of the Nouakchott Port in Mauritania
International Trade in Services Negotiation Simulation
The purpose of this exercise is to simulate an international trade negotiation
designed to reduce trade restrictions between two nations.
While the factual scenario is based upon real issues, this case is hypothetical
in terms of specific stakeholders identified and certain facts presented.
This case will include country teams, government teams, industry association
teams, and various forums including a possible WTO Dispute Resolution
The goals of this exercise include:
of research and investigation skills;
of analytical, planning, and negotiation strategy skills;
of negotiation, mediation and conflict resolution skills;
of durable written agreements; and,
of planning and presentations skills to various governmental and WTO
panels and bodies.
Ministry of International Trade and Industry (MITI)
Japanese Ministry of Health and Welfare (MHW)
Japanese Pharmaceutical and Medical Devices Safety Bureau (PMSDB)
Japanese Pharmaceutical and Medical Devices Evaluation Center (PMDEC)
U.S. Department of Commerce (DOC)
Medical Equipment Association (JMEA)
Japan Medical Equipment Industry
Japan Association for the Advancement of Medical Equipment (JAAME)
U.S. Health Industry Manufacturers Association (HIMA)
American Chamber of Commerce in Japan (ACCJ)
Medical Equipment Industry
of the Nouakchott Port in Mauritania
Updated May 2003 by:
Tyler Hoffman/Jeanah Lacey/Emmee Haun
This simulation is based on a Master’s in commercial Diplomacy Project
Completed at the Monterey Institute of International Studies by Mohamed
Facts and Issues Common to All Parties
inauguration in 1984, the port of Nouakchott Mauritania has been operated
as a publicly owned monopoly. As such, the absence of competition has
led to overstaffing of the port. Moreover, labor regulation induced high
labor costs. The port has thus become costly and inefficient, losing market
share to West African ports such as Dakar (Senegal) and Abidjan (Ivory
The exorbitant cost of the Nouakchott port has crippled Mauritania’s
trade. Moreover, Mauritania faces a deep public budget deficit and can
no longer subsidize the Nouakchott Port Authority. The Mauritanian government
views privatization of the Nouakchott Port Authority as a solution to
its budgetary problems. In addition, the World Bank and the International
Monetary Fund contribute to the pressure to structurally adjust the economy
via privatizing the Port Authority of Nouakchott, as well as all other
state-owned enterprises. Reasons for mass privatization are: 1) to reduce
the public budget deficit, 2) to stimulate the economy, 3) to insulate
port activities from political processes, and 4) to introduce competition
into the market. Privatization is politically uncertain because it will
define a new role for the port authorities, increase foreign direct investment,
and introduce labor reform.
numerous reasons for privatization. First, privatization would attract
new foreign direct investments, which would increase productivity and
competitiveness and bring port service up to international efficiency
levels. Second, privatization would increase trade at both the national
and regional levels which directly or indirectly translate into job creation.
Finally, introducing market based labor reform would reduce port labor
costs on the public budget.
is privatization of the port authority necessary?
There are many reasons for Mauritania’s government to privatize
the Nouakchott Port Authority. Since 1984, the Nouakchott port has exhibited
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 became overstaffed and out of control. The current challenge
is to foster sustainable improvements to port performance, and the Mauritanian
government views private sector participation as the means to accomplish
this improvement. Another important reason for privatization is the government’s
budget deficits and public finance crisis. Mauritania’s government
no longer has the financial resources to offset the port’s 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. In order to receive loans from these
institutions for economic and social reform, the country must reform its
are currently underway by the Economic Planning Board to privatize the
Nouakchott Port in Mauritania. For this to occur, a privatization bill
must be passed in Parliament that dissolves the current publicly owned
monopoly on the Nouakchott Port.
- In order
for draft legislation to be written, all stakeholders must agree on
a set of both general principles and specific provisions that will be
included in the text of the legislation.
- The majority
of foreign goods entering Mauritania come through the Nouakchott port.
- The Government
of Mauritania is trying to increase the volume of goods going through
the Nouakchott Port in light of regional instability that is deterring
shipping through the port in Dakar, Senegal.
- It is
a goal of the Mauritanian Government to weaken the current dominance
that the tribes and several influential business leaders have on port
operations, however, these stakeholders are important in the overall
political structure and should remain active participants in the privatization
has not committed its port sector to complete liberalization within
the GATS, however, this issue is on the agenda of the current Doha Round
of multilateral trade negotiations.
OF THE ISSUE
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. During the 1960s Independence movement, Mauritania was
essentially nomadic society, with only 5 percent of the population living
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 and Nouadhibou, which represent
the political and economic capital of the region. 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’s people live below the poverty
line of one dollar a day.
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 vote.
Chief of State: President Maaouya Ould Taya (since December 12, 1984)
Head of the government: Prime Minister Cheikh El Afia (since January 2,
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’s 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. The rural sector employs an estimated 64 percent
of the labor force. Despite considerable changes since independence in
1960, Mauritania’s economy remains vulnerable to external shocks
such as climatic changes or fluctuation in the world price of its principal
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. At
that time, annual iron income had decreased by 30% and the annual fishery
earnings had decreased by 50%. In 1989, foreign direct investment was
about $4 million, and in 1999 FDI was nearly $0. In neighboring countries,
FDI was about $169 million in Senegal and about $16 million in Mali.
demonstrate Mauritania’s need for economic structural reform to
improve productivity and competitiveness that will attract new investment
in the global market. This structural reform could be entails privatization
of the state owned enterprises, including the port authority.
2- Important Facts:
During the 1960s, many newly independent African countries, including
Mauritania, applied socialist models to their economic and political systems
that involved large nationalization programs. These new states took control
of their productive assets from foreign companies, basing their development
on state owned enterprises. In the 1960s Mauritania was one of these countries,
nationalizing both a French iron mining company and the national fishing
company. With the fall of the Soviet Union, the African socialist model
of nationalization lingers more as a habit than a firmly held ideological
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 are contributing factors to government budget deficits and public
financial crises. Many African nations no longer have the financial resources
to support their state owned enterprises or to provide the capital necessary
for further development. Moreover, state owned enterprises have become
overstaffed, inefficient and less competitive.
of the economy:
In a world where open economies and globalization are the norm, state
owned enterprises such as the Nouakchott port and its port authority continue
to operate with outdated models. In practice this means that development
has proceeded in accordance with sociopolitical criteria rather than commercial
criteria. The following trends should be noted:
technological innovation and growing integration of markets have forced
private enterprises to form foreign alliances in technology, investment,
owned enterprises are ill-placed to forge such alliances.
- The growing
globalization of the economy and the end of the Cold War has pushed
many states toward privatization and other economic reforms.
The Nouakchott Port opened for service in 1984. The port was a gift from
the Republic of China, built at no cost to the government of Mauritania.
In the past, China financed many of Mauritania’s infrastructure
projects to assist the newly socialist independent African country. As
a consequence, Mauritania does not recognize Taiwan as an independent
nation and supports China’s policies in the United Nations.
of Nouakchott consists of two quays, one for small vessels (Whart Quay)
with a draft of less than 5 m and the second for larger vessels with a
max draft of 10.5 m.
The second quay is known as the “Port of Friendship Quay”
stretching 585 m and split into four berths, three for cargo handling
and one for serving vessels.
at Harbor Mouth
m from channel to port
approx 1000 cbm
with 10 tons capacity
Connections Available Rail
elements of port activities:
There are three essential elements of port activities: port operations,
port land, and port regulations. Port operations are concerned with the
physical transfer of goods and passengers between sea and land, but may
also include warehousing, storage, and packaging. In addition, manufacturing
or product assembly activities that take place within the port estate
are also considered port operations.
jurisdiction involves any activity under the management and development
of the port estate. Therefore, Port Land is responsible for articulating
its development strategy, conceiving and implementing port policies that
maintain a consistent strategic direction. On the practical level, the
Port Land Authority supervises major civil engineering works and maintains
the berths, piers, and road access to the port complex. 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.
essential element of port activities is port regulation. This includes
maintaining the conservancy function and maintaining navigable approaches
to the port. The port regulation unit also provides piloting services,
vessels traffic management, and safe passage of vessels within the defined
area of port jurisdiction. 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 markets the entire port and its facilities to potential
for port privatization:
A survey of the top 100 ports in the world reveals four dominant port
models. 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, India and most
model, henceforth referred to as model II, transfers port operations to
the private sector. In this model, port land remains public with regulatory
activities also being monitored by the public sector. There are many examples
of this type of arrangement in North America and European ports, with
terminals leased to the private sector.
type of port, model III, is the port where both operations and port property
rights rest in the private domain. The public sector via Port Authority
still controls regulations matters such as navigable approaches. 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.
port model, model IV, is a port where all three functional elements are
the responsibility of the private sector. In this model the government
has no involvement in port activities other than regulations on sub-standard
vessels, pollution or accidents. In model IV, the market determines opportunities
for new private sector investments. Not surprisingly, the United Kingdom
has the a fully privatized port.
of Port Privatization:
Interestingly, eighty-eight of the top 100 container ports fit Model II,
where port operations are carried out by the private sector and 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 entitled 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 government control. These include several ports
in South Africa, Singapore and Israel. South Africa plans to transfer
responsibility for cargo-handling operations to the private sector.
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 all 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 in key aspects of port activities where
efficiency is a function of competition for port users.
AND ECONOMIC ANALYSIS
economic theory teaches us that privatizing port operations will increase
port efficiency and improve competitiveness. The reason for this efficiency
is that the main goal of a private company is to generate profit. In contrast,
government operations are less likely to take corrective measures such
as labor reduction, even when such a reduction is needed. Consequently,
labor is occupied in activities that do not contribute to the health of
the economy. In the short-run, re-allocation of labor can be difficult,
but it promotes the long-run health of the enterprise. On the public sector
level, port privatization will help alleviate the budget deficit, reducing
the outflows of monies for unproductive labor. Also, the increased volume
of products passing through the port, as expected due to efficiency measures,
will raise government revenues via service charges.
For years, the Mauritanian government has paid scant attention to the
operational deficits in Nouakchott Port. Their hope was to correct the
problem with larger budgetary allocations or higher port service charges.
These port deficits were seen simply as internal costs for the country
with no major implications on foreign trade.
trade flow decreased in 1999 by 11% in Mauritania from US $747 million
to US $662 million. This reduction in trade bears significant consequence
on revenues collected on port services since demand for port services
depends on the volume of goods handled. It is important to understand
that port costs factor into the final price of the end product. Consequently,
if port costs are excessive, the competitiveness of the merchandise is
reduced and the volume of port services provided declines.
In the following
section, an estimate will be supplied for the surplus of dock workers
in the Port Authority due to the inefficiency of nationalization. From
this information one can infer an estimate of potential job displacement
after privatization. Finally, a calculation will be offered for the amount
of compensation for laid-off of dock workers. Sources used for these estimates
include both the World Bank in Washington, D.C., and the International
Maritime Organization in London. The quantitative analytical tools applied
are general in nature and the results are intended as a thought provoking
method and not as a predictive tool.
Labor before privatization:
- All goods
trade passes through the port.
- No services
trade passes through the port.
and unloading ships requires the same effort per ton of product.
requirements per ton for different products are similar.
port uses the same production technology used when it was built in 1984.
there was no excess labor at the Nouakchott Port.
- The port
has 150 dock workers.
Change in Trade Volume between 1989 and 1999:
in M $
in M $
1-Trade Volume in 1989:
Export 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
change in trade volume between 1989 and 1999 is calculated thus:
(Trade Volume 1999 – 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 tenuously estimate the excess labor in the port of Nouakchott
at 5%. With a number of Dock workers at 150, there are at least 7 to 8
unnecessary workers. This is assuming that the only source of inefficiency
is due to labor costs and that the technological change associated with
privatization will not result in the reduction of labor.
the surplus dock workers at Nouakchott Port Authority after privatization,
it is necessary to estimate the percentage change of trade volume in Dakar
Port Authority, Senegal, between 1989 and 1999. Since the Dakar Port Authority
is considered a direct competitor, the following analysis will serve as
a gauge to for the performance of the Nouakchott port.
Percentage change in trade volume in Dakar Port Authority:
in M $
in M $
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
change in trade volume between 1989 and 1999 in Dakar Port:
(Trade Volume 1999 – Trade Volume 1989)/ Trade Volume 1989 = 10%
The volume of trade in Dakar between 1989 and 1999 increased by 10%.
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%. A contributing factor is that landlocked Mali formally imported
through both the Nouakchott Port and Dakar Port. However, since the Port
of Nouakchott had become inefficient and very costly, Mali shifted its
business to the much cheaper Port in Mali.
Labor after Privatization:
Cargo Handling Productivity:
Man-Hours Worked in Million
ton Handled Million
If the new
private port operator uses 1996 technology, productivity per worker will
be increased to 12.30 tons/ man-hour. Since the current port facilities
use technology from the 1980s, actual productivity is 6.25 tons/man-hour.
As such, actual productivity is approximately one-half of the currently
From the following one can conclude that after privatization, port operations
will use half as many workers as before. The actual number of dock workers
is 150. We already know that between seven and eight dock workers are
unnecessary. Therefore, the number of dock workers needed to efficiently
operate the port is: (150-8)/2= 71. All other things equal, approximately
79 dock workers (150-71) are likely to be laid off.
The section will attempt to provide a rough estimate the funds needed
to compensate the laid off dock workers. For an objective study, it would
have been interesting to look at compensation plans for other African
dock workers; unfortunately, no such data exists because not a single
port in Africa has been privatized. As an alternative, this study will
look at representative ports from Less Developed Countries in Latin America
that have been privatized. The study will use their compensation plans
as a measure for compensation in Mauritania. The following three Latin
American Countries were selected: Chile, Colombia and Venezuela.
These figures have been converted to 2001 dollars:
Chile : US $14,300 X 1.71 = US $24,500 in the year 2001.
Colombia >: US $6250 X 1.613 = US $ 10,100 in the
Venezuela : US $ 14,800 X 1.19 = US $ 17,650 in the year
these figures in Mauritania, it is necessary to use the Purchasing Power
Parity (PPP) factor.
Mauritania: PPP X GDP/per Capita= $832
Chile: $ 24,500/ GDP per capita = $ 24,500/ 4,890 = 5
Colombia : $ 10,100/ GDP per Capita = $ 10,100/ 3380
Venezuela : $ 17,650/ GDP per capita = $ 17,650/ 7082
The range of compensation should be between $2,100 to $4,200 (2.5 X 837
to 5 X 837) per dock worker. Therefore, the range for all surplus workers
is $165,900 to $331,800.
The results show that the estimated range for the compensation for a Mauritanian
dock worker is between $2,100 and $4,200. This amount is 5.25 to 10.5
times greater than GDP per capita. If one considers purchasing power parity
factor, this amounts to a great deal of money. However, laying off workers
also saves money since state employees are provided housing, electricity,
water, health insurance, and alimentation coupons for necessity products
from the government. After being laid off, the worker will lose all these
will the Nouakchott Port Authority increase its activities via privatization?
Better Services – The demand for port services is quantified
by the volume of handled goods. Since port services are an integral part
of the manufacturing and distribution system an exporting firm, the cost
associated with these services are directly transferable to the customer.
With the introduction of technological innovation, port services will
be of higher quality and more efficient, thus opening up the Mauritanian
market to firms who previously deemed the market unattractive.
Competitiveness – About 50% of Mauritania’s exports are
concentrated in the fishing industry, with its two primary markets concentrated
in Europe and Japan. These two markets have access to comparable products
from both Senegal and Morocco. One can easily presume that excessive port
costs in Mauritania serve to negatively impact the attractiveness of Mauritanian
goods. Assuming that the privatization effort would help cut the cost
of handling fish exports, Mauritania will become more internationally
competitive in its key industries. The growth in demand for Mauritanian
fish would also serve to stimulate its complementary industries. The long-term
impact of privatization will increase demands for workers, fish packing
services, land and ocean transport services, and cargo handling services.
Thus, the entire Mauritanian economy will benefit.
World Bank/ IMF:
The World Bank and the International Monetary Fund are pressuring the
Mauritanian government to privatize their state owned enterprises as part
of their overall structural adjustment reform. This mass privatization
aims to reduce the public budget deficit, and create a market based economy.
According to World Bank analysis, Mauritania’s state owned enterprises
account for one half of all outstanding domestic debt and for a substantial
portion of foreign borrowing. Government borrowing normally has two effects
on investment. First, it decreases private investment because government
borrowing drives up interest rates. Second, it decreases the effectiveness
of investment since government ventures are unduly favored over private
ones. Moreover, the lack of competition and the monopoly position of government
run organizations promote inefficient labor cost and institutionalizes
corruption among managers of these state owned enterprises and government
In order to compete on the global market, Mauritania must increase private
sector participation within the economy. Deregulating will facilitate
this transition, fostering competition with state the owned enterprises
(SOEs). The goal of the World Bank policy for Mauritania is for the government
to reallocate public resources via SOE subsidies toward investment in
infrastructures and social programs that create favorable competitive
The World Bank and the International Monetary Fund see privatizing state
enterprises as essential for introducing a free market system because
privatization increases both the size and dynamics of emerging markets.
The hope is that the distribution of ownership will promote both foreign
and domestic investment which in turn will reduce volatility in the capital
market which causes inflation. The international institutions see privatization
of SOEs as a means to reduce public expenditure, pay off foreign debt,
and increase government revenues.
The Word Trade Organization:
Mauritania, as a member of the World Trade Organization since January
1995, is committed to the National Treatment Principle and the Most-Favored
Nation Principle. The National Treatment Principle applies automatically
to all goods imported and domestically sold in Mauritania. In terms of
services, National Treatment applies only in those sectors and with those
countries that have voluntarily made commitments. In this case, the Mauritanian
government offered National Treatment of services only in the tourism
sector, which is unrelated to port privatization. The Doha Round of trade
negotiations is currently underway and maritime services (which includes
ports) are on the agenda. While Mauritania is not obligated to make commitments
in this area there is growing momentum to do so as other WTO members will
likely make their own commitments in this sector.
With regards to transparency, the GATS states that the government must
publish all laws and regulations. The purpose of this arrangement is to
allow foreign companies and governments to use these inquiry points to
obtain information about regulations in any service sector. The end goal
of the WTO is to create an open system of operations that is not influenced
by corruption. Also, the World Trade Organization encourages members to
enhance labor and environmental standards to increase safety for workers
and reduce trade impacts on the environment.
World Maritime Organization:
Mauritania, as a member of the International Maritime Organization, must
comply with international maritime rules and standards that ensure safe
and effective shipping services. It also must protect the coast from environmental
degradation due to shipping related activities. In order to improve the
safety and efficiency of maritime transport, the International Maritime
Organization recommends the use of modern equipment. This will help ports
be more efficient and reduce operational cost. The Port of Abidjan (Ivory
Coast) and the Port of Dakar (Senegal) have invested in cargo handling
equipment which permits loading and dispatching operations on both sides
of vessels. Moreover, the IMO suggests the use of basic standard equipment
such as computers and the internet which trained people can operate. Finally,
ports exchange large amounts of information with other members of the
distribution chain. The IMO encourages ports to use the Electronic Data
Interchange system (EDI) to better integrate port operations, manufacturing,
transport and warehousing. The rules of EDI are set by the United Nations
Rules for Electronic Data Interchange for Administration, Commerce and
Transport. A UN/ EDIFACT study demonstrated that the use of EDI in ports
could improve resource savings and customer services.
public port regulations state that as a government entity, the Nouakchott
Port Authority should be owned and operated by the government. However,
the law provides that in the instances when the government commences a
privatization program; private sector participation in state-owned enterprises
is possible. In this manner, the government should initiate a competition
policy that allows the private sector to compete with the public sector
on equal terms. This competition policy should include removal of subsidies,
public loan guarantees and harmonization of tax systems applied to the
state owned enterprises and private enterprises. Investment rules must
protect foreign investors, recognize foreign participation in private
ownership, determine to what extent foreigners can participate in the
privatization of SOEs, and guarantee repatriation of profits and capital.
With regards to labor, law reform is needed to determine the extent to
which private investors can set employee salaries and benefits and hire
and lay off workers. Generally, labor for state owned enterprise personnel
do not favor privatization because public sector employees enjoy special
civil service benefits and the public labor regime is established more
in accordance with sociopolitical than commercial criteria.
legislation, Ordinance no. 97 of April 1996 states that the decision to
transfer ownership assets from the public sector to the private sector
of any state owned enterprise should be made in the Council of Ministers.
Moreover, the ministers should debate the passage of the bill in the bicameral,
Mauritanian parliament. In order for the bill to become law, more than
50% of the votes in both chambers must be acquired.
is a political process that can disrupt various interest groups. Since
ports are sources of public employment, they are vulnerable to political
pressure. Governments are sociopolitical institutions, and it is difficult,
if not impossible, to resist pressures from port labor for protectionist
measures and subsidies. Such pressure is usually justified in terms of
(a) the preservation of national sovereignty; (b) the desire to retain
national autonomy over certain activities; (c) the notion that state ownership
is needed to safeguard the public interest; and (d) the fear that wealth
might become concentrated in the hands of a few private parties.
labor organizations and government branches use collective bargaining
more as a means of redistributing the nation’s wealth (role taxes)
and satisfying political aspirations, than as a means of increasing national
wealth or protecting workers from unhealthy working conditions. This practice
has led to over-staffing, low productivity, high costs and corrupt practices.
If the Nouakchott Port is privatized, the short-term effects on these
interest groups will certainly dominate the political discussion. The
potential social impact of privatization is often calculated in terms
of lost jobs, but excess labor is a problem in itself, caused by poor
public management. It is a problem that would need remedying even in the
absence of privatization. According to Pierre Guislain, social factors
are usually taken into consideration more in the short term than in the
long term job creation generated by a more dynamic system.
In public ports with no private sector participation, state subsidies
have made port workers immune from market mechanisms. Moreover, the government
has established a labor regime that supports port workers’ desire
for jobs and income security. The same regime has given them a monopoly
over port services. As a result, port workers have little commercial incentive
to work efficiently.
After introducing market based port labor reform, port workers are exposed
to the brutality of market efficiency where one’s job and income
is tied to a worker’s value to the firm. Since ports are a crucial
part of Mauritania’s distribution system, efficiency is important.
Consumers (i.e. the brutal market) purchase goods and services where total
costs, including port costs, are lowest. Only by responding to the needs
of these customers can port workers guarantee their jobs and incomes.
Therefore, the goal of port labor reform should be to help workers recognize
that their value in the future will be contingent on their ability to
integrate technical skills into their range of activities. In the long
run, technical sophistication will reverse the affects of initial job
Needs for Commercially Oriented Port Labor Reform:
1- Modern Technology:
Investments in new technology are necessary to make ports efficient and
attractive to shipping companies. For many years, governments in developing
countries have supported labor in the name of job security and sought
to hold back technological innovation.
to the Pacific Maritime Association, loading and dispatching, containerization,
computerization, and telecommunication have revolutionized port operations.
These technological advances have intensified competition between ports.
As a result, port customers have increased commercial pressure on ports
to improve productivity and bring down labor costs.
For example, in the 1950s the handling of dry-bulk cargoes required 20
men for each vessel’s cargo holds. Twenty years later these cargoes
were handled at specialized terminals and much larger cargo could be dispatched
using three men for the entire vessel.
of these technological innovations will satisfy each group of the port
community. Unions seek to maintain high levels of employment and benefits,
carriers seek to reduce vessel time in port, port managers seek to achieve
a reasonable return on investments, and port customer groups seek to reduce
charges and eliminate unnecessary delays.
Corporatization is needed to convert public enterprise organized under
public law into companies organized under private law. The University
of Brussels privatization expert Pierre Guislain has done a fascinating
study entitled “A Strategic, Legal and Institutional Analysis of
International Experience’’ explaining that corporatization
law will not become effective until the status of public enterprises are
amended under the law.
of corporatization are to improve economic performance and enhance port
accountability. Other objectives are: 1) free the port of social and non-commercial
obligations, 2) clearly separate ownership and management of the port,
and 3) empower management to run the port as a commercial entity.
in the Privatization Challenge, corporatization or transformation into
a commercial economy should not be viewed as merely a legal distinction.
Instead, It requires a broad range of restructuring measures, such as
deregulation and financial restructuring.
The objective of deregulation is to attract investors into port operation
activities. For this reason Mauritania’s government should eliminate
rules, regulations, subsidies and sociopolitical obligations that obstruct
participation of the private sector in port activities. The removal of
such obstacles will give private port operators more freedom to respond
to the market mechanism (supply/demand) of the global economy. However,
some regulations are necessary to hedge against anti-competitive behavior.
If deregulation is not accompanied by antimonopoly laws, private terminal
operators may attempt to obtain monopoly control over port operations.
In this case, privatization has failed to serve its purpose.
The role of the antimonopoly commission is to protect customers from monopoly
practices by private terminal operators, exporters/importers associations,
and unions. Moreover, the antimonopoly commission will enhance competition
and will enforce property rights over port zone activity. This commission
will prevent the public sector monopoly from being handed over to private
interests because ports tend to facilitate natural monopolies. Moreover,
the antimonopoly commission will investigate claims of abuses by dominant
firms. Finally, this commission will adopt antimonopoly laws that are
applied to terminal operators and dock labor alike, ensuring that market
mechanisms are used to compete, and not to create cartels.
According to Pierre Guislain, financial restructuring measures require
abolishing discriminatory practices. Discriminatory practices include
such financial privileges as subsidies, tax and customs exemptions, and
state guarantees on borrowing. Financial restructuring also includes abolishing
social services such as health insurance, education, and housing for employee
families. Financial measures will clean up the balance sheet by removing
debt, evaluating assets and liabilities, and arranging new agreements
with financial institutions, especially creditor banks. Generally, the
supervisory group that selects recruits for the new port management team
must be selected from an outside party because former managers may not
possess the required skills or they may not adequately support the restructure.
objectives of Market Based Port Labor Reform:
The first aim of market-based reform should be to preserve competition
while avoiding monopoly control of port services whether by private terminal
operators or labor unions. In the absence of private sector participation,
unions have little incentive to accept market-based reform. Without market
oriented reform, no commercial basis for private sector participation
can be established.
The second aim of market-based reform is to expose dock workers to the
market mechanism of the global economy. Dock worker wages and benefits
will become tied to the interests of port customers and private terminal
operators. Dock workers will adapt to new technology through retraining
programs, which will cut costs and improve productivity. Another objective
of labor reform is to enhance the collaboration between unions and the
private sector on operational problems. With globalization, the commercial
goals of the private sector and social goals of dock workers have become
interdependent. Dock workers are the employees of private terminal operators,
and work with them to solve productivity and cost problems. Terminal operators
seek to motivate dock workers by offering market wages and benefits. This
will enhance the competitiveness of exports on international markets.
based reform commission:
The government should set up a commission to develop a market-based labor
regime. This commission should be composed of officials from the Ministries
of Finance, Trade, Transport and Labor. From the private sector side private
terminal operators, unions, port administrations, and exporters/importers
should also be included. To achieve port labor reform based on consensus,
the commission must listen not only to unions but also to customers and
private terminal operators. The commission should organize seminars and
use the media to convince the union that market-based reform is inevitable,
compensations will be substantial, and that the country will benefit.
Moreover, the committee must encourage a joint committee between unions
and private terminal operators, resolving operational problems and disputes
without government intervention. Finally, the commission must designate
the government as a regulatory body. The market labor reform commission
should also set up training programs, placement services for laid off
dock workers, and early retirement plans. Placement services should be
linked to a worker’s successful completion of training programs
leading to jobs either in the port sector or other industries.
of results of port labor reforms:
Chile: Compensation paid to workers laid off in the Chilean
ports as result of the deregulation amounted to a total of US $30 million.
Payments per worker averaged US $14,300. By 1982 increased productivity
had generated savings of US $40 million. Efficiency benefited port operators,
exporters, importers and carriers. In 1995, the economies with public-sector
ports in Chile increased earnings to US $140 million.
The government of New Zealand implemented a similar privatization scheme,
paying US $28 million to compensate excess workers. By the end of 1990
the direct savings to port customers amounted to US $56 million. For every
job lost in New-Zealand’s docks, the Government estimated that 10
were generated in other sectors by eliminating cost and productivity bottlenecks
caused by the ports.
of Market-Based Labor Reform:
The government should not directly participate in relations between port
labor and private terminal operators. The collective negotiation will
be bipartite (employers-unions) rather than tripartite (unions-government-employers)
because the new relationship between employers and workers should arise
from market-based labor reform. Consequently, the government should abstain
from interfering in port labor relations, except in its capacity as regulators,
owners and investment promoters. The regulatory function of the government
should be confined to establishing and protecting competition, and to
intervening to resolve regulatory disputes. Finally, the government should
no longer yield to the demands of port unions. Port administration should
not participate in port activities as either operators or employers. In
this context, collaboration and trust between port unions and private
terminal operators will be fostered, which will help improve workers wages,
benefits and job security while helping private terminal operators achieve
The adoption of market-oriented port labor reform will expose dock-workers
to world-wide competition. The new labor regime, under privatization,
will transform the old inefficient ports from an institution where workers’
wages dominate competitive considerations into an organization where labor
is a factor of production valued based on its contribution to customer
needs. In this case, the government should no longer be absorbing the
cost of low labor productivity.
In the past, the government reserved the domestic market for national
entrepreneurs and guaranteed jobs and benefits for dock workers without
acquiring new technology, cutting costs or improving productivity. These
policies raised the price of imported products in the national market.
Private terminal operators will no longer compensate dock-workers for
their political value, but by the market determined value of their labor.