Strengthening Ukraine’s port sector governance. The World Bank report

STRENGTHENING UKRAINE’S
PORT SECTOR GOVERNANCE
CONSOLIDATING CONTROL OVER PORT LAND USE AND
MOVING TOWARDS A CONTEXTUALIZED LANDLORD
MODEL: GLOBAL EXPERIENCE AND OPTIONS
FOR UKRAINE

STRENGTHENING UKRAINE’S PORT
SECTOR GOVERNANCE
CONSOLIDATING CONTROL OVER PORT LAND USE AND
MOVING TOWARDS A CONTEXTUALIZED LANDLORD
MODEL: GLOBAL EXPERIENCE AND OPTIONS
FOR UKRAINE
Kyiv, 2020

Strengthening Ukraine’s Port Sector Governance2
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Strengthening Ukraine’s Port Sector Governance 3
Table of Contents
Acknowledgements�� 6
Executive Summary�� 7
1. Ukraine’s Maritime Ports Sector in Context�� 9
1.1. The case for reform�� 15
2. The Landlord Model: Concept, Application, and Future Direction�� 18
2.1. The landlord model and port land ownership�� 18
2.2. The landlord model applied in the world�� 19
2.2.1. Europe�� 20
2.2.2. North America�� 20
2.2.3. Latin America�� 21
2.2.4. Africa�� 22
2.2.5. Asia�� 22
2.2.6. Oceania�� 23
2.3. Evolution of the landlord model and autonomy of port authorities�� 24
3. International Experience on Gaining Uniform and Legitimate Control over Port Lands�� 27
3.1. Ways to gain control�� 27
3.2. Forms of control�� 29
3.3. Ways to legitimize control�� 31
3.3.1. Impact assessment�� 31
3.3.2. Revenue sharing�� 32
3.3.3. Representation in governance�� 32
3.4. Land governance in ‘new’ EU member states�� 36
3.4.1. Romania�� 38
3.4.2. Bulgaria�� 38
3.4.3. Slovenia�� 38
3.4.4. Croatia�� 39
3.4.5. Poland�� 39
3.4.6. Latvia�� 40
3.4.7. Lithuania�� 40
3.4.8. Estonia��41
3.4.9. Implications and lessons learned��41

4. Options to Consolidate Land Use Control within the Legal Framework of Ukraine�� 42
4.1. Categories of port land�� 42
4.2. Suitable forms of control over port land�� 43
4.2.1. Right of trusteeship�� 44
4.2.2. Industrial parks�� 45
4.2.3. Comparison�� 46
4.3. Legal matters related to land use planning and land acquisition�� 47
4.3.1. Special status of the port area�� 47
4.3.2. Status and mission of the port authority�� 48
4.3.3. Coordination of land use�� 49
4.3.4. Preemptive right to purchase land�� 50
4.3.5. Purchase of private lands for port needs��51
4.3.6. Expansion of ports�� 52
4.3.7. Regulation of water bottoms�� 53
4.4. Conclusions�� 54
5. A Possible Reform Pathway for Ukraine’s Port Sector�� 55
5.1. Definition of strategic port areas�� 56
5.1.1. Define and legally adopt the boundaries of port lands�� 56
5.1.2. Distinguish between ports of strategic importance and secondary ports�� 57
5.1.3. Consider potential clustering of strategic ports�� 58
5.2. Consolidation of management/control over strategic ports�� 59
5.2.1. Map out current ownerships and land use of strategic ports.......................................................... 59
5.2.2. Choose the framework to consolidate management/control over strategic ports�� 59
5.2.3. Identify the net benefits of consolidating management/control�� 60
5.3. Governance of the strategic port areas�� 60
5.3.1. Choose the tool to transfer control of strategic port areas to port authority�� 60
5.3.2. Decide on the level of centralization�� 60
5.3.3. Adjust the governance of the port authority�� 60
6. Conclusions�� 63
7. References�� 65
8. Annex: Overview of Legislation Applicable to Land in Ukrainian Seaports�� 68

List of Figures
Figure 1.1. Global exports of coarse grains and wheat, marketing year 2018-2019*�� 9
Figure 1.2. Ukraine’s average annual corn and wheat exports, 2005-10 vs. 2015-2020F�� 10
Figure 1.3. Ukraine’s top-10 corn export markets, 2005 vs. 2017�� 10
Figure 1.4. Ukraine’s containerized maritime port throughput, 2004-2017.��11
Figure 1.5. 2017 Brazilian and Turkish income per capita and containerized maritime
port throughput relative to that of Ukraine��12
Figure 1.6. Four main port administration and governance models in the international experience��13
Figure 1.7. Current land ownership and control arrangements at the Pivdennyi sea commercial port�� 14
Figure 3.1. Port authority ownership of port land in Europe�� 29
Figure 5.1. Reform phases�� 55
Figure 5.2. USPA land use database and GIS visualization tool: Screenshots�� 56
Figure 5.3. European container multi-port gateways�� 58
List of Tables
Table 1.1. BIMCO’s five best-performing dry bulk ports in the world in 2018�� 16
Table 2.1. Port operational models�� 19
Table 2.2. Key features and benefits of corporatized port authorities�� 24
Table 2.3. International experience with the landlord model�� 26
Table 3.1. Options to gain uniform and legitimate control over port land�� 27
Table 3.2. Potential positive and negative impacts of port development�� 31
Table 3.3. Comparison of supervisory board composition in core European port authorities�� 32
Table 3.4. Governance features of ports in recent EU member states�� 36
Table 3.5. Operational and financial indicators of ports in recent EU member states�� 37
Table 5.1. Hierarchies in national port policies�� 57
Table 5.2. International examples of port clustering�� 59
Table 5.3. Corporatization reform agenda items�� 61
Table A2: Comparison of the trusteeship and lease models by land ownership type�� 69

Acknowledgements
This report was prepared by a World Bank team led by Gözde Isik (senior transport economist) and Luis C. Blancas
(senior transport specialist) with inputs from Patrick Verhoeven (lead port consultant, International Association of
Harbors and Ports), Andrii Pidhainyi (senior legal consultant, AGRECA Law Firm), Andrii Shkliar and Alexandr
Pidlisnyi (GIS component development and design, Center for Transport Strategies), and John Arnold (U.S.
Department of the Treasury).
The team benefited greatly from the comments of World Bank peer reviewers Kavita Sethi (senior transport
economist) and Ninan Oommen Biju (senior port specialist).
The team is grateful for the guidance provided by Satu Kähkönen (country director, Ukraine), Karla Gonzalez
Carvajal (transport practice manager, Europe), Juan Gaviria (former Transport Practice manager, Europe),
Baher El-Hifnawi (program leader, Infrastructure and Sustainable Development), and Fiona Collin (lead transport
specialist).
Finally, we extend our gratitude to the Minister of Infrastructure of Ukraine, Vladyslav Krykliy, and the Ukraine’s
Minister of Infrastructure in 2016-2019, Volodymyr Omelyan, for their leadership and support, and to our counterparts
at the Ukrainian Sea Ports Authority (USPA) Raivis Veckagans, Volodymyr Shemayev, and Olga Komorova for
fruitful discussions, consultations, ideas, organization of joint workshops, and access to data and information.

Executive Summary
Ukraine is a maritime nation of systemic importance to the rest of the world. . It is the world’s second-
largest exporter of coarse grains—primarily corn—and the fifth-largest exporter of wheat. These are commodities
on which many countries, particularly in North Africa and the European Union (EU), but also, increasingly, in
East Asia, depend on for basic food security and food production. Ukraine is also an important global supplier in
other edible and mineral bulk markets. Ukraine’s key grain exports have grown remarkably over the past 10 to 15
years and have diversified in market reach. Recent growth in Ukraine’s containerized throughput is encouraging
suggests containerized trade will continue on a growth path.
The long-term sustainability of Ukraine as a supplier of basic commodities and, increasingly, as an
importer and exporter of containerized goods, depends to a large extent on its ability to deliver sufficient
and adequate maritime port connectivity, including on the water side, terminal side, and land side. This
in turn depends on Ukraine’s ability to plan the development of ports in a way that incentivizes the efficient use
of land, balances private sector interests with public sector (i.e., societal) interests, and promotes private sector
investment through the reduction of avoidable risks.
In the international experience, the most widely adopted sectoral governance mechanism to empower the
state to manage the port sector in a way that achieves the above goals is the landlord port model—properly
contextualized to reflect each country’s national and subnational goals and aspirations, institutional and
legal landscape, long-established sectoral practices and norms, and national risk profile. In its simplest
form, the landlord port model is based on two tenets: (i) a public port authority that owns or otherwise exerts unified
control over the use of port lands, plans integrated port development on this basis; and (ii) one or more private
(or corporatized) terminal operator who assumes certain risks and responsibilities under a concession or lease
agreement and is responsible for day-to-day port operations subject to well-defined operational requirements and
legally binding risk allocation stipulations.
Ukraine is a port governance outlier among major maritime nations. Ports are in practice an amalgamation
of fragmented actors lacking—and, therefore, not subject to—integrated public sector oversight.
Lack of consolidated land ownership and land use in sea ports of Ukraine (case of the sea port of Pivdennyi)
Publicly-owned land, most of it
subject to long-term leases to
private terminal operators in
combination with ad-hoc
agreements (with USPA) for the
use of berths and, in some cases,
separate ad-hoc agreements on
rights-of-way for hinterland links
(also through USPA)
Fragmented small-scale land plots
owned by individuals, which can prevent
consolidated use of land for more
productive purposes given the economies
of scale eﬀects of cargo consolidation
in logistics (particularly bulk logistics)
Publicly-controlled access to berthing
areas fronting privately owned and
operated landPrivately owned and
operated land

This matters because a lack of well-defined sectoral governance for maritime ports, and especially a lack
of alignment with international good port governance practice in a contextualized manner, generates
otherwise avoidable risks that (a) increase the cost of doing business and the private cost of capital to
investors, and (b) reduce the port sector’s economic returns to Ukraine as a nation, which could otherwise
be mitigated through consolidated control of ports in a corporatized port authority and through port authority
managed concession agreements. The current situation is also costly in that it constrains and limits Ukraine’s
national port authority’s (Ukrainian Sea Ports Authority – USPA) ability to strengthen its own institutional capacity
in line with that of leading port authorities elsewhere.
While current private sector interest in Ukraine’s port sector appears to be strong—in effect reducing
the sense of urgency for reform—the benefits accruing to investors/terminal operators, the state (at the
national and subnational level), shippers (importers and exporters), and the economy as a whole from
the development of seaport infrastructure and the delivery of handling services would be larger, more
sustainable, and subject to less risk if the USPA was empowered as a (de facto) landlord port authority
than under current arrangements.
A transition to a contextualized landlord port governance model can empower the state to:
• Conduct planning of port infrastructure and service delivery at the port and network level;
• Enhance connectivity and reduce logistics costs;
• Better integrate urban ports with the cities (and citizens) that host them, which would make the port system
more sustainable and economically impactful; and
• Strengthen the financial prospects of individual investments.

1. Ukraine’s Maritime Ports Sector in Context
Ukraine, a lower-middle-income country of 45 million people, is a bulk freight maritime exports powerhouse of
systemic importance. It is the world’s second-largest exporter of coarse grains1
and the fifth-largest exporter of
wheat, accounting for 17 percent and 9 percent, respectively, of the world’s exported tonnage of these commodities
in marketing year 2018-2019 (Figure 1.1). Beyond grains and wheat, Ukraine is a significant exporter of several
other bulk commodities. In tonnage terms, in 2017 Ukraine accounted for 2.5 percent of global exports of iron ore,
3.5 percent of global exports of gravel, 12 percent of global exports of semi-finished iron products, 35 percent of
global exports of non-kaolinic clays, 46 percent of global exports of sunflower seed oil, and 9 percent of global
exports of rapeseed.
As such, Ukraine is a major supplier of bulk commodities to the rest of the world, and these commodities are
overwhelmingly transported via sea freight. Any disruption to Ukraine’s ability to bring these supplies to market via
its network of maritime ports can lead to reductions in the industrial output, and to stockouts in the food, consumer
goods, and animal feed supply chains of Ukraine’s main trading partners. This is a particularly pressing risk in the
case of edible dry bulk exports—e.g., coarse grains and wheat—on which many countries in North Africa, the
European Union (EU), and, increasingly, East Asia, depend as a basic matter of food security and food production
continuity. In short, Ukraine’s role as an intercontinental supplier of basic commodities to the rest of the world is
unique, particularly in relation to its (still) relatively small economic size and income per capita, and much of this
function ultimately depends on the sufficient availability of operationally adequate maritime gateways. As such,
enhancing the operational and institutional resilience of Ukraine’s maritime ports sector is an issue of global, not
just national or even regional, relevance.
Figure 1.1 Global exports of coarse grains and wheat, marketing year 2018-20191*
Millions of metric tons
Coarse Grains
* Marketing year refers to October-September for coarse grains and July-June for wheat.
Source: USDA, World Bank analysis
1
Corn, barley, sorghum, oats, and rye. Corn accounted for approximately 87 percent of Ukrainian exports of coarse grains
in the 2018-2019 marketing year.
21%23%
13% 13%
15%6%
9%
17%
16%
16%
4% 30%
17%
World exports = 201 World exports = 178
All others All others
Australia
Russia
Russia
Brazil
Argentina
U.S.
U.S.
Ukraine
Ukraine
Canada EU(87% of which corn)

Ukraine’s grain exports have grown at a rapid pace over the past 10 to 15 years and have diversified in market reach,
both of which bode well for the sector’s ability to attract private investment and gain in competitiveness. While grain
export volumes of any country fluctuate annually depending on weather patterns, soil conditions, seed quality, and
the like, comparing Ukraine’s annual average export volumes of corn and wheat between the 2005-2010 and 2015-
2020 (forecast) periods reveals a remarkable story of growth in the country’s agricultural and export output: exports
of corn are seven times larger today than they were in the second half of the last decade, while exports of wheat are
nearly three times as large (Figure 1.2).
The accompanying diversification of trading partners is equally remarkable. Taking corn as an example, Ukraine’s
corn exports today reach 68 countries, compared to 34 countries—or exactly half the current market reach—in
2005. Whereas in 2005, Ukraine’s top 10 destination markets accounted for 87 percent of total corn exports, today
that share has decreased to 80 percent. And whereas in 2005, North African and the Middle Eastern countries were
among Ukraine’s largest trading partners for corn, today the EU has emerged as a major destination (in addition to
the historically traditional markets of North Africa and the Middle East) as well as China (Ukraine’s first-ever export
shipment of corn to China took place only in 2013) (Figure 1.3). This solid track record of commercial diversification
and volume growth, combined with the expectation of future increases in Ukraine’s agricultural yields—which remain
a fraction of those in the EU—and sustained global demand for this output, makes Ukraine’s dry bulk sector attractive
to private investment.
Figure 1.2 Ukraine’s average annual corn and wheat exports, 2005-10 vs. 2015-2020F
Source: USDA, World Bank analysis
Figure 1.3 Ukraine’s top-10 corn export markets, 2005 vs. 2017
Source: UN Comtrade, World Bank analysis
2005-2010
2015-2020F
Corn Wheat
3.2
6.7
22.5
17.8
7.0x
2.7x
2017 total top-10 = 15.62005 total top-10 = 2.4
0.5 2.8
2.6
2.2
1.2
1.0
0.8
2.0
1.7
0.3
0.3
0.2
0.2
0.2
0.2
0.2
0.2
0.1 0.7
0.7
Netherlands
Egypt
Egypt
Spain
Spain
Belarus
Algeria
Syria
Tunisia
Libya
China
Italy
Israel
Israel Iran
Iran
Russia
Tunisia
Portugal
Turkey

Ukraine’s containerized port throughput remains relatively low by international standards, but the country’s
development trajectory suggests that sustained volume gains in containerized trade are likely through at least the
medium term. Ukrainian ports handled 850,000 TEUs in 2018, which was still below the 1.1 million TEUs handled
in 2008 (an all-time high for Ukraine), before the onset of the 2009 global economic crisis. But Ukraine’s income per
capita—US$3,000 at market rates in 2018—is also relatively low, and international experience in middle-income
countries shows that as per capita incomes rise so will containerized volumes (Figure 1.4).
For example, Brazil and Turkey, a major dry bulk exporter and a regional peer to Ukraine, respectively, are both
upper-middle-income countries with about the same income per capita at market rates (between 3.7 and four times
that of Ukraine) and about the same level of containerized throughput (about 14 times that of Ukraine) (Figure 1.5).
The evolution of these countries points to the likely long-term evolution of Ukrainian containerized trade as Ukraine
transitions from lower-middle-income to upper-middle-income status. More recently, containerized volumes grew
at an average annual rate of 21 percent during the 2015-2018 period (not far from the 30 percent average annual
growth rate of the pre-crisis 2004-2008 period), coinciding with a cyclical recovery in the Ukrainian economy as
well as a cyclical recovery in global container shipping. Throughput growth is expected to continue in the short
term, through at least 2024.
Figure 1.4 Ukraine’s containerized maritime port throughput, 2004-2017
Millions of TEUs
Ukraine: GDP per Capita at Market Rates, 2004-2017
US$ thousands
Source: IMF; World Development Indicators; Journal of Commerce; World Bank analysis and research
’04 ’05 ’06 ’07 ’08 ’09 ’10 ’11 ’12 ’13 ’14 ’15 ’16 ’17 ’18
1.2
1.0
0.8
0.6
0.40
0.58
0.73
0.99
0.52
0.70
0.81 0.81 0.79
0.66
0.48
0.59
0.71
0.85
1.12
1.4
1.8
2.3
3.1 3.1 3.0
2.1 2.2
2.7
3.0
3.6
3.9 4.03.9
2.6
0.4
0.2
0
’04 ’05 ’06 ’07 ’08 ’09 ’10 ’11 ’12 ’13 ’14 ’15 ’16 ’17 ’18
4.5
4.0
3.5
3.0
2.5
2.0
1.5
1.0
0.5
0
2009 global economic
crisis and aftermath
Height of conﬂict with
Russia and impact from
global freight recession
’04 ’05 ’06 ’07 ’08 ’09 ’10 ’11 ’12 ’13 ’14 ’15 ’16 ’17 ’18
1.2
1.0
0.8
0.6
0.40
0.58
0.73
0.99
0.52
0.70
0.81 0.81 0.79
0.66
0.48
0.59
0.71
0.85
1.12
1.4
1.8
2.3
3.1 3.1 3.0
2.1 2.2
2.7
3.0
3.6
3.9 4.03.9
2.6
0.4
0.2
0
’04 ’05 ’06 ’07 ’08 ’09 ’10 ’11 ’12 ’13 ’14 ’15 ’16 ’17 ’18
4.5
4.0
3.5
3.0
2.5
2.0
1.5
1.0
0.5
0
Світова економічна криза
2009 р. та її наслідки
Пік конфлікту з РФ
та вплив світової рецесії
вантажних перевезень

Figure 1.5 2017 Brazilian and Turkish income per capita and containerized maritime port throughput
relative to that of Ukraine
Source: World Development Indicators; IMF; World Bank analysis and research
Achieving and, more importantly, sustaining the above developments over time is dependent upon sufficient
and adequate availability of maritime port cargo and vessel handling capacity, and the associated road, rail, and
inland waterway hinterland connectivity capacity to and from ports. To date, Ukraine’s installed port handling
capacity, particularly for the grain trade, has been sufficient to accommodate past export growth. The current
national weighted average terminal capacity utilization stands at an estimated 60-65 percent (indeed signaling
mild overcapacity). However, sustaining this going forward will require capacity expansion in terminals, in berthing
areas, in multimodal hinterland connectivity linkages (primarily rail), in marine access channels, and in inland
waterway connections that should be pursued network-wide but in a targeted, demand-driven manner, at the
commodity, regional, and/or operation type level (e.g., edible bulk vs. non-edible bulk vs. containerized cargo;
across different geographies; and between common-use and dedicated terminals). As volumes continue to
increase and additional capacity comes online to match these volume surges, the complexity of the port logistics
system will increase in tandem, necessitating a step change in planning, decision making, and investment support
capacity at the institutional level in national and sub-national governments.
The challenge is that the existing governance model of Ukraine’s maritime ports sector is both an outlier in the
international experience and unlikely to generate as much economic benefit going forward as it could under more
robust arrangements. Most ports in the world can be classified according to their governance model into one of
four categories (Figure 1.6): (i) public service ports, where the state both owns or otherwise controls the use of
port lands, infrastructure, and supra-structure and provides handling services (the Slovenian port of Koper is an
example); (ii) tool ports, where the state owns or otherwise controls the use of port lands, infrastructure, and supra-
structure but outsources handling services to private sector operators (the Bangladeshi port of Chittagong is an
example); (iii) landlord ports, where the state owns or otherwise controls the use of port lands, and transfers the
right to develop port super-structure (and sometimes infrastructure as well) and contracts cargo handling services
to the private sector or corporatized operators on the basis of long-term arrangements (typically a concession
agreement) (the ports of Singapore and Rotterdam are examples); and (iv) private ports, where private investors own
port lands, infrastructure, and super-structure, as well as provide handling services (the British port of Felixstowe
is an example). Among these four governance models, the most dominant by far in the international experience
is the landlord model. For example, it is estimated that nearly 90 percent of the world’s container terminals are
organized as landlord ports, with a public port authority and private container terminal operators functioning under
concessions or long-term leases. Notably, all four of these models assume (i.e., take for granted) that there is
consolidated land use control and planning in either a public port authority (in the case of public service, tool, and
landlord ports) or a private entity (in the case of private ports).
12x
14x
16x
10x
8x
6x
3.7 4.0
14.1 14.0
4x
2x
0
Brazil
Turkey
Income per capita
relative to Ukraine
TEU throughput
relative to Ukraine

Figure 1.6 Four main port administration and governance models in the international experience
Nature of private sector involvement
Source: World Bank Port Reform Toolkit; World Bank analysis
Ukraine’s current system of port governance does not fall neatly into any one of these categories. It defies
straightforward categorization and, more fundamentally, it lacks unified control of land use and land use planning
at a designated entity. To date, Ukrainian ports are managed and operated in a highly fragmented manner.2
The
2013 Law on Seaports of Ukraine meant to bring more coherence in the system by establishing a national port
authority—the USPA—with local branches and striving towards a landlord model. That ambition has so far failed
because the competencies of the USPA include only some control over berthing areas, typically no control over
backup cargo handling areas, and only indirect influence over hinterland connectivity interfaces with road, rail, and
inland waterways.
Port lands in Ukraine are owned and controlled by several parties, including state-owned companies, regions,
municipalities, and private companies (see Figure 1.7 for an illustration of this at Pivdennyi, Ukraine’s largest and
deepest maritime port); the USPA has little means to coordinate planning, and as such it is in practice neither an
authority nor a landlord. This makes the system prone to deploy over-capacity and produce an overly fragmented
terminal basis. There is no explicit linkage between port operations and Ukraine’s national and sub-national
government goals and there are land-based barriers to improving hinterland connectivity, which appear to be the
binding constraint of Ukraine’s logistics system at present.
2
See Annex 1 for an overview of Ukraine’s port sector composition and governance challenges.
Public service port
Tool port
Landlord port
Private port
U.K.
Hong Kong,
Australia
Singapore
Chittagong,
Bangladesh
Koper,
Slovenia
Most ports
(e.g., Northern Europe,
North America)
Low
LowHigh
High
Publicsectorrisk
Public sector risk
Works and services
contract
Operations and
maintenance
Concession
agreement
Full
privatization

Figure 1.7 Current land ownership and control arrangements at the Pivdennyi sea port
Source: USPA GIS system tool; World Bank analysis
Under the current fragmented environment, the USPA has only (some) control over berthing areas, typically no
control over backup cargo handling areas, and only indirect influence over hinterland connectivity interfaces with
road, rail, and inland waterway access. Most existing land leases came about through unsolicited private sector
proposals rather than as a result of planned development. Leases lack operating agreements and do not include
performance criteria that are typical for concession agreements. Many of them are long-term in nature (up to
49 years) which implies that there are locked-in arrangements that are de facto barriers to a shift in the sectoral
governance and to the viability of long-term planning of the port network.
It is the USPA’s stated goal to change this picture through sectoral reform, for the benefit of the system as a
whole, with the deployment of proven tools that can help balance private sector and public sector interests—such
as international-standard competitive concession agreements under public oversight. Like most countries in the
EU, and a number of maritime economies in Asia and Latin America, have done over the past three-to-four-plus
decades, Ukraine is in a period of transition in the way the governance of the port sector is organized, from a
current mixed network of public service ports and privately held port lands, to a planned network of landlord ports.
However, a lack of port area land use control—not to be confused with ownership—bestowed upon the USPA and
its local branches prevents it from conducting land use planning, which in turn prevents the USPA from structuring
competitive concession agreements (especially for greenfield investments) as the lead agency, thus generating
avoidable risks to would-be investors. Further complicating the picture is that, as a state-owned company, the
USPA generally lacks functional and financial autonomy. The USPA currently transfers approximately 75 percent of
its income to the national government budget, which has consequences for both sectoral governance and national
logistics costs.
Publicly-owned land, most of it
subject to long-term leases to
private terminal operators in
combination with ad-hoc
agreements (with USPA) for the
use of berths and, in some cases,
separate ad-hoc agreements on
rights-of-way for hinterland links
(also through USPA)
Fragmented small-scale land plots
owned by individuals, which can prevent
consolidated use of land for more
productive purposes given the economies
of scale eﬀects of cargo consolidation
in logistics (particularly bulk logistics)
Publicly-controlled access to berthing
areas fronting privately owned and
operated landPrivately owned and
operated land

1.1. The case for reform
Ukraine’s ongoing ability to deliver maritime (export) volumes at above-average growth rates in a fairly consistent
manner means there will be private sector investment interest in Ukraine’s maritime ports sector over at least the
medium term, irrespective of any reform effort. This is already illustrated by a long list of unsolicited investment
proposals and ongoing investment projects in some of the main Ukrainian seaports. For example, since the end
of 2016, the global container terminal operator Hutchison Ports Holdings (HPH) has signed a Memorandum of
Understanding with the Ukrainian government to operate container terminals at Chornomorsk Port via a long-
term lease; Posco Daewoo has taken a majority stake investment in a joint venture to develop and manage a grain
terminal at Mykolaiv seaport; and the multinational trader Cargill, in joint venture with Ukraine-based MV Cargo,
has developed a state-of-the art US$150-million grain handling terminal at the port of Pivdennyi. In addition, the
bidding process for two pilot public-private partnership (PPP) transactions to privatize, via long-term concessions
(the first such transactions in Ukrainian seaport history), the state-owned stevedoring companies Stevedoring
Company Olvia and Kherson Commercial Sea Port, at the ports of Olvia and Kherson, respectively, are ongoing as
of the time of writing and generating keen investor interest. Between 2013 and 2018, the share of national maritime
port throughput handled by state-owned stevedoring companies declined by 17 percent and today stands at 24
percent of total throughput.
However, the benefits from port development and operations accruing to investors and terminal operators;
cargo interests; national, regional and local governments; and the economy as a whole would be larger, more
sustainable, and subject to less risk if the Ukrainian seaport system would be managed and operated according
to a contextualized landlord model of port sector governance. This would strengthen planning, reduce perceived
sectoral risk, facilitate the delivery of integrated multimodal logistics services, and motivate collaboration in the
supply chain.
This report intends to outline feasible options for a sectoral reform process that can apply a contextualized landlord
model to Ukrainian ports in line with international state-of-the-art practice—and put such a process in its proper
national and international context. It also intends to highlight how unique, in the international experience, Ukraine’s
port sector governance case is, particularly for an exporter country of systemic importance. Reform matters
because it stands a chance to empower the state to:
• Conduct planning of port infrastructure and service delivery at the network level, which would allow Ukraine
to better prevent supply-demand mismatches and make strategic decisions in a way that balances public and
private sector goals;
• More effectively connect ports with their serviced hinterlands through roads, rail, and inland waterways;
• Better integrate urban ports with the cities (and citizens) that host them; and
• Strengthen the financial prospects of individual investments and thereby more effectively attract private
investment by better managing competition risk, legal risk, environmental and social risks, and other risks that
should be primarily borne by the state.
The above functions are the hallmark of most effective landlord ports in the world. As such, the pursuit of this
reform effort, while ambitious for Ukraine at this point in its development trajectory, merely intends to bring Ukraine
in line with some of the most common practices in port sector governance globally. The outcomes that can be
expected from the adoption of a contextualized landlord model of port sector governance in Ukraine have been
well illustrated in the international experience. For example, taking the ports that at least by one source3
are
considered the best performing dry bulk ports in the world, (a) they all are managed under the landlord model, and
(b) they all applied the landlord model in a contextualized manner, tailored to their local environment, and national
and subnational goals, practices, and aspirations (see Table 1.1).
3
BIMCO (Baltic and International Maritime Council) Dry Bulk Terminals Vetting Report 2018. BIMCO is the world’s largest international
shipping association, representing shipowners, operators, managers, brokers, and agents.

Table 1.1 BIMCO’s five best-performing dry bulk ports in the world in 2018
BIMCO’s Best Performing Dry Bulk Ports in the World in 2018
Port Rank
Governance
model
Nature of port authority organization
Szczecin,
Poland
1 Landlord port • Public local port authority (responsible for two ports,
Szczecin and Swinoujscie sea ports)
• Private provision of terminal storage and handing
services
Quebec,
Canada
2 Landlord port • Public local port authority
Newcastle,
Australia
3 Landlord port • Private company acts as a landlord under the
overall oversight of the Port Authority of New South
Wales, a state-owned corporation
services
Gladstone,
Австралія
4 Landlord port • State-owned company («port government owned
corporation») acts as port authority, landlord,
and (partial) operator of Gladstone and two other
ports in Queensland state
Cienaga,
Colombia
5 Landlord port • National Port Authority acts as landlord
• Private operation of ports via long-term port-spicific
consessions: ports lands designated as such by the
state
Source: BIMCO (Baltic and International Maritime Council) Dry Bulk Terminals Vetting Report 2018; World Bank analysis and research
The two critical elements in the reform process are the establishment of unified control over the port estate and the
transformation of the USPA, through not only legal but also institutional means, into a landlord port authority with
full-blown competencies and tools to increase the competitiveness of the Ukrainian port system. The focus will be
on how to consolidate and legitimize the USPA’s control over port land in Ukrainian seaports so that it can exercise
power as a landlord port authority. As most leading ports in the world have obtained unified control over port land
some time ago and since the dispersed situation of Ukraine is rather unique, the number of successful cases that
provide straightforward comparison is very limited. We, however, found inspiration in port expansion projects, port
cooperation initiatives, and port-city relations management. These are typically characterized by conflicts related
to fragmented ownerships, autonomy, and access and usage rights that are at the core of the Ukrainian case. We
use examples from around the world, with a relatively strong focus on the EU. This approach is justified by the
fact that the experience with the landlord concept is historically most widespread in Europe and that Ukraine has
an Association Agreement with the EU. Finally, we want to frame the consolidation of control over port land in a
broader reform pathway that includes a discussion on decentralization of non-strategic ports and clustering of
certain strategic ports.

The structure of the rest of the report is as follows:
• In Chapter 2 we briefly revisit the landlord concept, sketch its current application in some of the world’s leading
port countries and regions, and highlight its evolution and impact on the role of port authorities;
• Chapter 3 addresses the principal question of control over port land from the perspective of the international
experience, including ways to gain control, forms of control, and ways to ensure control over port land is
legitimized. These are illustrated with practical examples, including an overview of port land configurations in
EU countries that, like Ukraine, transitioned from closed to open economies;
• In Chapter 4 we compare the theoretical options to consolidate land use control with the possibilities provided
under Ukraine’s legal framework;
• Chapter 5 sketches a possible reform pathway for Ukraine, embedding the land-control question as one of the
steps in a broader process; and
• Chapter 6 concludes.

2. The Landlord Model: Concept, Application, and Future
Direction
The landlord model is a concept that found its roots in the larger ports of northwest Europe and saw widespread
application in the slipstream of containerization, which called for private sector investment and know-how that
publicly owned port authorities could not deliver. Port reform programs in the 1980s and 1990s introduced the
concept worldwide and it was also strongly promoted by the World Bank. Today it has become the norm in most of
the larger cargo ports. The concept is, however, applied in various ways and has also seen innovation over time.
In this section we will first revisit the landlord model and compare it with the notion of port land ownership. We will
then provide a snapshot of its current application in some of the world’s leading ports. Finally, we will discuss the
evolution of the concept and the implications for port authorities.
2.1. The landlord model and port land ownership
In most countries, port management is confined to a port authority. The term “port authority” implies a specific,
i.e., public, form of port management, but it is used generally as the generic term for the body with statutory
responsibilities that manages, exploits, and develops a port’s water and land-side domain, regardless of its
ownership or legal form (De Monie 2004).
Port authorities can assume four functions, namely those of landlord, regulator, operator, and community
manager. The latter function has both an economic and societal dimension and is essentially a coordinating role
of stakeholder interests. Port authorities can extend these functions beyond the local port level, creating regional
and global networks (Verhoeven 2015).
Irrespective of whether the port authority owns the port land or manages the land on behalf of a national or local
government, the landlord function consists of a number of common elements, i.e., the management, maintenance,
and development of the port estate; the provision of infrastructure and facilities; as well as the conception and
implementation of policies and development strategies linked to the exploitation of the port estate (Baird 2000,
Baltazar and Brooks 2001, Van Hooydonk 2003).
The landlord model implies that port authorities are no longer directly involved in the provision of operational
services, but concentrate on their roles as landlords, regulators, and community managers. The main feature
of the operator role consists of the granting and surveillance of concessions, lease agreements, and/or licenses
to independent service providers (Verhoeven 2015). The landlord function can be considered as the principal
function of contemporary port authorities, also when seen from the value chain perspective. Strategically relevant
activities of port authorities that ultimately define competitiveness of their ports include building and maintaining
port infrastructure, operation and exploitation of infrastructure, and the marketing and sale of infrastructure (Dooms
and Verbeke 2007).
The perceived advantages of the landlord model are: a more market-oriented approach to port services, positive
effects on balance sheets of governments, improvements in productivity and financial performance of port
authorities, an overall efficiency of port operations, the attraction of private investment, and the formation of skills
and know-how.
As mentioned earlier, next to the landlord model there are three distinctive additional models generally seen in the
international experience: (i) the public service port, whereby a publicly owned port authority provides all operational
services; (ii) the tool port, whereby a publicly owned port authority not only rents out land and infrastructure, but
also superstructure and some personnel (e.g., crane drivers) to private operators; and (iii) the private service port,
whereby a privately owned port authority provides all operational services. This typology has seen widespread
application among others through the World Bank Port Reform Toolkit (2001). Table 2.1 summarizes the main
features of each model.

Table 2.1 Port operational models
Responsibilities Public service Tool Landlord Private service
Infrastructure Public Public Public Private
Superstructure Public Public Private Private
Port labor Public Mixed Private Private
Other functions Majority public Mixed Mixed Majority private
Source: Based on Brooks and Cullinane (2007)
Coastal areas, including seaports, often rest in public ownership and are treated as «public domain» or «commons».
But rather than being «collectively owned or managed by all of its users» like «true commons», coastal areas are
often owned and regulated by the state or the state’s agencies at various scales or forms of governance, for the
benefit of the public and under constitutional and regulatory limitations. Full privatization remains exceptional for
the time being. It exists in the United Kingdom, Australia, and New Zealand and is emerging in Latin America.
It should be noted that even in these countries, the land is often given in a very long-term lease or concession.
Generally, it is still the government (state or city) that owns port land. Ports are public infrastructure, but in the
landlord configuration they have a mixture of public-private properties. Fragmented ownerships and obscure
property rights are often a source of conflict and different public institutions will have divergent views of what public
land ownership actually means (Teschner 2018).
The landlord model does not necessarily imply that the port authority really «owns» the port land. Ownership
has two levels of meaning: a practical-regulatory and a symbolic one. In practice, the matter does not rest with
ownership per se, but within the rights of access (exclusion or inclusion) or rights of use (Teschner 2018).
2.2. The landlord model applied in the world
In 1999, a survey undertaken by the International Association of Ports and Harbors (IAPH) among 188
ports worldwide gave evidence of the growing importance of the landlord model, following a series of
reforms that took place in several countries in the 1990s (Baird 2002).
A recent comparative analysis of port governance in major port countries across the globe confirms that
the trend has continued: full or semi-privatization of ports remains exceptional. The most common and
dominant model in the early 21st
century is undoubtedly the landlord model, which exists in a number
of variants, depending on the level of decentralization and autonomy of the port authority involved, the
cultural disposition of the country considered, or the level of involvement of the landlord in furthering and
enhancing port activities (Brooks et al. 2017).
The study also identifies the aspect of size, which explains why in some countries a distinction is made
between key commercial ports and secondary ports. Another distinctive feature is the changing nature
of the port authority’s role, which moved from an integrated, holistic player to an autonomous, but
government-owned port development company that is self-sustained financially, committed to port
development based on business needs, operated broadly under the landlord model, and empowered to
negotiate and sign long-term leases or concession contracts.
Finally, cooperation between ports is also identified as an emerging trend, both organically and as part
of a deliberate strategy to promote such cooperation, even where such potentially cooperating ports are
also in direct competition through a shared hinterland. This desire for cooperation is often motivated by
regionalization strategies of ports, as well as by logistical advantages that may accrue. Governments are
in turn inclined to support cooperation to optimize the use of scarce resources, including port land and
infrastructure funding (Brooks et al. 2017).

In the paragraphs below, we shall briefly look at the specific characteristics and trends of the landlord
model in different world regions.
2.2.1. Europe
European ports are characterized by three historical governance traditions: the Hanseatic model of municipal
governance, which is typical for North Sea and Baltic Sea ports; the Latin model where the central government is
the key player, which characterizes French and Mediterranean ports; and the Anglo-Saxon model of independent
management, which can be found in the United Kingdom and Ireland (Suykens and Van de Voorde 1998). The
landlord model developed early in Hanseatic ports. A port like Rotterdam already allowed private cargo handling
companies to operate their own terminal facilities in the 1930s. In southern Europe, the introduction of the landlord
model only took off in the 1990s, often through complex and highly contested reform processes. The model is less
common in the United Kingdom and Ireland. The larger UK ports mostly operate as private service ports, although
some do lease out facilities or have joint ventures with third operators as well.
The latest port governance fact-finding report of the European Sea Ports Organization confirms that in most
European ports today port services are in private hands: that is typically the case for cargo handling services, where
service providers are generally granted the use of port land through lease agreements or public domain concessions
(ESPO 2016). Earlier surveys demonstrated that, notwithstanding existing differences, awarding processes are
considerably converging. Most port authorities are trying to optimize the use of scarce land via the inclusion of
throughput specifications in the contract. They are also increasingly using the terminal awarding process to achieve
a broader environmental compliance for port activities and the sustainable development of the port.
Port authorities continue to use terminal award procedures also to shape the structure and market organization of
the terminal handling business in the port area, thereby in principle ensuring further capacity growth for efficient
incumbent firms and ensuring intra-port competition by allowing in new entrants when poor competitiveness
requires the port to do so (Notteboom et al. 2012). Since the last edition of the ESPO report, more port authorities
are structured as independent entities, operating in a commercially-oriented manner. More far-reaching forms of
cooperation between neighboring ports is also an emerging trend (ESPO 2016).
For Europe, we should also point to the influence of the EU’s supranational policy and legislation. A European
Court of Justice decision led the Italian government to adopt a law in 1994 that turned Italian ports into landlord
ports. More recently, the economic crisis brought the “troika” of the European Commission, the European Central
Bank, and the International Monetary Fund to put pressure on the governments of Cyprus, Portugal, and Greece
to undertake further reforms (Carvalho and Marques 2017). In the case of Greece, this resulted in a semi-
privatization of the port of Piraeus. In 2017, a specific ports regulation was adopted that introduces a balanced and
flexible framework based on landlord principles. Paradoxically enough, cargo handling services were exempted
for reasons of political appeasement. Some countries instead chose to apply the rather rigid EU Concessions
Directive, although it strictly speaking does not apply to allocation of port land. The landlord model is generally
consistent with EU regulation of other transport sectors (railways) and network industries (telecommunications,
energy), where systematically a structural separation between infrastructure management and operations was
pursued. Finally, we note that EU case law is increasingly qualifying port authorities as undertakings engaged in
economic activities, regardless of their legal and fiscal status or means of funding (Verhoeven 2015).
2.2.2. North America
In numbers, there are about as many landlord ports as public service ports in the United States, but most of the
larger cargo ports work on a landlord basis (Fawcett 2007, Sherman 2008). Compared to other world regions, port
governance in the United States has been very stable (Fawcett 2007, Knatz 2017). Still, there is growing pressure
on port authorities to become self-funded by making more of their assets, developing into genuine asset managers,
also beyond the port confines (Pigna 2018). Competitive pressure is also incentivizing ports to collaborate more

closely on a regional basis. The recent establishment of the North West Seaport Alliance, which jointly manages
the cargo terminals of Seattle and Tacoma, is considered a game changer (Knatz 2017).
The 18 major ports of Canada, including all of its container ports, are run by what are referred to as “Canadian
Port Authorities,” non-share federal agencies. Most other ports were divested in the last decades and the assets
were devolved to provincial or local jurisdictions. The landlord model is the general norm in most ports. Recent
reviews of the Canadian port system suggest a move towards further privatization (Institute of Governance 2018),
whereas other reform should rather focus on corporate governance, ensuring less political appointments and more
reporting transparency, than on ownership or operational reform (Brooks 2017).
2.2.3. Latin America
The landlord model was introduced in several Latin American countries. Port reforms were part of waves of
privatizations in infrastructure sectors since the 1980s. In the port sector, this process of privatization was in full
swing by the 1990s, with the establishment of concessions in major state-owned ports among Latin America’s
biggest players: Argentina, Brazil, Chile, Colombia, Mexico, and Panama (OECDITF 2017, Suárez-Alemán et
al. 2018). In 2015, private concessionaires accounted for nearly 90 percent of all containerized cargo. While
performance analyses show an improvement in the average technical efficiency of the ports in the region, concerns
also exist about lack of competition. Approximately 80 percent of container terminals in the region were granted to
the same five companies during the last twenty years. On a worldwide scale, the region still lacks top-performing
ports. Private ports exist in Latin America. Up until recently these were mostly single-user ports belonging to
producers of commodities. In more recent years, however, privately owned ports for public use opened up for
business as well, in Chile (2012) and Colombia and Brazil (2013) (Suárez-Alemán et al. 2018). The changes in
Latin America were less triggered by changes in the wider market environment, but more by institutional changes
(González Laxe et al. 2016).
Box 2.1: Porto do Açu: A private Brazilian port with an overseas public port authority investor
Port do Açu, located in the northern part of Rio de Janeiro State in Brazil, is one of the largest multi-user private
ports in Latin America. The port is developed and owned by the listed company Prumo Logística, which is
controlled by U.S.-based EIG, one of the leading providers of institutional capital to the global energy industry.
The vast greenfield port covers a land area of 13.000 hectares. The port opened in 2014 and Prumo Logística
has entered in numerous joint ventures with private operators to run both cargo handling and industrial facilities
in the port area.
In 2017, Port of Antwerp International (PAI), a subsidiary of Antwerp’s Port Authority, invested US$10 million in
Porto do Açu. For this investment PAI received 1,176 percent of the share capital. PAI has the option to invest
additionally after 18 months at its sole discretion. Port of Antwerp International also appointed one member of
the board of directors, four managers of Porto do Açu, and is providing a considerable amount of consultancy
services.

2.2.4. Africa
The existence of national port authorities is still very common in Africa, for instance, in leading port countries such
as Ghana, Kenya, Nigeria, South Africa, and Tanzania.
In South Africa, ports are publicly owned and managed by the state-owned company Transnet via two operating
divisions, the Transnet National Ports Authority, which is responsible for the port landlord functions, and Transnet
Port Terminals, responsible for operations. Transnet also controls the railroad, which causes some issues of
regulatory oversight (Havenga et al. 2017).
The federal government of Nigeria adopted the landlord model in the early 2000s. By 2006, 26 long-term port
concessions had been awarded to private companies, with durations ranging between 10 and 25 years. During
these periods, each operator runs the facility involved and pays rent to the national port authority. For additional
infrastructure or greenfield developments other PPP options are available to structure the responsibilities of
the private operator and the port authority. Minimum tonnage requirements were included in the concession
agreements to encourage productivity and competitiveness among the terminal operators. The absence of an
economic regulator in the early stages of the concession policy implementation, however, led to defaults which
explain the low level of service at the ports. While cargo and vessel throughputs did improve, cargo-handling
operations were not managed optimally with substantial delays frequently associated with operations at the berths
(Onwuegbuchunam 2018).
In East Africa, the landlord model has been more successfully introduced in Tanzania than in Kenya, although
there is still a lot of progress to be made. The strategic objective to become a landlord is more explicit in Kenya,
but many barriers remain, including stakeholder pressure, regulatory issues, and the financial consequences of
losing lucrative cargo-handling activities, leading to little or no real progress in this area (Dooms and Farrell 2017).
Port reform in Africa is generally more focused on reducing trade barriers and impediments such as corruption and
bureaucracy (Dooms and Farrell 2017, Havenga et al. 2017).
2.2.5. Asia
In several Asian countries, a quasi-landlord model was introduced, marking an evolution from fully integrated
state-owned service ports to divestiture between state-owned port authorities and state-owned operators, which
in both cases may or may not be corporatized. Singapore is a classic example, with the separation of the Maritime
and Port Authority of Singapore (MPA) and the Port of Singapore Authority (PSA), the latter having developed
into a global port and terminal operator. State-owned operators can have joint ventures or other operational
arrangements with (foreign) private operators (Saragiotis and De Langen 2017).
The Port Law of 2004 and the related Rules on Port Operation and Management led to a further decentralization
of port governance in China and opened the path to processes of corporatization of port authorities and the
introduction of modern corporate governance principles in the seaport system. In order to end the dual role of port
authorities as both regulator and port operator, the new governance framework aimed at strictly separating these
functions via the establishment of municipal port administration bureaus and separate port business companies
and groups. The port law also put an end to port ownership by the central government and the ceiling of 49 percent
of foreign investors was abolished to open possibilities for foreign players to invest in and operate ports, even
without needing a local Chinese partner. Policy formulation and strategic port planning is the responsibility of the
central government and the respective provincial governments, so any plans of local governments still need the
approval of these higher authorities. Since the reform of 2004, Chinese policy has not fundamentally changed, but
new emphasis has been put on 1) increased port integration and co-operation, 2) a strong orientation on hinterland
development through corridors and dry ports, and 3) a two-way opening up of the port sector by combining
initiatives to attract foreign investments and trade to Chinese ports with an internationalization of Chinese port-
related companies (Notteboom and Yang 2017).

The four main ports of South Korea (Busan, Incheon, Ulsan, and Gwangyang) all operate as landlords. The
central government is the main regulator (through the Ministry of Oceans and Fisheries). The port authorities are
corporations with their own capital. They own land and infrastructure, including container terminals, distriparks,
and other facilities, which they lease to private operators who operate and manage them. In South Korea’s four
main ports, operational functions are fully in private hands. Busan Port Authority is undergoing additional changes
and may go further down the path of semi-privatization in the years to come (Song and Lee 2017).
Ports in Japan are traditionally managed as part of local administrations and generally operated as tool ports
where both infra- and superstructure are provided by the port, leaving the actual cargo handling operations to
private companies. Recently, bay-wide terminal operating companies have been set up covering several ports.
This is the case for Yokohama-Kawasaki International Port Corporation and Kobe-Osaka International Port
Corporation. These companies lease terminal facilities from national government and port management bodies
and are fully autonomous to manage all container terminals on a bay-wise basis (Inoue 2014, 2018). The container
ports are managed by a special purpose company, at least 30 percent of whose shares are owned by the private
sector. Each company also has a chief executive from the private sector (Shinohara 2017). The establishment of
these bay-wide operators is meant to prevent fierce competition for terminal tenants and shipping lines between
neighboring ports on the same bay. This is in line with the recent port policy shift in Japan which is focusing public
investment on selection and concentration and strives to make full use of the knowledge and governance of the
private sector (Shinohara 2017).
The port sector in India was opened to private sector participation through an amendment to the Major Port
Trusts Act in 1997, allowing PPPs as a viable solution to the financial constraints that prevented Indian ports from
bringing their facilities and infrastructure up to global standards. Although the government encourages private
sector participation in development and operation of port infrastructure, the realization of these plans largely
hinges on structural and systematic improvements such as a more systematic introduction of the landlord model
(Hussain 2018).
2.2.6. Oceania
Major Australian ports, in particular capital city ports, are generally referred to as being private. The term, however,
covers a more complex system, which involves a government-owned corporation that chiefly oversees the regulatory
role of the port authority, a privately-owned company assuming the landlord role as managers of the port estate,
and private stevedores carrying out operations. Port land is still owned by state governments. Private investors,
such as institutional fund owners, are strongly represented among the private asset owners. While the privatization
of Australian seaports has been effective from the financial perspective of the state, concerns do exist about long-
term viability of port infrastructure and impacts on customers and communities (Chen et al. 2017).
Port reforms in New Zealand during the 1980s and 1990s resulted in partial privatization of the main commercial
ports, although in most ports, the majority of shares remains controlled by one or more local authorities. Most of
the minor ports have remained 100 percent local government-controlled since they were established.4
In practice,
New Zealand’s commercial ports vary slightly in the business models they have adopted and most sit somewhere
between mixed and full-service ports. Most own and operate most of the assets and provide infrastructure, cargo
handling services, technical-nautical services, and other services (New Zealand Institute of Economic Research
2010).
4
In May 2019, the Hawke’s Bay Regional Council in New Zealand approved the partial privatization of Napier Port, with the Regional
Council remaining a majority shareholder.

2.3. Evolution of the landlord model and autonomy of port authorities
The basic premise of a landlord port authority is that it has full control over the port estate. But the concept of a
landlord port authority has evolved considerably beyond this fundamental feature. From being mere “conservators”
of the estate, landlord port authorities are becoming “facilitators” or even “entrepreneurs” (Verhoeven 2015). Some
even argue that the term “port authority” has become outdated and that the term “port development company” is
more appropriate (De Langen and Van der Lugt 2017). While that may do injustice to the public responsibilities
that landlord port authorities still have, it is unmistakably true that successful landlord port authorities today are
more entrepreneurial than before. Their hybrid nature makes them the perfect leaders in matching investment with
community buy-in, environmental constraints, and managing other elements that will increase the competitiveness
of a port (Pigna 2018). One question that fundamentally touches on the essence of the landlord concept is whether
as pro-active “developers” port authorities may be returning to the in-house provision of certain services.
Port authorities should be sufficiently independent to fulfil a proactive role. Independent management will especially
increase a port authority’s ability to invest, by having more autonomy over its own revenue sources, attracting
new share capital, and having better access to private financing. It will also increase the port authority’s ability to
engage more actively in participations that would extend its influence in the logistics chain, including through port
clustering. (Verhoeven 2015).
To make port management more independent, there are essentially two major reform options: corporatization
and privatization. With corporatization, ownership of the port authority essentially stays in the hands of the
government, which becomes a shareholder. Privatization, on the other hand, cedes the factual ownership to a
private undertaking, either in full ownership of the port estate or through a long-term master concession. The
choice between corporatization and privatization will depend on the profile the port authority wants to adopt,
which in turn very much depends on the operational configuration and the type of port (Verhoeven 2015). The key
features and benefits of corporatized port authorities are summarized in Table 2.2.
Table 2.2 Key features and benefits of corporatized port authorities
Key features Benefits
• Financially self-sustained
• Committed to port development based on business
needs
• Operated broadly under the landlord model
• Empowered to negotiate and sign long-term lease or
concession contracts
• Demand-driven infrastructure investments
• Revenue maximization from available assets
• Market-driven pricing
• Rationalization and improved control of operations
Source: Saragiotis and De Langen (2017)
Independent management is a matter of functional and financial autonomy, but this is not sufficient as such. The
abovementioned advantages of corporatization will only materialize if reform also establishes professional and
transparent corporate governance as well as proportionate regulatory oversight (Verhoeven 2015).
Adhering to a true corporate culture first of all affects the structure of the port authority. Corporate culture implies
that the supervisory body, i.e., the board of directors, and the management will have to act in the sole interest
of the corporation. This is fundamentally different from structures one often encounters in semi-autonomous,
commercialized port authorities, where the supervisory body rather represents the interests of its members, be
they local politicians, government administrators, stakeholders, or even customers and tenants. The profile of the
board members will, therefore, require careful attention in terms of professional expertise and independence, but
also in terms of remuneration and training. The same applies to the management committee, notably the positions
of CEO, COO, and CFO. Clear responsibilities will furthermore have to be established between the general
assembly of shareholders, the board of directors, and the management, notably regarding strategic decisions,
financial supervision, senior staff appointments, etc. Several corporatized port authorities voluntarily chose to

apply corporate governance codes for listed companies. This practice is generally recommended by the OECD
for commercially oriented corporations in public ownership (OECD 2004). Corporatization will especially reinforce
the economic role of the port authority and will, therefore, put its hybrid nature even more on the spot than before.
This requires clarity of roles and objectives, autonomy from political intervention, accountability, participation,
transparency, and predictability. It will bring about a careful balancing act, especially in commercial relations with
customers and tenants. Publication of annual financial accounts will frequently be a legal requirement anyway, but
various other reporting issues, e.g., on economic and environmental performance, are considered to be part of
good corporate governance. Establishing a formal corporate social responsibility (CSR) policy will generally benefit
port authorities and especially those located close to urban communities. Municipal owners of port authorities are
usually most concerned that corporatization will disconnect the port from their city. But even in the interest of its
own license to operate and grow, a port authority cannot afford to neglect its societal role and responsibility. CSR
also concerns the port authority’s own staff. Human resources management in a corporate environment is very
different from a government environment. In several cases, port management reform will involve a change from
civil service status to contractual employment, which usually is not an easy process (Verhoeven 2015).
Whereas port authorities, regardless of who owns them, should be free from political intervention, this does not
mean that they should be free from regulatory oversight. Port authorities can potentially exert considerable market
power, not just in terms of pricing, but also in allocation of contracts to terminal operators and other service
providers. An assessment of this market power and, in particular, the potential for abuse, should be part of the
reform process so that an appropriate form of regulatory oversight can be installed. The level of regulation should
take into account potential countervailing powers. A balance indeed needs to be found between, on the one
hand, having a strong port authority that is an equal match for tenants and customers and, on the other hand,
avoiding abuse of market power. A standard recipe does not exist and will depend on the relevant geographical and
product markets in which the port authority operates. Still, complete absence of regulatory oversight might mean
the best of both worlds for port authorities, but it is doubtful whether it is in the interest of port competitiveness.
Assessments should be repeated at regular intervals following reform, as circumstances may change considerably
over time (Verhoeven 2015).
We can conclude that the landlord model is still dominant in the world, with different applications. At the same time,
the landlord concept and the way port authorities apply it is evolving. The role of landlord port authorities evolves
from conservators of the estate to proactive land developers who focus on maximizing the value of their assets. To
fulfil this role, port authorities are becoming more autonomous and are developing different skills bases. Whereas
full privatization is still exceptional, we notice developments in Latin America, Asia, and Oceania that may increase
the number of privately-owned landlord ports open to common users in the future. That, in turn, will drive the need
for port regulation to ensure fair competition and avoid abuse of dominant positions. Another clear trend is regional
cooperation among ports, motivated by the need to retain market share in strongly competitive markets.
The overview we presented in this chapter demonstrates that the current governance model of Ukrainian seaports
lags far behind these main trends, as it is missing the essential feature of the landlord model, i.e., control over port
land, to start with. At the same time, this creates an opportunity to implement an innovative governance concept,
adapted to the local context, rather than just copying the basic model that is becoming outdated.
As a guide, Table 2.3 summarizes the lessons that can be learned from the international experience, indicating
both good practices and potential pitfalls.

Table 2.3 International experience with the landlord model
Widely shared good practices among landlord port
authorities
Potential pitfalls of the landlord port model
• Corporatization and structuring of port authorities
as independent entities operating in a commercially
oriented manner
• Optimization of the use of scarce land by including
throughputandseveralotherperformancespecifications
in concession agreements
• Use of the terminal award procedure to pursue broader
environmental and community goals to bolster the
sustainable development of the port (e.g., in the case
of ports with multimodal hinterland connections,
mandatory thresholds on inbound and outbound cargo
moved by inland waterway or rail transport)
• Use of the terminal award process to both facilitate
capacity expansion by efficient incumbent operators
and introduce intra-port competition, either as an end
in itself or in response to poor performance or a need to
expand capacity
• Cooperation with other port authorities on a regional or
port-range basis
• Participation in planning and decision-making beyond
the port perimeter to include immediate and extended
hinterland connectivity, extended gateways/dry ports,
and logistics centers
• Evolution of port authorities from mere conservators
of the estate to proactive land developers focused
on value creation: to fulfil this role, port authorities
are becoming more autonomous and are developing
different skills bases
• Heavily dependent on matching the empowerment
given to the port authority with institutional capacity
to exercise that authority in practice in a manner
that can best reflect public and private sector
considerations
• Some port authorities have struggled with properly
assessing unsolicited proposals, running the risk
of accepting too many and resulting in excessive
«terminalization» or fragmentation of the port area
• Port authorities must recognize the limits of their
own authority and in so doing pursue collaborative
relationships with municipal, regional, and national
government entities
• The model encourages development at the individual
port level. But what is best for an individual port may
not necessarily be best for the national network
of ports. Therefore, institutional mechanisms are
often needed to balance local with national interests
(such as establishing a lead agency for ports at the
national level)
• The model may need a regulator, particularly where
the system lacks inter- and/or intra-port competition:
the regulator may or may not be the same entity
as the national lead agency, and the role requires
experience to be built over time to gain legitimacy
in the market
• The model does not preclude concessionaires from
being government-owned companies themselves
(common in Asia, for instance), which may create
risks
Source: World Bank analysis

Strengthening Ukraine’s port sector governance. The World Bank report

Strengthening Ukraine’s port sector governance. The World Bank report

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Strengthening Ukraine’s port sector governance. The World Bank report