Private Finance in Port Investment: The South Pacific Islands

Maritime ports and investments to target their expansion are often deemed by governments not only as an important enhancement of their national assets but also as a means of establishing a gateway to the global shipping network. In the last two decades, ports have grown rapidly to become increasingly specialized, highly capital-intensive, and able to carry out a wide range of value-added activities. The recent financial crisis and the consequent restricted availability to credit highlights a major long-term challenge for port investment, which is how to attract the private sector in the financing of port developments in order to maintain and increase market share while achieving profit margins. Foreign direct investment (FDI) in ports is generally very successful, and effective strategies, particularly in developing countries, where international terminal operators (ITOs) in Africa and South Asia are responsible for over 75 percent of privately handled containers and cargo (Drewry, 2010), are proof positive of this success. But, as observed by UNCTAD (2011), although an attractive option, FDIs are not always simple to implement.