A Strategy for the
Privatization of the Nouakchott Port.
By Mohamed Mouknass
CD 691 MACD PROJECT
MA Commercial Diplomacy
Monterey Institute of International Studies
Pro. Geza Feketekuty and Prof. William Arrocha
AND ECONOMIC ANALYSIS
labor before privatization
II-Surplus labor after privatization
II- The World Trade Organization
III- The World Maritime Organization
III- LABOR STRATEGY
Since its inauguration in 1984, the port
) has been run as a
publicly owned monopoly. Unfortunately, the absence of competition has
led the port to overstaffing. Moreover, labor regulation has caused
high labor costs. The port has thus become costly and inefficient,
and has lost market share to such West African ports as Dakar (Senegal)
and Abidjan (Ivory Coast).
The exorbitant cost of the Nouakchott
port has crippled
trade. Moreover, Mauritania faces a deep public budget deficit and can
no longer subsidize the Nouakchott Port
government sees privatization of the Nouakchott Port Authority as a
solution to this issue. The World Bank and the International Monetary
Fund have pressured the government to structurally adjust their economy
by privatizing the Port Authority of Nouakchott, as well as other state-owned
enterprises. Reasons for this mass privatization are to reduce the public
budget deficit, to create wealth, to insulate port activities from the
political process, and to introduce competition.The privatization will
define a new role for the port authorities, increase foreign direct
investment, and introduce labor reform.
For the purpose of this Master project, I assume the role of a member
of the Economic Planning Board in charge of developing a privatization
strategy for the Port Authority of Nouakchott (
). This Economic Planning
board is presided by the Finance Minister.
There are numerous aims for privatization. First, privatization
would attract new foreign direct investments, which would increase productivity
and competitiveness. The investments would bring the port service up
to international levels of efficiency. Second, privatization would
increase trade at the national and regional levels, and directly or
indirectly create jobs. Finally, introducing market based labor reform
would reduce port labor costs on the public budget.
Why is privatization of the port authority necessary?
There are many reasons for Mauritania
ís government to privatize the Nouakchott Port Authority. Since 1984,
the Nouakchott port has posted a disappointing performance. To keep
it operational, government bureaucrats have managed the port through
public subsidies and preferential access to credit. In 1994, the port
was given greater autonomy. However, such reform proved impossible to
sustain; after initial improvement, the port deteriorated. It grew overstaffed
and out of control. The challenge now is to bring sustainable improvements
to port performance, and the Mauritanian government views private sector
participation as the means to accomplish that. Another important reason
for privatization is the governmentís deep budget deficits and public
finance crisis. Mauritania
ís government no longer has the financial resources to offset the portís
losses, much less provide capital increases for its development. Finally,
Mauritania has committed
to structural adjustment programs with the World Bank and the International
Monetary Fund. They must reform to receive loans from these institutions
to finance their economic and social plans.
STRUCTURE OF THE DOCUMENT
This paper begins with an overview of the project and its goal,
followed by the Executive Summary. The background section introduces
Mauritania , its economy,
and its political systems. Following is the Commercial and Economic
analysis which evaluates losses of the Nouakchott Port in this past
decade and estimates surplus labor. Next, the Institutional and legal
analysis describe domestic and international requirements of port privatization.
The Political Analysis section describes the political environment and
stakeholders. Finally, the recommendations section proposes reforms
for the Mauritania Government to facilitate the privatization process.
The purpose of this project is to develop a strategy for the privatization
of the Nouakchott Port in Mauritania
. The privatization is intended to enhance trade, increase foreign direct
investment in port activities, reduce the public budget deficit, and
introduce labor reform. This report first gives a brief background of
Mauritania and its political
environment. Next, it describes the ports and their functions, identifying
options for privatization of the top 100 container ports in the world.
Advantages and disadvantages of each option are addressed. Following
is the commercial and economic analysis, which evaluates surplus labor
before and after port privatization. The analysis provides a compensation
plan for surplus dock workers. The institutional and legal analysis
describes domestic and international requirements of the port. The political
analysis describes the political environment and stakeholders.. Finally,
the recommendations section proposes initiative reforms for
Mauritania ís government to facilitate the privatization
process. In the annex of this paper, market-based port labor reform
is recommended for any port privatization. The annex provides the needs
of commercially oriented port labor reform, the objectives of this reform,
and consequences at the political, economic and social levels.
Mauritania is located
at the western extremity of the Saharan desert. The population was estimated
at 2.6 million people in 1999, with a growth rate of 2.6 percent per
year (IMF Report, 1998). During the 1960 Independence movement,
Mauritania was essentially a nomadic society;
just 5 percent of the population lived in urban conglomerations near
the Atlantic Ocean. Due to heavy rural-urban migration, particularly
over the last two decades, over half of the population now lives in
urban centers such as Nouakchott , the political capital, and Nouadhibou,
the economic capital (World Bank Report, 1999). The ethnicity of the
population is 50 percent Moors and 50 percent black Africans. Social
indicators, like nutritional levels, food security, income, and access
to water, are poor. Fifty percent of Mauritania
ís people live below the poverty line of one dollar
a day (World Food Organization Report, 1999)
Government type: Republic
A new constitution was approved in mid-1991, after which political parties
were legalized and voters registered. Presidential elections were held
in early 1992 and Colonel Ould Taya was elected. He was re-elected for
an additional six-year term in December 1997 with 90 percent of the
Chief of State: President Maaouya Ould Taya (since December 12, 1984)
Head of the government: Prime Minister Cheikh El Afia (since
January 2, 1996
Cabinet: Council of Ministers, appointed at the pleasure of the Prime
Bicameral legislature consists of the Senate, 56 members elected by
the municipal leaders to serve six years, and the National Assembly,
79 members elected by popular vote to serve five years. The Senate assembly
consists of 55 members from the political party of the government and
1 member of the opposition. The National Assembly includes 71 members
from the political party of the government and 8 from the opposition.
Mauritania ís economy
has become substantially liberalized since the early 1980s. The economic
structure encompasses a relatively small modern sector and traditional
subsistence sectors such as agriculture and breeding.
Mauritania has a very narrow economic base. Its
industrial sector is dominated by mining and fishery activities, which
together provide all export earnings (IMF Report, 1998). The rural sector
employs an estimated 64 percent of the labor force. Despite considerable
changes since independence in 1960, Mauritania
ís economy remains vulnerable to external shocks
such as climatic changes or fluctuation in the world price of its principal
exports (IMF Report, 1998).
GDP per capita in Mauritania
is about $390. The average GDP per capita in Sub-Saharan Africa is about
$500. In 1989, export earnings were approximately $438 million; by 1999
export income declined to about $333 million. The annual iron
income had decreased by 30% and the annual fishery earnings had decreased
by 50% (World Bank sources). In 1989, foreign direct investment was
about $4 million, and in 1999 the FDI was about $0 (World Bank Data,
2000). In neighboring countries, the FDI was about $169 million in
and about $16 million
in Mali .
In conclusion, the data analysis proves that
economy needs structural changes to improve productivity and competitiveness
and attract new investment in the global market. Structural reform could
be accomplished through privatization of the state owned enterprises,
including the port authority.
2- Important Facts:
During the 1960s, many newly independent African countries, including
applied socialist models to large nationalization programs. The new
states took control of their productive assets from foreign companies,
and based their development on state owned enterprises. In the 1960s
government nationalized both the iron mining company from
and the national fishing
company. The nationalization was linked to the rise of the nationalism.
the past thirty years, state owned enterprises have survived through
tariff protection against competing imports, preferences in public-procurement,
exclusive rights, preferential access to credits, government guarantees,
tax exemptions and public subsidies. According to the World Bank, these
practices led the governments to deep budget deficits and public finance
crises. Many African states no longer have the financial resources to
offset the losses of state owned enterprises, or to provide the capital
necessary for development. Moreover, state owned enterprises have become
overstaffed, inefficient and less competitive (Guislain, 1997, p.48).
of the economy:
In a world where open economies and globalization are the rule, state
owned enterprises in general and public port authorities in particular
continue to be operated with outdated models. Development has proceeded
more in accordance with sociopolitical criteria than commercial ones.
technological innovation and growing integration of markets have forced
private enterprises to form foreign alliances in technology, investment,
State owned enterprises are ill-placed to forge such alliances
(Guislain, 1997, p.8).
growing globalization of the economy and the end of the Cold War have
pushed many states towards privatization and other economic reforms.
Nouakchott Port was inaugurated in 1984. The Republic of China built
the Port of Nouakchott at no cost to the government of Mauritania.
China financed many infrastructure projects in
Mauritania in the name of
helping the newly socialist independent African country. As a result,
Mauritania does not recognize
Taiwan and supports
China ís policy in the United Nations.
port of Nouakchott consists of two quays, one for small vessels (Whart
Quay) with draft of less than 5 m and the second for larger vessels
with a max draft of 10.5 m.
second quay is known as the ` Port of Friendship Quay í stretching 585
m and split into four berths, three for cargo handling and one for serving
at Harbor Mouth
m from channel to port
of deepwater Quays
yards approx 1000 cbm
cranes with 10 tons capacity
role of port privatization management around the world:
Defining private sector participation in port activities requires
attentive analysis. In this section, I will describe the functioning
of ports, their roles and responsibilities, various models of port privatization,
the benefits and objectives of each model, and the advantages and disadvantages
of privatization. Moreover, I will analyze private sector participation
of the top 100 ports in the world and determine which type would be
best for the port of Nouakchott . Finally, I will describe lessons learned
from port privatization in Latin America .
The elements of port activities:
There are three essential elements of port activities: port operations,
port land, and port regulations (Baird, 1995, p.1). Port operations
are concerned with the physical transfer of goods and passengers between
sea and land. Port operations may also include warehousing, storage,
and packaging. Manufacturing or product assembly activities within the
port estate are considered port operations.
land responsibility includes the management and development of port
estate. It also includes conceiving and implementing port policies and
development strategies. Port land authority supervises major civil engineering
works, provides and maintains berths, piers, and road access to the
port complex (Baird, 1995, p.2). According to the Journal of Maritime
Policy & Management, besides municipal authorities, ports are
often the largest landowners within a city. For example, Antwerp port
authority controls some 125 km of berth length and occupies a land area
of 14,000 hectares. The Los Angeles port has 45 km of waterfront covering
an area of 3,000 hectares.
third essential element of port activities is regulation, which includes
maintaining the conservancy function and insuring navigable approaches
to the port. Port regulation also includes providing pilotage services,
vessels traffic management, and ensuring the safe passage of vessels
within the defined area of jurisdiction of port. The port regulation
power enforces laws relating to health and safety and controls pollution
levels within the port estate. Finally, the port regulator monitors
the performance of the port, coordinates policy making with local and
national government bodies, plans future expansion, and promotes the
entire port and its facilities to users (Baird, 1995, p.3).
for port privatization:
An analysis of the top 100 ports in the world reveals four models of
ports. The first model is the public port with no private sector involvement.
All three elements; operations, regulations, and land, are the responsibilities
of the state. Public ports are still found in Singapore
and all African states.
second model, which I call model II, is the port that transfers port
operations to the private sector. In this model, port land remains in
public ownership and regulatory activities are also the responsibilities
of the public sector. According to Mr. Cass, a specialist of port privatization,
there are many examples of this type of arrangement in North America
and European ports, with terminals leased to the private sector.
third type of port, which I call model III, is the port where two elements,
operations and property rights, are controlled by the private sector.
The public sector via port authority still controls regulations matters
such as navigable approaches (Baird, 1995, p.7). This type of privatization
usually corresponds to single user ports such as oil ports or mineral
ports, but is not appropriate to multi-user ports.
last model of port, which I call model IV, is a port where all three
elements, operations, land, and regulatory, are the responsibility of
the private sector. In this model the government has no involvement
in port activities other than control of sub-standard vessels, pollution
or accidents. In this port model the market determines opportunities
for new private sector investments. Only the United
Kingdom has a fully privatized port.
of Port Privatization:
of the top 100 container ports fit Model II, where port operations are
carried out by the private sector, with the public sector retaining
property rights over port land and regulatory functions. Model II is
by far the most common arrangement for private sector participation
in port activities.
to a study titled Process, Players and Progress, only seven of
the top 100 container ports appear to conform to Model I, where the
three elements of the port are under the government control. These include
several ports in South Africa
, Singapore and
Israel . South Africa
plans to transfer responsibility for cargo-handling operations to the
sector participation in the top 100 ports:
to the same study, only two of the top 100 container ports conform to
Model III: Tilbury and Felixstowe in Great Britain
. These ports are owned and operated by the private
sector, with public sector control over regulatory functions. Finally,
only three of the top 100 container ports conform to model IV. These
ports also are located in Great Britain
. In each of these three ports the private sector controls operations,
land, and regulations. In conclusion, the United
Kingdom is the only country with real port privatization.
However, other countries offer private sector participation in port
operations, which are the most important aspects of port activities
for port users.
AND ECONOMIC ANALYSIS
There is no doubt that privatizing port operations will increase
port efficiency and improve competitiveness. Privatizing port operations
will reduce port labor demand on the public budget and raise government
For many years, Mauritania
government paid scant attention to deficits in Nouakchott
Port in the belief
that they would be corrected by bigger budgetary allocations or by higher
port charges. These port deficits were seen simply as internal costs
for the country with no major implications on foreign trade.
The trade flow for Mauritania was US $747 million in 1998, and
in 1999 declined to US $662 million. As we see, the import/export value
decreased by more than 11%, which has negative consequences on port
services, since the demand for port services depends on the volume of
goods handled. Port costs factor into the final product price. If port
costs are excessive, the competitiveness of the merchandise is affected.
If sales decrease, demand for port services decline.
this section, I will try to estimate the surplus of dock workers in
the Port Authority in Nouakchott before privatization. I will also estimate
the excess of labor after privatization. Finally, I will estimate the
amount of compensation for laid-off of dock workers. My sources used
include the World Bank in Washington , D.C., and the International Maritime
Organization in London . I will also apply knowledge from the Quantitative
Tools Analysis of the Commercial Diplomacy Class.
Labor before privatization:
goods trade pass through the port.
services trade pass through the port.
and unloading ships requires the same effort per ton of product.
requirements per ton for different products are similar.
ís port uses production technology from when it was built (1984).
there was no excess labor at the Nouakchott Port.
port has 150 dock workers.
Change in Trade Volume between 1989 and 1999:
in M $
in M $
Volume in 1989:
Volume in 1989: Export/ Export Price= 438/97= 4.52
Import Volume in 1989: Import/ Import Volume= 382/103=3.71
Trade Volume in 1989: Export Volume + Import Volume= 4.52 + 3.71 = 8.22
Trade Volume in 1999:
Export Volume in 1999: Export/ Export Price= 333/79= 4.22
Import Volume in 1999: Import/ Import Price: 329/91= 3.62
Trade Volume in 1999: Export Volume + Import Volume= 4.22 + 3.62 = 7.84
percentage change in trade volume between 1989 and 1999 is calculated
(Trade Volume 1999 Ė Trade Volume 1989)/ Trade Volume 1989= -4.8%
The volume of trade in Nouakchott between 1989 and 1999 decreased
by almost 5%. We can thus estimate the excess labor in the port
at 5%. The number of
Dock workers is 150, so 7 to 8 people are redundant.
Before estimating the surplus dock workers at Nouakchott Port
Authority after privatization, I would like to estimate the percentage
change of trade volume in Dakar Port Authority,
, between 1989 and 1999.
Dakar Port Authority is considered a direct competitor in West
Africa to Nouakchott
change in trade volume in Dakar
| Export in M $
| Import in M $
| Export Price
| Import Price
Export Volume in 1989= Export/ Export Price = 7.3
Import Volume in 1989= Import/ Import Price = 13.7
Export Volume in 1999 = Export/ Export Price = 8.35
Import Volume in 1999 = Export/ Export Price = 14.35
Trade Volume in 1989 = Export Volume + Import Volume = 21
Trade Volume in 1999 = Export Volume + Import Volume = 23
Percentage change in trade volume between 1989 and 1999 in
(Trade Volume 1999 Ė Trade Volume 1989)/ Trade Volume 1989 = 10%
The volume of trade in Dakar between 1989 and 1999 increased by 10%.
Conclusion: Between 1989 and 1999, the trade volume through
the Nouakchott Port Authority decreased by 5%, while the trade volume
through Dakar Port Authority increased by 10%.
, which is a land-locked
country, imports trough Nouakchott
However, the Port
has become inefficient
and highly costly. It is much cheaper for
to import through
Surplus Labor after Privatization:
Global Cargo Handling Productivity:
Man-Hours Worked in Million
Cargo ton Handled Million
If the new private port operator uses the technology of 1996,
productivity per worker will be 12.30 tons/ man-hour. However, the actual
productivity is 6.25 tons/man-hour because the port uses the technology
of the 1980s. Actual productivity is approximately one-half with the
We can conclude that after privatization, port operations will
use half as many workers as before privatization. The actual number
of dock workers is 150. We already know that seven to eight dock workers
are redundant. So the number of dock workers needed will be: (150-8)/2=
71 . Therefore 79 dock workers (150-71) are likely to be laid off.
In this section, I will estimate the amount of money needed
to compensate the laid off dock workers. For objective criteria, I hoped
to analyze compensation for dock workers elsewhere in Africa
. However, no single port in Africa
has been privatized.
Since many ports in Latin America
have been privatized, I used their compensations for objective criteria
on compensation in Mauritania .
I selected three Latin American Countries:
|| Amount/ worker
|| US $14,300
|| US $6,250
|| US $14, 800
convert all these dollar figures to year 2001 dollar figures:
US $14,300 X 1.71 = US $24,500 in the year 2001.
US $6250 X 1.613 = US $ 10,100 in the year 2001.
US $ 14,800 X 1.19 = US $ 17,650 in the year 2001.
To relate these figures to Mauritania
I will use the Purchasing Power Parity (PPP) factor.
PPP X GDP/per Capita= $832
$ 24,500/ GDP per capita = $ 24,500/ 4,890 = 5
$ 10,100/ GDP per Capita = $ 10,100/ 3380 = 3
$ 17,650/ GDP per capita = $ 17,650/ 7082 = 2.5
The range of compensation for Mauritania
is: 2.5 X 837 to 5 X 837, or
$2,100 to $4,200 per dock worker.
The range for all surplus workers is: $165,900 to $331,800.
The range for the compensation for a Mauritanian dock worker is between
$2,100 and $4,200. These amounts are 5.25 to 10.5 times greater than
the GDP per capita. If we consider purchasing power parity factor, these
amounts are a lot of money. On the other hand, as a state employee,
a dock worker is provided housing, electricity, water, health assurance,
and even alimentation coupons for necessity products from the government.
After being laid off, the worker will lose all these social benefits.
How could the Nouakchott Port Authority increase its activities?
We know that:
First, the demand for port services is derived from the volume of goods
handled. Port services are integrated into manufacturing and distribution
systems, so port costs are added to the final product price, which affects
the competitiveness of the final product.
Second, 50% of Mauritania
export is fishery products to Europe
They compete with the same products from
at the same prices.
We can presume that excessive cost of port facilities for any of these
countries could mean the loss of both the European and Japanese markets.
Letís assume the privatization of Nouakchott
port operations help cut the cost of handling fish exports (with a negative
impact on fish exports from Senegal
). Japanese or European
fish brokers in Tokyo ,
will probably ask fish
producers in Mauritania
to provide them with greater volume once they realize that their fish
can be obtained relatively cheaply. The fish brokers will continue to
buy Mauritanian fish until volumes are insufficient to satisfy Japanese
and European demand. The growth in the demand for
fish will increase demands for workers, fish packing services, land
and ocean transport services, and cargo handling services at port. The
entire Mauritanian economy will benefit.