Applying a Suitable Port Investment and Operation Management Model

Other conditions (public license) for private operators to provide port services.

- Approve fee schedule:The Port Authority will set a price framework (floor price) for port services, common forms for ports. For example, in Mumbai (India), the Port Authority of this city sets a floor price for all ports. Ports are only allowed to compete on technology, equipment... but are not allowed to undercut. After that, the Port Authority will monitor the implementation of the price framework by the ports.

It should be noted that there is a difference between the National Port Authority and the Port Authority. The National Port Authority is formed from relevant Ministries and ministerial-level organizations to establish national port policies, establish a legal framework and require the Port Authority to implement them. The Port Authority is only responsible for managing a port or a port cluster in a locality or region to avoid fragmentation, each port operating in a different way, leading to unfair competition and wasting Vietnam's coastal resources. In the immediate future, the Port Authority model can be piloted for the Cai Mep - Thi Vai port cluster (Ba Ria - Vung Tau), the Central port cluster or two key ports: Lach Luyen port (Hai Phong) and Van Phong port (Khanh Hoa).

3.2.4.4. Apply appropriate port investment and exploitation management models

In the coming time, it is necessary to choose a suitable model of port investment and exploitation management to reduce the pressure on investment capital from the state budget, while increasing the recovery of state investment capital. There are 3 popular port management models to be considered for selection: Service port model (state port), Leased port model (port owner), Commercial port model (enterprise or private port). These three models are further detailed into 5 management forms presented in Table 3.5.

Table 3.5: Forms of port investment and exploitation management

Form

A	B	C	D	E	F
Master plan	
Construction	Public infrastructure (channels and breakwaters...)				
	Port infrastructure (wharf, warehouse...)		
	Superstructure (loading equipment...)
Own	Land					
Own	Port construction			*1		*1
Port operations	
Tugboat and pilot	 or

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Source: Author's synthesis and [31] Note:  : State

: Private (* 1 : Land lease)

According to the information in Table 3.5, the service port model is equivalent to form A. The port owner model is equivalent to forms B and C. Form B is that the state leases both public infrastructure, port infrastructure and loading and unloading equipment..., private enterprises only operate and exploit. Form C is that the state leases only public infrastructure and port infrastructure, private enterprises will invest in loading and unloading equipment themselves... The commercial port model (private port) is equivalent to forms D, E, F. In which form D is that the state only invests in public infrastructure, the rest of the private enterprises invest in port infrastructure and loading and unloading equipment themselves... Form E does not exist in Vietnam because land is owned by the entire people and the state is the representative. Form F encourages private enterprises to invest in both public infrastructure, port infrastructure and loading and unloading equipment.

- Based on the importance of seaports (see the seaport classification table approved by the Prime Minister in Appendix 1.2) to apply a suitable model of port investment and exploitation management, the author has the following recommendations:

+ Form A (service port) should be applied to type I ports, which are national and inter-regional key ports. However, it should not be applied to all 17 type I seaports but only to especially important ports within those type I seaports. According to Japan's experience, out of more than 1,000 seaports, the Japanese Government only manages about 11 especially important ports (inter-regional) in terms of both investment, construction and operation. In addition, the Government provides financial subsidies to a number of important local ports and does not subsidize the remaining ports.

+ Forms B and C (port for lease) should be commonly applied to the remaining type I ports and type II ports (local ports).

+ Form D (private port) should be encouraged to apply to type II ports,

III. This form plays a very important role because it reduces the burden on the state budget. However, private ports must always be placed under state control because the operation of seaports is also related to national security and defense.

+ Form F should be encouraged to be applied to specialized ports (type III ports).

- Of the above forms, form C has been piloted at Cai Lan port - Quang Ninh (with terminals 5, 6, 7) and should be widely applied in Vietnam in the coming time for the following reasons: Firstly , state investment capital in seaport infrastructure will be preserved because it can be recovered by: public infrastructure is recovered by collecting fees from users. Port infrastructure is recovered through collecting infrastructure rental fees. Secondly , the business of exploiting seaport infrastructure and the business of loading and unloading goods have been separated, thereby also separating the assessment of the effectiveness of investment in seaport infrastructure (belonging to the state) and the effectiveness of service enterprises (belonging to port exploitation enterprises). Assessing the financial efficiency of seaport infrastructure construction investment projects in practice will be easier, because the revenue has been clearly accounted for. Inefficient construction projects will not be invested in. Third , create equality and healthy competition among enterprises in the port exploitation business. Eliminate the Ask - Give mechanism, create initiative and self-responsibility of enterprises in the business.

Fourth , closely linking the interests of the lessee of port infrastructure with port operations, ensuring that the seaport is exploited with high efficiency. Fifth , the state and port enterprises share risks, profits and make the most of the enterprise's resources .

However, this form also has some disadvantages such as when an incident occurs, the process and procedures for the lessor to carry out repairs are complicated, cumbersome, and time-consuming. This has deprived the lessee of autonomy and business opportunities. Moreover, when there is a need for production, the lessee cannot use the leased assets as collateral for loans.

The form of leasing port infrastructure has been applied in most countries with developed marine economy. In China, after the government builds port infrastructure, it can sell or lease it back to the private sector. However, in the US states, it is believed that "Selling port facilities is an act of transferring money from the federal fund to the private sector and will cause losses to the federal government" [95], so only the leasing method is applied. In Vietnam, the method of leasing port infrastructure should only be applied because of its benefits and ease of implementation. With the form of equitization, careful consideration should be given before making a decision.

3.2.5. Solutions to improve the efficiency of investment in seaport development in each investment stage

Investment efficiency in the development of the seaport industry (as presented in the chapter)

II) is not high and the investment efficiency of seaport projects is not as expected. Only a few projects have achieved high efficiency such as projects of Saigon New Port Corporation; Vietnam National Shipping Lines (Vinaline) with Hai Phong port, Saigon port, Doan Xa port; and projects of some other port enterprises... There are many projects with low efficiency or even loss such as some port projects in the Central region, some port projects in Cai Mep - Thi Vai area (Ba Ria - Vung Tau)... The cause of loss lies in both the investment phase and the operation phase. Therefore, there needs to be solutions for each phase of the project, in order to improve the investment efficiency of seaport projects and thereby improve the investment efficiency of the seaport industry.

3.2.5.1. Solutions for the investment orientation phase

a. Strengthening the application of scientific evaluation methods to select optimal investment projects

Due to limited investment capital, while the demand for investment in the entire Vietnamese seaport system is very large, it is necessary to invest selectively and focus on key points. Prioritize capital for seaport projects that are truly necessary for the economy. There are many proposed seaport projects and projects supporting seaport development. Every project is considered important and it is not always possible to find the optimal project in all the set criteria. Therefore, the simplest way is to apply the scoring method to select the priority investment project first. The criteria for comparison include:

(1) Transportation demand [20] : This is an indicator reflecting the need for immediate projects to meet the transportation needs of the economy. Projects in the top 10% of demand will be given a score of 10, and for every 10% of demand lower, the score will decrease by 1 point.

(2) Geographical advantage : The project construction is in accordance with natural laws, and will have low maintenance costs in the future.

(3) Economic feasibility : The impact of the seaport project on the development of the socio-economy through specific indicators such as the chain effect on the development of an industry or an economic region; the impact on the development of export processing zones, urban areas, industrial zones; budget contribution; job creation. This indicator is scored by experts.

(4) Financial feasibility : These are indicators reflecting the financial efficiency that the project brings to the investor, calculated in the project profile such as IRR, NPV, and payback period.

(5) The role of the project in the transport network [20] : with 3 levels:

- Is the main axis - main corridor: highest point (10 points)

- Is a secondary axis - corridor

- Is local transportation

(6) Less initial investment advantage : Due to the scarcity of investment capital, projects that do not require too much capital, beyond the capacity of the economy, can also be given priority. However, in case of capital shortage, it is still possible to borrow foreign capital or look for

waiting for capital mobilization channels, so this indicator has only low importance weight.

(7) Project maturity/Progress [20]:

The order of scoring is 10 points if the project has completed detailed design; 9 points for the project is in detailed design; 8 points for the project has completed feasibility study...; 2 points for the project is still at the idea level; 1 point for the case where there is no action (table 3.6).

(8) Conformity with higher-level planning or national development strategy : with 3 scoring levels:

- Included in official planning

- Is it suitable?

- Unclear, not suitable

(9) Impact on the natural environment : Potential impact of the project on the natural environment.

Each of the above criteria is planned with a maximum score of 10 and the best meeting of the criteria's requirements will receive 10 points. The scoring of each criterion can be clearly quantified or experts can be consulted on the level of meeting the requirements of the project under consideration for the requirements of the criteria under consideration. The calculation sequence is as follows:

+ Score each of the 9 criteria listed above.

+ Multiply the score by the importance weight of each criterion

+ Calculate the total score for each criterion and each project

+ Select the seaport project with the highest score

The application of scoring method to select projects aims to strictly control the number of seaport investment projects. Avoid the situation in the past, with little capital, but invested in projects that were not really necessary or not suitable, while necessary projects were not invested.

Table 3.6: Criteria and their importance in the scoring method to determine the optimal order for the project

Criteria

Target	Ladder point	Importance weight
1. Transportation needs	(ton km + passenger km)/km	10	20%
2. Geographical advantage	- In accordance with natural laws - Low maintenance costs when in operation	10	7%
3. Economic feasibility	- Impact on industry and regional development - Submit budget - Create jobs	10	30%
4. Financial feasibility	- NPV - IRR - Payback period	10	10%
5. The role of the project in the value chain network	- Main axis/Main corridor - Secondary axis/corridor - Local	10	10%
6. Capital advantage less initial investment	- Amount of initial investment required for the project	10	3%
7. Project maturity/progress	10. Detailed design (completed) 9. Detailed design (in progress) 8. Feasibility study (completed) 7. Feasibility study (in progress) 6. Pre-feasibility study (completed) 5. Pre-feasibility study (in progress) 4. Planning (approved) 3. Planning (under review) 2. Idea 1. No action yet.	10	10%
8. Conformity with higher planning or national strategy	- Included in official planning - Is it suitable? - Unclear, not suitable	10	5%
9. Impact on the environment school	- No harm to the natural environment	10	5%

Source: Author's synthesis with reference [20]

b. Synchronous investment at seaports

To orient investment activities at ports, it is necessary to refer to the experiences of highly effective investment ports and lessons learned from loss-making ports.

* Lessons learned from highly efficient investment ports

Saigon New Port Corporation (Saigon New Port SNP) is considered one of the largest seaport operators in Vietnam, with a seaport system and modern warehouse infrastructure in most key areas in the country and is considered a vivid proof of the right investment with the following investment lessons:

- Investing in the right direction : since 1990, SNP has recognized the strong development trend of container cargo in the world as well as in Vietnam and decided to focus on developing container ports. This decision has helped SNP lead the Vietnamese seaport system in terms of container market share.

- Optimal location for seaport investment : SNP always chooses port construction locations in places with extremely favorable natural conditions for port construction, located in key economic zones, located between or near industrial parks and large centers, connected to the rear by road and waterway systems.

- Actively invest in loading and unloading equipment systems and modernize the port management system : Equipment at SNP is purchased synchronously. SNP applies the TOPX port management and operation system...

- Appropriate investment in marketing : SNP has close relationships with over 500 import-export customers, 40 shipping lines, 50 logistics companies [23] and has become a reputable address for shipping lines to choose when they want to dock in Vietnam.

- Investing in human resource development : SNP has sent many officers to study port exploitation and engineering in the Netherlands, Taiwan and Korea [23], opened many classes on port exploitation, information technology, foreign languages and MAR for officers and employees.

- Investing in seaports in sync with logistics services and port-to-port traffic : SNP always focuses on providing comprehensive services to customers by building and expanding the logistics service system. Since 2009, SNP has had a fleet of 15 barges [110], with a total capacity of 750 TEU to transport imported and exported goods from regions.

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