections (SPS)

Benefits from MDP

 One-stop point for all customs clearance and related

services

 Aappropriate transhipment and parking areas for the

cargo trucks

 Truck and cargo idle time savings resulting from reduced

dwell time

 Reduction of losses of perishable goods resulting from

the construction of a covered area.

 De-congest Phuntsholing city and bring in efficiency in the

cross-border movement of goods

Traffic forecast for cargo trucks (2013-2036) Traffic is expected to grow at much higher rate with the Motor Vehicle Agreement among four countries Bangladesh, Bhutan, India and Nepal ( BBIN) is expected to increase the traffic flow.

Scenarios Period Low Medium High 2013-2020 1.65% 3.32% 4.99% 2021-2030 1.00% 1.68% 2.70% 2030-2036 1.00% 1.68% 2.70%

Economic and Financial Benefits

Threshold =12% Scenarios EIRR With bypass road Without bypass road Low growth 18.4% 14.6% Med growth 21.5% 17.6% High growth 24.7% 17.6%

Financial benefits

 In terms of operational costs, the Project will breakeven

within the first five-year period at applying existing tariff

• structures. Profits in subsequent years is expected to rise

significantly.

 The mini dry port project shows financial sustainability

for operation and maintenance and thus potential for O&M contract under PPP. However, it would not generate sufficient excess cashflow for funding of initial investment under a PPP/concession scheme.

Proposed contact type and packaging

 Design and Build Contract under conventional

procurement method for detail designing and construction of the MDP. National Competitive Bidding process has been recommended.

 O & M under PPP framework. Management contract for

O&M on the basis of fixed fee and performance-related

• bonuses. This would benefit from private sector expertise

in building facilities management and transport logistics.

Pasakha Dry Port

• Area: 15.6 Acres
• 3-Zones:

1. Export Zone 2. Administrative area

• 3. Import Zone
• Cost estimate : USD 16m
• Project life cycle : 20

Yrs (2+18)

• Full fledged dry port
• For med to long run
• TEU 0.064m (2016) – 0.327m (2035)

Layout concept

Container freight Station Export Container freight Station Import Cold Storage Import Empty container yard Reefer Container yard Dry bulk & dusty Cargo vehicle parking Container yard

Processing zone

Staff Residential Zone Canteen & clinic

Benefits

Exporter/Im porter Freight forwarder Shipping Agent Port Authority Society Transporter Increased Trade Flow Faster customs clearance Reduced no. of C&F agents Improved Communication Reduced road congestion Creation of jobs Quicker turnaround time Reduced road accident Increase national security

Financial Viability and Sensitivity analysis

Scenarios/Metrics Project IRR Equity IRR Minimu m DSCR Average DSCR Base Case 12.25% 13.90% 1.13 1.34 Traffic 10% 12.78% 14.81% 1.24 1.40 20% 13.19% 15.55% 1.31 1.44

• 10%

11.47% 12.61% 1.00 1.25

• 20%

10.40% 10.94% 1.00 1.14 Capex 5% 11.55% 12.80% 1.07 1.28 10% 10.89% 11.75% 1.01 1.22 O&M 10% 11.54% 12.78% 1.06 1.28 20% 10.78% 11.58% 1.00 1.21 Debt IFA - 2%,2% (unhedged) 12.15% 18.32% 1.62 1.85

Procurement contract

Design & Construction O & M

Thank You