1. Efficient allocation of port facilities
2. Improvement of services and expansion of facilities
3. Introduction of optimal tariff policy from owner, operator, or user point of
4. Support for development of domestic shipping
5. Encouragement of trade in specific imports or exports and/or specific
ship types in the national, regional, or local interest
6. Efficient allocation of cargo within a multi port system
7. Efficient allocation of cargo between modes
8. Maximization of local, regional, and/or national income
9. Optimum financial strategy to meet financial obligations toward lenders,
owners, national, local, or regional communities or combination thereof
10. Maximum total net utility
11. Income distribution
12. Cost reimbursement
1. Meeting the financial costs of the port including the cost of debt
2. Attainment of a specific or maximum achievable return on the assets
employed by the port.
3. Achievement of cash flows that are sustainable and minimize shortterm borrowings.
4.Reserve accumulation to meet contingency, facility maintenance,
technical improvement, and capacity enhancement requirements.
5.Promotion of facility use to assure effective (balanced) utilization of
1. Port operations performance
2. Port cost structure and finances
3. Port user costs and the alternatives available to port users.
4. Cost at competing ports
1. Economic Approach- This usually implies the use of marginal cost pricing . (assumes use
of marginal cost pricing in all related transport activities). Average costs are only equal to
marginal costs when the port operates near capacity, below that level of operation
marginal costs are well under average costs.
2. Financial Approach- This is usually recovery of fixed and variable costs plus adequate
return on investment and working capital employee, generally consistent with an average
cost pricing approach.
3. Impact Pricing Approach- This is usually based on the impact on:
a. A regional- national development
b. An existing level and distribution of economic activity
c. A national economic policy including a policy toward redistribution of wealth
d Some financial resources of government and ability to provide subsidies of alternatively
to reinvest profits
e. An impact of services on users and others and the resulting value of service to users
4. Incentive Pricing.- This usually base on the tariff requirements that will attract users. who
are capable of efficiently using port resources. It is generally designed to encourage
efficient use of r sources, technological improvement, and increased productivity, and
often designed to assure marginal ability to pay at accrued benefit pricing.
The formulation of goals
The development of pricing strategies
The accounting for the costs to the port of
providing resources and services.
The determination of the productivity of port
resources in performing different activities.
The estimation of costs to port users and the
effects of competition on the demand for port
Formulation of goals
Preparation of strategies
Revision of tariff items
Related to fixed costs
Revision of tariff items
Related to variable costs
Analysis of costs
To port users
Revision of demand forecast
Revision of tariffs
Developed tariff formulation process
They demand on port ownership, port control. port development,
the role of the port, and more. The most common port investment
objective is probably “economic efficiency”, which can be
expressed or measured in terms of the following1.Discounted net national, regional, or local benefits such as income
generated by particular port investment alternatives.
2.Transportation cost savings, and the resulting impact on
transportation costs of trade and services.
3.Indirect economic benefits including secondary and multiplied
4. Impact on direct and indirect employment or unemployment
5. Impact on local, regional, or national economic growth.
Equity objectives are usually much harder to measure than economic
efficiency because it is often difficult to define regions or classes and to
Another objective of increasing importance can be defined as the
environment quality objective, which is usually measured in terms of the
percent change in environmental quality parameters such as:
1. Air, water, noise (etc.) pollution
3. Impact on recreational opportunities
4. Safety (employees, users, community)
6. Flexibility to respond to changing requirements
8. Community acceptance
1. Minimizing ship turnaround tune in port
2. Maximization of port facility and resource utilization
3. Maximization of port throughput in terms of ship and cargo traffic
4. Minimization of port costs per unit throughput or per unit time
5. Maximization of port surplus (profit)
6. Minimization of port investment risk
7. Maximization of port employment
8. Minimum impact of regional (national) trade competitiveness
Statement of investment objective
Definition of measure of investment success
Description or modeling of investment alternatives
Investment analysis model
Investment evaluation model
1. Standard benefit/cost analysis including internal rate of
return or net present value methods in which financial and
economic benefits and costs of the investment are
2. General consumer surplus or consumer utility analysis in
which we assume, that the public has a diminishing
marginal utility for benefits arising from investment in
projects. Consumer surplus is defined here as the
difference between the amount the public is willing to pay
and actual cost.
3.Maximization of the expected value of utility of an
alternative investment chosen from among a choice of
1. A set of available alternative investments decisions.
2. The status and possible actions of competing ports.
3.Empirical and subjective data from observation estimates
subjective - judgments, surveys, and the like.
4.Performance of alternatives in terms of capacity, service,
benefits, or outcomes resulting from selections from
among the alternatives.
5.Sets of decision strategies including constraints or limits
or limits in both range, number of decisions, and
sequence of decisions.
6.Objectives or criteria for effective decision making, as
either a quantifiable criterion such as maximum profit or
benefit or maximum utility. The objective may also be
conditional or it may itself contain uncertainty
2. Adversity and other factors relating to opposition
4. Human relation
5. Political and regulatory
7. National and international relations
8. Resource availability
1. Function Variables
Port service and labor
2. Structural Variables
such as: .
3. Environmental Variables
Local, national, and
including rate regulation
Agency and other ruling
4. Competition Variables
Competing ports and
Competing rates and
5. Market Variables
6. Macro environmental
7. Resource Variables
Staff availability and training
Port ownership – public or private
Port’s current and future development and investment
Size of the investment required
Expected return from port capital investment and the
debt capacity the port can carry.
Expected growth rate in port demand and associated
uncertainty and risk.
Costs and benefits, terms and provision of available
financing methods and their relative effect on the
degree of control of port management over its
Internal rate of return (IRR)
Net present value (NPV)
Pay back period (PP)
Accounting rate of return (ARR)
Capital recovery factor (CRF)
Minimum average annual coat (AAC)
Present Worth (PW)
Equated interest rate of return (EIRR)