CPA Report Strategic Choices - 21-12-2012

Curaçao Harbour Policy 2012-2021

Report 2: Strategic Choices Integral Policy Recommendations & Analyses of Selected Policy Options

Maritime & Transport Business Solutions B.V.

21 December 2012

STRICTLY CONFIDENTIAL

FINAL VERSION

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Document Title Curaçao Harbour Policy 2012-2021

Report 2: Strategic Choices Document Status Strictly Confidential & Final

Company Maritime & Transport Business Solutions B.V. - MTBS Authors 8150001 /017 /025 /035

Date 21 December 2012 Project Name Curaçao Harbour Policy

MTBS Reference 825280 Client Government of Curaçao

Client Reference Harbour policy

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This report is for the sole use of the Client and is not to be copied or distributed outside of the Client organisation. The report contains confidential information that should not be made publicly available. Publication might harm the interests of individual parties.

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This document is intended only for use by the addressee. It may contain confidential or privileged information. Maritime & Transport Business Solutions B.V. (MTBS) makes no representations or warranties about the accuracy or suitability of this document and its information for any purpose. Errors and omissions may occur. Therefore, MTBS disclaims any warranty, whether express or implied, as to any matter relating to this service and all information provided, including but not limited to the fitness for any particular purpose. In no event shall MTBS be liable for any indirect, special, incidental, or consequential damages arising out of any use of reliance of any information contained herein. Nor does MTBS assume any responsibility for failure or delay in updating or removing the information contained herein.

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CONFIDENTIAL FINAL VERSION

Report 2: Strategic Choices Page 5 21 December 2012

Table of Contents

FOREWORD ............................................................................................................................... 12

SECTION A: INTEGRAL POLICY RECOMMENDATIONS ................................................................... 17

1 Vision on the Curaçao Maritime Cluster .............................................................................. 18

2 Institutional Policies ........................................................................................................... 20

3 Segment Policies................................................................................................................. 25

SECTION B: SELECTED POLICY OPTIONS ....................................................................................... 38

1 Institutional Structure......................................................................................................... 39

2 Container Transshipment Hub ............................................................................................. 67

3 Yachting & Marinas .......................................................................................................... 116

4 Ferries .............................................................................................................................. 151






Detailed Table of Contents

FOREWORD ............................................................................................................................... 12

SECTION A: INTEGRAL POLICY RECOMMENDATIONS ................................................................... 17

1 Vision on the Curaçao Maritime Cluster .............................................................................. 18

2 Institutional Policies ........................................................................................................... 20

2.1 Strategic Position .................................................................................................................. 21

2.2 Policy Recommendations ...................................................................................................... 23

3 Segment Policies................................................................................................................. 25

3.1 Containers (Existing Facilities) .............................................................................................. 26

3.2 Containers (Container Transshipment Hub) ......................................................................... 28

3.3 Free Zones ............................................................................................................................. 29

3.4 Dry Bulk ................................................................................................................................. 30

3.5 Liquid Bulk ............................................................................................................................. 31

3.6 Cruise .................................................................................................................................... 32

3.7 Marinas ................................................................................................................................. 33

3.8 Ferries ................................................................................................................................... 34

3.9 Docking.................................................................................................................................. 35

3.10 Bunkering .............................................................................................................................. 36

SECTION B: SELECTED POLICY OPTIONS ....................................................................................... 38

1 Institutional Structure......................................................................................................... 39

1.1 Introduction .......................................................................................................................... 40 1.1.1 Background ..................................................................................................................................... 40 1.1.2 Reading Instructions ....................................................................................................................... 40

1.2 Institutional Framework Curaçao Maritime Cluster ............................................................. 41 1.2.1 Port Regulations.............................................................................................................................. 42 1.2.2 Beheersovereenkomst ..................................................................................................................... 42 1.2.3 Working Group “Protecting Public Interests in Ports and Inner Waters” ....................................... 43



1.3 Position Curaçao Port Authority ........................................................................................... 44 1.3.1 Current Situation ............................................................................................................................. 44 1.3.2 Current Port Management Model Curaçao .................................................................................... 44 1.3.3 Required Changes for a Consistent Institutional Position ............................................................... 48

1.4 Position Harbour Master ....................................................................................................... 50 1.4.1 Current Situation ............................................................................................................................. 50 1.4.2 Recommended Changes to the Position of the Harbour Master .................................................... 50

1.5 Position KTK .......................................................................................................................... 52 1.5.1 Current Situation ............................................................................................................................. 52 1.5.2 Recommended Changes to the Position of KTK .............................................................................. 53

1.6 Mission Statement Curaçao Port Authority .......................................................................... 55 1.6.1 Current Situation ............................................................................................................................. 55 1.6.2 Recommended Changes to the Mission Statement of CPA ............................................................. 56

1.7 Business Case Curaçao Port Authority .................................................................................. 58 1.7.1 Current Situation ............................................................................................................................. 58 1.7.2 Recommended Changes to the Business Case of CPA ..................................................................... 58

1.8 Conclusions ........................................................................................................................... 62 1.8.1 Institutional Structure Curaçao Maritime Cluster ........................................................................... 62 1.8.2 Policy Recommendations ................................................................................................................ 63 1.8.3 Implementation Considerations (outlook phase 3) ......................................................................... 65

2 Container Transshipment Hub ............................................................................................. 67

2.1 Introduction .......................................................................................................................... 68 2.1.1 Initial Concept: Curaçao Container Hub Vision ............................................................................... 68 2.1.2 Reading Instructions ....................................................................................................................... 69

2.2 Considerations for Policy Development ............................................................................... 70 2.2.1 Commercial Considerations ............................................................................................................ 70 2.2.2 Technical Considerations ................................................................................................................ 71 2.2.3 Economic Considerations ................................................................................................................ 73 2.2.4 Financial Considerations ................................................................................................................. 74

2.3 Capacity Development .......................................................................................................... 75 2.3.1 Greenfield Terminal Development .................................................................................................. 75 2.3.2 Draft Terminal Layout ..................................................................................................................... 76 2.3.3 Main Investment Items ................................................................................................................... 78 2.3.4 Preliminary Investment Estimates (capex) ...................................................................................... 80

2.4 Preliminary Top-Down Viability: Minimum Transshipment Volumes .................................. 82 2.4.1 Inputs: Assumptions ........................................................................................................................ 82 2.4.2 Outputs: Minimum Required Transshipment Volumes ................................................................... 84

2.5 Container Transshipment Market ......................................................................................... 87



2.5.1 Caribbean Hubs ............................................................................................................................... 88 2.5.2 Feeder Potential in the South and the East ..................................................................................... 90 2.5.3 Regional Port Developments ........................................................................................................... 91 2.5.4 Venezuela: Primary Feeder? ........................................................................................................... 92

2.6 Conclusions ........................................................................................................................... 93 2.6.1 Potential of a Transshipment Hub on Curaçao ............................................................................... 93 2.6.2 The Role of the Government ........................................................................................................... 94 2.6.3 Policy Recommendations ................................................................................................................ 95 2.6.4 Implementation Considerations (outlook phase 3) ......................................................................... 96

Annex: Port Fact Sheets .................................................................................................................... 99

3 Yachting & Marinas .......................................................................................................... 116

3.1 Introduction ........................................................................................................................ 117

3.2 Vision for Curaçao Yachting Sector ..................................................................................... 118 3.2.1 Preliminary Rational for Curaçao as Yachting Destination ........................................................... 118 3.2.2 Curaçao as potential yacht storage hub ....................................................................................... 119 3.2.3 Charter Market ............................................................................................................................. 121 3.2.4 Super yacht market ....................................................................................................................... 124 3.2.5 Conclusion ..................................................................................................................................... 126

3.3 Marina Development on Curaçao ....................................................................................... 127 3.3.1 Marina Development Structures ................................................................................................... 127 3.3.2 Possible Greenfield Marina Locations ........................................................................................... 130 3.3.3 Critical Success Factors for Development of Greenfield Marinas.................................................. 137 3.3.4 Preliminary Review of the Possible Locations ............................................................................... 138 3.3.5 Preliminary Valuation ................................................................................................................... 139 3.3.6 Economic Considerations .............................................................................................................. 142 3.3.7 Yachting Infrastructure Development Plan ................................................................................... 144

3.4 Yacht Customer Setting ....................................................................................................... 145 3.4.1 Introduction .................................................................................................................................. 145 3.4.2 Current Challenges ........................................................................................................................ 145 3.4.3 Curaçao Yachting Association ....................................................................................................... 147

3.5 Conclusions ......................................................................................................................... 148 3.5.1 Policy Recommendations .............................................................................................................. 148 3.5.2 Implementation Considerations (outlook phase 3) ....................................................................... 149

4 Ferries .............................................................................................................................. 151

4.1 Introduction ........................................................................................................................ 152 4.1.1 Background ................................................................................................................................... 152 4.1.2 Reading Instructions ..................................................................................................................... 153



4.2 Ferry Business ..................................................................................................................... 154

4.3 Ferry Markets ...................................................................................................................... 157 4.3.1 Import Cargo ................................................................................................................................. 157 4.3.2 Export Cargo ................................................................................................................................. 158 4.3.3 Tourists ......................................................................................................................................... 159 4.3.4 Commuters .................................................................................................................................... 161 4.3.5 Economic Passengers .................................................................................................................... 161

4.4 Conclusions ......................................................................................................................... 162 4.4.1 Potential of a Ferry Link to Curaçao .............................................................................................. 162 4.4.2 The Role of the Government ......................................................................................................... 162 4.4.3 Policy Recommendations .............................................................................................................. 163






CURAÇAO HARBOUR POLICY

FOREWORD



Background

The Caribbean island of Curaçao has historically been blessed with a well developed and diversified maritime cluster. The cluster comprises of a broad spectrum of private enterprises, state-owned companies, public authorities and other public and non-governmental bodies with the Island’s port facilities at its core. Primary economic activities include cargo- and passenger related activities such as container handling and value added logistics, oil storage and refining, dry bulk handling, and cruise and yachting. The vessel traffic around the island has subsequently resulted in a strong nautical service sector on the island, providing ship repair, bunkering, towage, banking, insurance, education and the ship registry. There is a strong interrelation between these businesses in the cluster and they provide diversity to the national economy which would otherwise be dominated by tourism.

As economic regulator and infrastructure developer, the Government of Curaçao relies on a modern and value-enabling port institutional framework to ensure sustainable economic performance of its maritime cluster. To safeguard the long term viability and prosperity of the cluster and its actors, the Government regularly updates its policies taking into account local and international trends and developments. Policy updates allow the Government to capitalize on new opportunities and to adjust their own institutional position towards the latest economic insights.

This Harbour Policy Document

This policy document is the second deliverable of the project “Curaçao Harbour Policy”. This report concludes the policy part of the project which has been executed by Maritime & Transport Business Solutions B.V. for the Ministry of Economic Development of Curaçao (Ministerie van Economische Ontwikkeling, MEO).

This policy document presents an integral harbour policy recommendation for the island. It touches upon all relevant segments (section A), while providing more in-depth background and analyses for selected policy options (section B).

This policy document is supported by an overall review of the island’s maritime cluster which is used as the basis for policy-making (“Phase 1: Strategic Position”) and by detailed implementation plans for selected focus areas (“Phase 3: Implementation Plans”).

Note to the reader: this report is based on the state of affairs until 1 Augustus 2012. In the period between 1 Augustus 2012 and the date of submission of this final report (21 December 2012), things might have changed. These changes, however are not incorporated in this report.



The Harbour Policy Project

The advisory project which has resulted in this policy document was executed between spring and autumn 2012 and was structured in three phases:

Road map for harbour policy development

The first phase, strategic position, was aimed at determining the current state of affairs in the maritime cluster of Curaçao through an assessment of the facts and the prevailing opinions amongst local and international stakeholders. This first phase was finalized during an interactive workshop held in Willemstad on the 25th of May 2012. The outcomes of this phase have been documented in the Phase 1 Report: Strategic Position.

The second phase, strategic choices, was subsequently initiated and revolved around an in-depth assessment of selected policy options within the overall maritime cluster of the island. Four focus areas1 were selected in joint consultation with the main maritime stakeholders following finalization of the first phase: 1) The institutional structure of the maritime cluster; 2) development of a container transshipment hub; 3) development of the marina and yachting sector; and 4) Curaçao as a ferry port. Additional research by the consultant and another round of focused and interactive workshops (held early July 2012) has contributed to specific policy recommendations in these fields.

The third and final phase, implementation plans, follows from the harbour policy as documented in this report. It provides practical guidelines to the authorities and other stakeholders in relation to the most relevant policy options: The institutional structure, the transshipment hub and the marina sector. To facilitate the implementation of the proposed policy and to prevent the policy becoming yet another study on the Government’s shelf, the consultant has stressed the importance of including such practical and detailed plans to the overall harbour policy recommendations.

1 Various highly relevant areas have intentionally not been selected for further research. This includes the future of the Isla Refinery, the CDM Shipyard, the second Megapier for cruise vessels, and the renegotiations of the concession agreement with CPS. Reasons for their further omission in this phase is the fact that other advisory and implementation projects are currently executed covering these topics to much further detail than this policy study can practically capture. Although these sectors have not been dealt with in further detail, their relevance to the island’s maritime cluster has been captured in the integral policy recommendations as included in this policy document.

Phase 2:Strategy development

Phase 1:Situational analysis, strategic

position

• Intended future position• Development of strategic options• Evaluation and choice of preferred option(s)• Polioy

Curacao Harbour Policy 2012-2021

• Mission, actual objectives, actual strategy• Internal analysis: strengths & weaknesses• External analysis: opportunities & threats

Phase 3:Implementation of the policy

• Planning• Implementation



Relation to other Policy Projects

Since the island’s port activities are not stand-alone in the economy, this harbour policy should also not be addressed in isolation to other aspects of the national economy. Many other industries are closely related to the port and as a result, other policies and other research needs to be taken into account. Specific reference here is made to various policy-related projects and developments which are currently being undertaken in the island’s greater maritime and transport cluster:

• The future of the Isla refinery: currently being researched by Ecorys, assigned by Ministerie van Algemene Zaken;

• “Turn-Around Plan” for the dry dock, by CDM; • Development plan for the Second Megapier, by CPA; • Upcoming amendments to the concession agreement between CPA and CPS; • Airport policy: currently being developed by Roland Berger, assigned by CAH; • “Koers voor Maritieme Toekomst” by MAC, VVRP; • “Strengthening the Environment Agency”, Environmental Agency, supported by USONA • “Strategic Tourism Master Plan for the Island of Curaçao 2010-14”, by Halcrow, assigned by the

Curaçao Tourist Board (CTB); • Working group “Borging Publieke Belangen in Havens en Binnenwateren” (“Protecting Public Interests

in Ports and Inner Waters), by the MAC and VVRP; • “Besluitvorming en maatschappelijk draagvlak bij stedelijke gebiedsontwikkeling op Curaçao”, on the

development of a marina in Het Waaigat, by Van Hunen, 2011)

The Ministry of Economic Development of Curaçao (Ministerie van Economische Ontwikkeling, MEO) is considered to be best positioned to coordinate all policy-making with respect to these economic activities. The CPA, as the Landlord port authority, should also be involved in these projects.

Maritime & Transport Business Solutions (MTBS)

Maritime & Transport Business Solutions B.V. (MTBS) has been assigned by MEO as their strategic policy advisor for this project. MTBS is an international finance and strategy advisory firm, offering entrepreneurial business solutions to Clients in the maritime and transport sector. MTBS specializes in ports and terminals, and provides leading expertise in the areas of strategy, valuations, transactions and finance. The firm combines its market sector knowledge and state-of-the-art financial competences into one value proposition: “4P: innovative solutions for Port Public Private Partnerships”.

Operating from Rotterdam, The Netherlands, MTBS has a global client base of public and private organizations. Public Clients include port authorities, ministries, other governmental bodies, international financial institutions (including developments banks), and public port operators. Amongst MTBS’ private Clients, there are terminal operators, shipping lines, commercial banks, real estate developers, shipbuilders and engineering firms.






CURAÇAO HARBOUR POLICY SECTION A: INTEGRAL POLICY RECOMMENDATIONS



1 Vision on the Curaçao Maritime Cluster



Future Vision on the Curaçao Maritime Cluster The island of Curaçao is blessed with an extensive and diversified maritime cluster. The cluster is considered a primary economic engine, representing significant economic value for the island through direct and indirect employment and direct and indirect Government income. The maritime cluster also holds a sensitive position: The island economy depends on imports through its port and with only a modest population, the economy is susceptible for monopolistic behaviour of strategically positioned operators. Besides, there is a strong and often conflicting interaction between trade, tourism and the island’s sensitive ecology. The Government of Curaçao fosters its maritime cluster and aims at further growth by facilitating retention and expansion of existing economic activities and by rationally entering new markets, leveraging on both the island’s existing cluster and its strategic location in the southern Caribbean basin. The Government acknowledges that the Curaçao Port Authority plays a pivotal role in the maritime cluster. As the island’s landlord port authority, the CPA is the public counterpart to its operators and nautical service providers. Moreover, the CPA is the natural intermediary in port-related affairs involving multiple public and/or private entities, including the operators for which it does not hold a land position. As Landlord, CPA is also the sounding board for development initiatives coming from the industry, the Government or the general population. CPA has therefore internalized intellectual capacity in relation to Industry, Trade and Tourism. As the cluster manager, CPA engages in port marketing, promoting the cluster amongst potential users and investors but also amongst the general population which needs to be informed about the role the cluster plays in their lives. CPA is financially independent running a sustainable business. From the port dues and concession payments, CPA funds its internal organization and (co-)invests in and maintains specific nautical assets. The Government itself is also involved in protecting and further developing the cluster. It facilitate the entrepreneurial base in the cluster by establishing clear and modern legislation; by providing fiscal incentives where needed; and by being fair and swift in required licensing procedures. In some cases, the Government actively contributes to the sector. This includes the transfer of existing and designated (future) port land to the mandate area of the landlord port authority. And it actively and rationally invests in specific public assets residing outside the scope or budget of the CPA, but which are necessary for specific port developments. Private sector operates their business efficiently and in an unimpeded manner. The authorities facilitate this by providing clear rules and regulations, which are modern, fair, and aimed at optimized private sector performance, while protecting public interests. State-of-the-art concession agreements which balance both public and private interests are developed by the CPA to structure its public-private partnerships. A modern legislative and contractual base is supported by active monitoring and regular compliance checks by the respective authorities, including CPA. An independent overall Competition Authority or Regulatory Board is available to monitor those markets on the island which are susceptible to monopolistic behaviour by economic actors; and it monitors situations in which public and private interests get tangled. Considering the economic position of the country, the Government and CPA remains financially prudent. Policy is at all times aimed at creating and protecting economic value, while preventing the waste of public resources. Developing healthy and rational ambitions which suit the small and sensitive economy also fits this overall focus on prudence.



2 Institutional Policies



2.1 Strategic Position

Curaçao is blessed with a diversified maritime cluster. The cluster comprises of various private and state-owned companies and it governed by various public bodies. The Curaçao Port Authority (CPA), the alleged Landlord, is a dominant entity in this scheme. Besides the CPA, various other bodies govern specific aspects of the cluster, such as the Harbour Master, the Maritime Authority (MAC) and the Environmental Agency (Milieudienst). Various observations have been made in relation to the current institutional setting:

1) CPA’s mission2 does not reflect its relevance to the national economy: it is focussed more on nautical services.

2) The institutional setting is arranged through management of waters (the Beheersgebieden), not through management of land.

3) The management of the port area is fragmented. The Landlord port authority does not manage the entire port area, some important port areas (refinery, oil terminal, dry dock3, scrap terminal) are managed and controlled by other government controlled entities.

4) The ownership of land in the port area is fragmented (national government, CPA, RdK, private); 5) Although CPA positions itself as a Landlord, it actually acts as a Tool Port (and for nautical services as a

Public Service Port). As a Landlord Port, CPA should facilitate port users by providing port infrastructure and leave commercial risks to private operators. As a Tool Port, CPA leases cranes and other equipment and superstructure to its operator(s) and provides nautical services via its affiliates. In its current form, the CPA is responsible for re-investments in and maintenance of the cranes and the terminal pavement, but considering the state of the assets, it is currently struggling with this task.

6) Within the CPA organisation focus is much on towage and piloting services instead of on typical Landlord tasks such as port development, port marketing, contract compliance, stakeholder management, et cetera. Consequently, these topics are not dealt with properly and as a result, the Government and the private sector have no reliable counter-part for port related business, leaving development opportunities untapped and leaving the government in regular need for external expertise on port-related matters.

7) The financial performance/sustainability, hence the focus, of the CPA strongly depends on nautical services.

8) Various port regulations are outdated and require modernization and alignment with each other and other documents.

9) Within the CPA organisation, responsibility for safety and order conflicts with the efficient provision of nautical services and the overall profit maximization of the corporatized port authority.

10) The statutory structure of CPA is in line with modern company law. CPA’s legal and financial authority is restricted by the government’s authority to instruct headlines of financial, social, economic and personnel policy. Furthermore, subject to approval by the General Meeting is any decision by the Board of Directors as the General Meeting may decide. Positions and responsibilities of Board of Directors and Supervisory Board should be clear and transparent, not only for the purpose of management of the company, but also for the purpose of arranging finance.

2 CPA is currently working on defining a new mission statement. 3 Dispute of land ownership between CDM and CPA has been solved



11) The government (through the Ministry of Transport, VVRP) has installed a Task Force to evaluate the public management and supervision of the waters. This Task Force shall advice the government regarding how to organize this management and supervision and what laws need to be updated and how to make them effective.

12) Following the change in of the island’s institutional position in 2010, the Maritime Authority (MAC) has executed a policy research study covering many aspects of the island’s maritime sector, including the MAC itself. In this document, “Koers voor onze Maritieme Toekomst”, various improvements for the performance of the MAC have been proposed; many of which still need to be implemented: o Modification of the structure of the MAC to create a clear separation between policy

development and inspection/enforcement tasks; o Development of a structured inspection program; o Improving the financial administration of the MAC o Involving classification societies to outsource certification and inspection tasks o Increasing the number of inspections to meet the required level o Expanding tonnage tax to shipping companies from countries of the European Economic Area and

the USA, include permanent establishments and mega-yachts and promote the attractive fiscal climate globally, with special focus on South America;

o Improving the legislative basis for the registry to target special tonnage such as (mega-)yachts and vessels under construction, by implementing various specific safety codes (e.g. CCSS and SCV);

o Improving promotion of the registry, not only for Dutch and European tonnage but also for regional and South American tonnage;

o Improving service level of the MAC and the registry: - improve the registration procedure of the registry through a (digital) one-stop-shop

concept; - improve the provision of relevant and up-to-date information; - develop a well-functioning complaints procedure;

o Developing new education and training initiatives for the logistics sector, port services and yachting sectors and provide internships.

13) Since Curaçao became a separate country within the Dutch Kingdom, the institutional position of the

Environment Agency has become unclear. Due to the negative status of various laws, including the General Police Regulation and due to a lack of resources, the agency is currently unable to cover its responsibilities in full. Other issues relate to the division of responsibilities amongst the MAC, the Harbourmaster and the agency and a lack of competences within the agency to cover complex issues such as with the refinery. There are however policy measure in place to improve the position and performance of the agency, following from the SEI initiative (USONA). These measures cover improving the environmental monitoring and compliance; and strengthening of the environmental agency.



2.2 Policy Recommendations

The following policy measures are considered applicable with regard to the port institutional structure:

1) CPA as Landlord Port Authority: commercial activities separated from CPA. To ensure the CPA can focus on its Landlord tasks and to allow operational entities (either private or state-owned) to focus on their operational performance, the following organizational changes are recommended:

a. Transfer of all operational assets to the private operators: Making the concessionaires responsible for all equipment and superstructure, including the cranes and the pavement. This move limits public spending on (much needed) maintenance work; it provides the operator with full control over its own business and it brings more balance in the public-private partnership between CPA and its concessionaires (see section 3.1 for more details)

b. Separation of KTK from CPA: shifting focus of the port authority from nautical services to Landlord tasks. By bringing KTK next to CPA, directly under MEO or another governmental organisation, the CPA may be able to move its focus from the efficient provision of nautical services to more relevant functions which are typically attributed to Landlord port authorities. In extension, divesting (part of) the shares of KTK to the private sector, may eventually render foreign capital and, if structured appropriately, may further enhance the operational performance of the towage company. Final positioning of KTK will be recommended in the implementation plan.

2) Introduction of a long term viable and sustainable business case for the CPA: following the recommended organizational changes, the financials of the port authority are expected to change. To ensure long term viability of the corporatized port authority it is recommended to investigate the business case of the landlord port authority, providing a financial basis for a revised port due and concession fee policy. The revised basis is needed to ensure that CPA can comply with existing and future maintenance obligations on port infrastructure; to ensure the CPA can (co-)invest in port business opportunities; and to ensure the CPA can fund its other daily landlord tasks such as contract compliance, port marketing, business development and stakeholder management.

3) Organisational separation of the Harbour Master: As a corporatized public body, the CPA basically functions as a private company aimed at the efficient allocation of resources and generation of profits for its shareholder(s). To this extent, the CPA is aimed at maximizing vessel traffic and cargo handling in the port. The Harbour Master is executing the important public task of ensuring that vessel traffic and cargo handling is executed safe and secure and in accordance with international and national legislation. As a result, there exists a natural conflict of interests between the Harbour Master (health, safety, security, and environment) and the CPA (profit). It seems logical to reposition the Harbour Master under the Ministry of Transport (VVRP). At VVRP the Harbour Master should work in close cooperation with the Maritime Authority (MAC) in aligning, upgrading and complying to all relevant regulations for health, safety, security and environment in the ports and the waters of Curaçao. For the environmental component of his mandate, close cooperation with the environmental agency (Milieudienst) is also relevant. However, to continue to ensure efficient operation of the port, it is recommended that the Harbour Master remains closely (but independently) involved in the CPA, in a similar way as he currently is. A detailed Service Level Agreement (SLA) is needed between the



Harbour Master and the CPA to ensure the sustainable performance and to protect the interests of both.

4) Developing a program for Competence Building at the Port Authority: The Landlord Port Authority is the designated public body for all types of port related matters. In its capacity and following its public mandate it should be a competent counterpart for both the private sector and the government for port-related matters such as performance improvements, environmental sustainability, and business development. To this end, the CPA needs to be able to engage with its concessionaires on their business and markets and it should be able to provide the government with its expert opinion in relation to business developments posited by governmental bodies and/or individuals. To internalize the required intelligence and expertise, CPA may wish to establish strategic partnerships with other (larger) port authorities or, more exotic, minority interests in CPA may be offered to an experienced port management company. From a practical and strategic perspective, a strategic partnership is recommended here. Further elaboration in implementation plan.

5) Introduction of a Regulatory Board or Competition Authority: As seen around the world, a small and isolated economy is susceptible to the negative effects of intimate relations amongst public and private entities and individuals. The economic risks should be endorsed by the government and general policy measures should be made to further protect the public interest. The (re-)establishment of a Competition Authority or Regulatory Board covering all relevant aspects of the sensitive economy is recommended. This authority or board may be involved in sensitive matters relevant to the entire economy. This includes the maritime cluster, in which it can deal with concession contract (re-) negotiations, contract compliance issues, arbitration and tariff policies. The organization should be independent and may be directly linked to international organizations such as the UNCTAD, the OECD, the ICN (International Competition Network) or ECA (European Competition Authorities).

6) Modernizing and aligning port legislation and regulations: As indicated many legal documents are currently outdated and misaligned with other regulations and policies. Some laws are even inactive as they are currently under negative status. The Ministry of Transport (VVRP) has recently established a working group which is currently dealing with these matters. “Borging Publieke Belangen in Havens en Binnenwateren” (“Protecting Public Interests in Ports and Inner Waters). It is recommended that MEO and the CPA become actively involved in the working group. Focus should also reside on the subsequent enforcement of the upgraded and aligned legislation.

More information: Report 1: Strategic Position More information: Report 2, Section 2: Selected Policy Options (Institutional Structure) Implementation: Report 3: Implementation Plans



3 Segment Policies



3.1 Containers (Existing Facilities)

Strategic Position: The container terminal is the country’s single most important connection to the global economy and since the island economy largely depends on imports; it can be considered the commercial lifeline of the country. CPS is the private operator and under a concession agreement with CPA, the company operates a monopolistic business. This monopolistic position is both formal and natural, following from specific exclusivity clauses in its current concession agreement and from the small market the facility serves. The concession agreement has forged a public-private partnership (PPP) between the private operator and the port authority. Despite CPA’s claims of being a Landlord port authority, this PPP is currently structured along the Tool Port management model: the private operator responsible for operations, labour and minor maintenance and the authorities are responsible for the infrastructure and the majority of the superstructure, including the cranes and pavement. In its current form, this PPP may be considered imbalanced: The private operator is able to generate significant profits, while the authorities are struggling to maintain the assets, especially the pavement and cranes. The contract provides the operator with relatively high tariff caps and a limited cost-base (labour, fuel and minor maintenance only). Combined with stable (low risk) trade levels, the operator can be considered privileged. Besides the perceived imbalance, the PPP lacks relevant incentives for contract performance of both partners and without a much needed focus on contract compliance, the PPP is currently not beneficial to the national economy. Policy Recommendations: Due to ongoing contract re-negotiations between CPA and CPS, this subject has remained outside detailed scope of this policy analysis. However, various policy recommendations with regards to the existing container business are made. The recommendations are aimed at restoring the observed PPP imbalance:

1) Increase competition for port services: Ideally, multiple operators compete for cargo in the port. Provided there is no collusion, competition IN the market is expected to drive down prices and improve service level for the clients. With only around 80,000 TEU per annum, the market on Curaçao is considered too small for this form of competition, especially in a Landlord system, where the operator is expected to invest in capital-intensive assets. With a lack of competition IN the market, the port authority may consider competition FOR the market by tendering the concession contract for the container terminal. In this system, (pre-)selected private operators are invited to bid for the concession contract in which the bidders are offered the monopoly, but in which the public interest is sufficiently protected. The CPA has however decided to revise and extend the concession agreement with the existing operator. This is a precarious situation in which the public interest needs to be safeguarded by the port authority and the negotiations should be aimed at better balancing the PPP between the CPS and the CPA. [CPA, supported by a newly established Competition Authority/Regulatory Board]



2) A few amendments to the concession contract should be considered to restore the balance between

the operator and the authority/economy. [CPA]: a. Increase responsibilities of the private operator: transferring the cranes and pavement to the

operator reduces the costs for the authorities (re-investment and maintenance). This transfer also allows the operator to better manage its own operational performance, which should be in accordance to a strict KPI regime, as formalized in the concession contract. It also transforms CPA to its envisaged landlord role. Increased responsibilities for the operator means that he needs to invest more and that he requires more time to recover these investments. Therefore, an increased contract term should be considered here as well.

b. Increase concession costs of the private operator: This is especially relevant in the case the CPA intends to remain responsible for the cranes and the pavement. Higher concession fees render additional income to the port authority, which it should use to meet its maintenance obligation for cranes, pavement and other infrastructure.

c. Reduce tariff caps for the private operator: alternative or parallel to increasing responsibilities and/or increasing concession fees, the revenue-base of the operator might be reduced by establishing lower maximum cargo handling and storage fees, while preventing the introduction of other types of fees by the operator.

3) Base contract contents on financial understanding: PPP agreements have a strong relation to the

financial position of the public and private partners. For structured contract negotiations aimed at protecting the public interest, the authority requires insight in the financial consequences of its position towards the private side and towards the economy it represents. Financial spreadsheet models are needed to assess the current situation and the positions during re-negotiations. [CPA]

4) Improve contract compliance: Through the concession contract, the private operator is granted a commercial mandate providing him with the monopoly for commercial cargo handling and storage. This position needs to be carefully monitored. The authority should make efforts to enforce performance and contract compliance of its private PPP partner. This relates to all clauses in the contract, including the tariffs which are charged, the maintenance and investment obligations, the key performance indicators, et cetera. In case CPA is transformed to an actual landlord, it can spend its resources on this important task of enforcing the concession contracts and ensuring its concessionaires perform to the best interest of the national economy, as should have been captured in the underlying concession agreement. [CPA, together with Customs, Harbour Master, Environmental Agency]

5) Ensure the protection of public interests: Since CPS is operating one of the most sensitive monopolies in the island’s transport sector, the CPA has a delicate task in re-negotiating the existing concession contract. Especially for such events where political power and economic interest may collide, an independent Competition Authority or Regulatory Board may be considered. More details on this have been described in section 2.2 point 5). [Government, CPA]

More information: Report 2, Section 2: Selected Policy Options (Institutional Structure)



3.2 Containers (Container Transshipment Hub)

Strategic Position: Although strategically located along existing maritime trade routes in the Caribbean basin, Curaçao’s position as a preferred location for a deep-sea container transhipment hub serving regional feeder ports remains disputable. With feeder-potential strongly depending on delayed but still expected port expansions elsewhere (Trinidad & Tobago) and on the highly uncertain political/economic future of its primary feeder destination (Venezuela), the outlook for Curaçao as a viable transshipment hub currently looks bleak. Especially since many of the threats and weaknesses remain outside direct control of the Government of Curaçao. Despite all the risks involved, the upside of a successful container transshipment centre on the island is clear: In the case the hub project is successfully implemented the island can expect significant direct and indirect financial and economic benefits. Policy Recommendations: The following policy measures are considered applicable with regard to the container transshipment hub:

1) The government is recommended to remain critical towards the hub potential of the island and it should remain reluctant to invest public funds in new port infrastructure for a business which strongly relies on sustainably capturing significant volumes of high-risk, foot-loose transshipment trade. [Government, CPA]

2) The government however is recommended to organize a market consultation, following this harbour policy project. During the market consultation, the hub project shall be presented to relevant market players and potential investors (terminal operators, shipping lines, infra funds). Their interest and the conditions for their involvement shall be tested and matched with the conditions of the Government. [Government, CPA]

3) Considering the continuous political and economic change which is visible throughout the region, circumstances and market interest may differ from time to time. The Government is therefore recommended to continuously monitor how the market perceives the island’s container transshipment potential. CPA, the landlord port authority which keeps track of relevant market developments in each segment is the logical entity that should be designated such a task. [CPA]

4) Independent from the outcome of the market consultation, the Landlord is recommended to allocate a (40-50ha) plot of waterfront land at Bullenbay for future development of a container terminal. The Government should ensure the CPA obtains the mandate over this land and the CPA should include this area in its overall Port Master Plan. Basic geological and bathymetrical research should be done to determine the exact location of this plot in the Bullenbay area and the Landlord (CPA) should continuously consider the outlook for container business vis-a-vis other port use in that area (e.g. dry and liquid bulk). [CPA, Government]

More information: Report 2, Section 2: Selected Policy Options (Curaçao Container Hub) Implementation: Report 3: Implementation Plans



3.3 Free Zones

Strategic Position: Curaçao has a long standing tradition with regards to its free zones. Although established back in the 1950s they have however claimed a modest role in the island’s economy and its maritime cluster. The island remains a small economy with a modest export potential. Attracting footloose industries of significant size remains challenging. This is largely due to the relatively high costs levels resulting from the island’s geographical position and the regionally high local labour costs and utility prices. The island currently has sufficient available space in its Economic Zones; especially in the free zone close to the airport, “Hato”. No drastic changes are expected towards the position of the free zones, unless a container transshipment hub is successfully developed on the island. In that future case, demand for free zone capacity might increase substantially and the landlord should take into account this demand when allocating land to such initiatives. Policy Recommendations: The following policy measures are considered applicable in the free zone segment:

1) The operational dynamics between the free zone at Koningsplein and the container terminal might be improved if there is an internal, bonded connection between them (resulting in cost savings due to the fact that no import duties are levied and time savings due to the fact that no customs interference is needed). Any operational issue currently observed may however also be solved through improved customs procedures on the interface of both. The landlord port authority, together with the landlord of the free zone should assume coordinating roles in this improvement. [CPA, CPS, Curinde, Customs]

2) Although the Economic Zone at Koningsplein is considered full, there is still sufficient space available at Hato. To this extent, there is no direct need to expand the area at Koningsplein. It is however highly recommended that Hato can be used in the same way as Koningsplein. This relates, amongst others, customs procedures and the service level of the customs in both zones (e.g. opening hours and bonded transfers). [Curinde, Customs, CPA, Government]

3) Many tenants of the free zones are allegedly involved in dealing with counterfeit products. The government should assess to which extent this is the case which actions to take. [Government, Customs, Curinde]

4) In case a container transshipment hub is actually being considered, sufficient space should be allocated for additional value-added activities at close proximity to the new terminal, preferably in a bonded customs zone. The landlord port authority should at that moment make an assessment of the required land, taking into account the short and long term. [CPA]

More information: Report 1: Strategic Position



3.4 Dry Bulk

Strategic Position: The market for dry bulk is limited on the island: minor volumes of imports are handled as general cargo by CPS in the Schottegat Area and by MCC at Fuikbay. The exports of dry bulk primarily relates to the Tafelberg quarry near Fuikbay. The export of scrap metal by the Antillean Scrap Company N.V. (ASC) is also mentioned here. No new markets and no significant growth in the existing markets are foreseen and the current facilities are able to effectively deal with demand. Despite the relatively small scale of operations, the economic position of this market should not be underestimated as they represent direct employment and downstream economic activities. Policy Recommendations: The following policy measures are considered applicable in the dry bulk segment:

1) Monitor and improve the provision of nautical services to vessels calling the remote port facilities at Fuikbay. [MCC with KTK, moderated by CPA]

2) Contain the cargo handling activities at Fuikbay, preventing conflicts with ecological assets and potential yachting/tourism activities in the area. [CPA Port Master Plan]

3) Only consider/negotiate landlord position at Fuikbay when the private operator (MCC) needs dredging or new berths. [CPA]

4) Integrate the control over the land of the scrap terminal in the landlord port authority (CPA) and establishing a modern landlease agreement between the operator and the landlord. [Central Government, CPA and ASC]

5) Issue environmental permits and ensure compliance through continuous monitoring and regular inspections. [Environmental Agency with private operators, moderated by CPA]

6) Allocating an area for yet unidentified future industrial development with adjacent dry bulk facilities. [preferably Bullenbay; CPA Port Master Plan]




3.5 Liquid Bulk

Strategic Position: The liquid bulk market in Curaçao primarily revolves around the petrochemical industry, which is of major economic importance to the island. Both the Isla refinery and the Bullenbay Oil Terminal generate substantial direct and indirect employment and collectively they generate a significant part of the vessel traffic to and from the island. Tanker vessels generate port dues for the CPA and constitute a basis for many economic activities in the maritime cluster, including bunkering (Curoil), ship repair (CDM) and nautical services (KTK and CPO). A major economic challenge in this segment is the ongoing issue with pollution through spills and fumes. The future of the refinery is currently uncertain: the PDVSA-RdK lease agreement is set to expire in 2019 and it is currently unclear if and how oil refining activities are retained on the island. From the perspective of a diversified maritime cluster, closure of the refinery is expected to have direct negative effects on the economic actors mentioned here. On the other hand, closure and soil remediation may provide the cluster with new (but highly uncertain) development opportunities on the available land and it solves the majority of the issues in relation to the pollution at the Schottegatbay and the St. Annabay. Detailed policy research on the future of the refinery is currently being executed. Policy Recommendations: The following policy measures are considered applicable in the liquid bulk segment:

1) Although CPA is currently not the landlord for the Refinery (RdK), it is recommended that it is actively involved in the definition of its future. As the port landlord, the CPA should assume an active role as cluster coordinator, representing the interests of all entities in the cluster, including the refinery and its relevant economic beneficiaries such as KTK, CPO, Curoil and CDM; but also the entities which have conflicting interest, such as the cruise and marina business (through the future Yachting Association) and the environmental agency. [CPA, RdK, Government]

2) From cluster perspective it is desirable to move the refinery to Bullenbay4, as this is expected to alleviate congestion at St. Annabay and it is expected to provide further cluster development opportunities for cruise, yachting and ship-repair within the Schottegatbay. [CPA, RdK, Government]

3) If the land of the refinery is continued to be used for port related purposes, it should eventually (after soil remediation) be integrated into the CPA, the landlord port authority. [CPA, RdK, Government]

4) As the port landlord, the CPA is considered the point-of-entry or spokesperson for a wide range of port related topics. This includes issues related to oil pollution in the ports waters. Currently vessel-owners and port operators which are affected by pollution of the port area are oblivious to where to report and end up in undefined bureaucratic processes. Although the CPA is not personally responsible for the spills, it should take on responsibility for these incidents and it should actively engage with the cluster to solve the issues. The financial compensation should of course be borne by the entity causing the spill (vessel owners, terminal operators, PDVSA, RdK), but as long no organization can be held responsible, fingers point in all directions and the problem persists. [CPA]

5) Market opportunities in this segment such as LNG and bio fuels should continuously be monitored and evaluated by the CPA. The landlord port authority is responsible for port master planning and port marketing and it should assume the role of intellectual counterpart for port and industrial development initiatives coming from the government, the population and the industry. [CPA]


4 However, recent research showed that the refinery cannot be moved (source: )



3.6 Cruise

Strategic Position: In line with many other island destinations in the Caribbean, the cruise industry together with regular hotel tourism is dominating the economy. In the island’s maritime cluster the role of the cruise industry is also evident, with strong links to other entities such as KTK, CPO and Curoil, but also with potential links to ship repair (CDM) and of course secondary industries servicing the cruise vessels or their passengers. The industry has a strong seasonal character with peaks in economic activities during high season from November to May. Market power in the industry resides at the cruise companies, which are very much capable of managing their costs and revenues. Cruise vessels often receive significant discounts on their port dues and a significant part of the passengers’ daily spending remains ‘on board’ of the vessels. A critical eye on the added value of cruising therefore remains needed. Despite these adverse industry characteristics, the economic activities relating to a flourishing cruise industry remain sizeable. Especially in case the island becomes a home-port for a cruise line, additional economic benefits are expected from the airport, from hotels and from the service industry (supplies, maintenance, repairs, waste management). With limited berthing capacity for the largest cruise vessels, Curaçao is currently missing out on opportunities. A second Megapier should resolve this issue to some extent. A long term vision on cruising is expected to bring effectiveness to future capacity issues and to other cluster-related developments. A future role for the Schottegatbay in the cruise market is not evident: currently the pollution prevents utilization of this part of the island and in the future it is expected that the majority of the large cruise liners calling the island is not able to navigate the nautical bottlenecks in the St. Annabay. Policy Recommendations: The following policy measures are considered applicable in the cruise segment:

1) Expand berthing capacity for large cruise vessels by developing the second Megapier in accordance to the development plan which is currently being prepared. [CPA]

2) Attract cruise line(s) to establish their home port at Curaçao. Assess under which conditions cruise lines would consider this and assess whether these requirements can be met. [CPA, MEO]

3) Develop an integral vision on the cruise industry, covering topics such as a long term capacity plan, its relation to receiving mega-yachts and retention/expansion of economic benefits of cruise for the island. [CPA, Curaçao Tourist Board, MEO]

4) Consider rehabilitation of the wharves on the Otrabanda-side between the Emmabridge and the Julianabridge aimed at cruise vessels and/or mega-yachts. [CPA]




3.7 Marinas

Strategic Position: In comparison with other Caribbean islands, the yachting tourism sector of Curaçao is currently underdeveloped. There is a limited number of berthing and anchorage facilities, there are limited yacht promotion activities and existing rules and regulations on the island are insufficiently tailored to the yachting sector. Nonetheless, Curaçao does have the potential to create a yachting sector that contributes to and diversifies the national economy and maritime cluster. The geographical location of the island in relation to hurricane trajectories is favourable for yacht storage during the hurricane season. Its international airport and neighbouring islands offer potential to attract charter tourists. The upcoming yacht sector in Central and South America offer the potential to capture the super yachts passing the southern edge of the Caribbean Basin. Policy Recommendations: Considering the potential, the government should aim to develop a complete yacht tourism product that results in a unique and enjoyable experience for the customer and that maximizes socio-economic value to the country. Although not active in the sector, the CPA is best positioned to assume the role of public authority in the development of marinas on the island. Together, the CPA and the government should assume an active role in the development of the marina in Het Waaigat and the waterfront area. The CPA should invest in anchorage facilities along the southern shores of the island in order to facilitate yachting in and around Curaçao. In other matters, the government and CPA should assume a facilitating role. The following policy measures are considered applicable in the marina segment:

1. Government of Curaçao, as majority shareholder, should steer the CPA towards the yachting sector. [Government, CPA]

2. The CPA should internalize marina expertise for the development of this new sector. [CPA] 3. CPA should develop a yachting infrastructure plan together with the private and public stakeholders,

in which the development of Het Waaigat and the installations of anchorage facilities are prioritized. [CPA, Stakeholders]

4. Given its public objectives and the catalyst function for the development of the yachting sector, the government and the CPA should actively participate in the development of Het Waaigat marina and waterfront area. [Government, CPA]

5. CPA should engage in efforts to initiate a Curaçao Yachting Association in which only private stakeholder are represented. [CPA]

6. The public authorities should create an easier registration process for visiting yacht tourists. [Government, CPA, MAC, Customs, HVI]

7. The public authorities should increase efforts to deter illegal anchoring and water pollution. [Government, CPA, MAC]

8. The government should stimulate the development of the yachting sector by reassessing rules and regulations concerning the sector, amending them when deemed appropriate and subsequently enforcing them and ensuring sustainable compliance. [Government]

More information: Report 2, Section 2: Selected Policy Options (Yachting & Marinas) Implementation: Report 3: Implementation Plans



3.8 Ferries

Strategic Position: In the past, many attempts have been made to establish a viable and sustainable ferry-link from the island to overseas destinations, but so far they have proven unsuccessful. Analyzing the regional ferry market, it is concluded that the potential for structural ferry business can be considered limited. From cargo perspective, Curaçao currently lacks the export volumes for a viable ferry trade within the region and this is only expected to change in the case the island successfully develops a transshipment hub. Import trade by ferry is also not expected to materialize on a significant scale as imports are predominantly sourced from distances outside viable ferry-reach (US/Europe/Far East) and it is not expected that this shall change dramatically over time. From passenger perspective, relevance is also very limited: Only a completely new type of tourist might be interested in visiting multiple destinations in the region during their holidays. Significant interest for a ferry connection is however expected from people visiting the mainland for cheap fuel, consumer products and contraband, which however may not be in the interest of the national economy. The sustained presence of the impressive HSS Discovery at Caracasbay may have fuelled the discussions of a ferry link connecting the island to overseas destinations. Considering the size of that vessel (large) and the expected trade on the route between Willemstad and Coro (modest), it is strongly doubted that the rumoured route was a sincere initiative and it may have paved the way for irrational claims and/or false hope on the ferry potential of the island. Policy Recommendations: The following policy measures are considered applicable in the ferry segment:

1) Learn from past attempts and continue to rationally assess the market potential for ferry links. The government and CPA should remain passive on this matter and only pursue active involvement once a sincere and viable initiative is launched by the private sector. [CPA, Government]

2) In that case, the CPA should verify the viability of the initiative and take a coordinating role to facilitate successful implementation. [CPA]

3) Following coordination by the CPA, the government needs to be responsive with its own immigration and customs procedures and engage in bilateral or even multilateral schemes facilitating efficient ferry trade. [CPA, Government]

4) No infrastructural investment should be made by the government (nor CPA), before sufficient guarantees are provided by the private sector (especially for cargo) or before the new tourist-concept has materialized (for passengers). [CPA, Government]

5) To further explore ways to attract tourists interested in ferry schemes, it is recommended that the project “1-ticket-multiple-destinations” is executed under coordination of MEO. Testing the concept with existing airline connections is recommended. [MEO]

6) One additional topic of relevance here are the prices of regional airline tickets: lower costs for these short flight may have positive effects for the economies involved. [MEO, VVRP]

More information: Report 2, Section 2: Selected Policy Options (Ferries)



3.9 Docking

Strategic Position: Historically, the Curaçao Dry Dock Company (CDM) has significantly contributed to the island’s economy. Together with the cruise industry and the refinery, it is one of the major industries diversifying the islands economy in general and the maritime cluster more specifically. CDM is a large employer on the island. The overall competitive position of CDM in the Caribbean region is excellent. The shipyard is strategically located next to existing trade routes, has sufficient facilities and is closely situated to the Panama Canal. The function of CDM is twofold; the shipyard attracts additional vessels to Curaçao and serves ships which are already calling the port for other business. The facility currently faces many challenges which should be tackled in the Turn-Around Plan which the company has recently developed. These challenges relate to the state of the assets, the education of personnel and the company’s ability to attract and efficiently serve its clients. Policy Recommendations: The following policy measures are considered applicable in the docking segment:

• The facility is in need of capital injections and a modern organizational structure. Private sector involvement seems inevitable to safeguard the future of the facility. The Turn-Around Plan should contain a clear strategy on how private capital and private operational excellence is introduced in the facility [CDM];

• The facility is an integral part of the port area of Curaçao. To this extent, CPA should be the designated Landlord5, overlooking its activities and facilitating its turn-around plan. Integrating all land on which the dockyard is situated within CPA is a recommended step to structure this relation in accordance to the Landlord ambitions [Government, CPA, CDM].

• Similar to the Isla refinery, the facility depends on sufficient trained and educated personnel. The government should ensure that locals receive sufficient education and together with CDM and the Isla Refinery, the government should organize specific training to ensure (local) labour is available for these two industrial employers. CPA, as the landlord should assume an active and coordinating role [Government, CPA, CDM, Isla Refinery, RdK];

• The pollution in the Schottegatbay limits the ability of the facility to service delicate tonnage such as cruise vessels and mega-yachts. To this extent, the future of the dockyard is connected to the future of the refinery and the pollution caused by its past and present. CPA as the designated landlord port authority should become more active in managing the causes and effects of the pollution, without directly bearing the financial burden of the pollution [CPA];

• In a future case in which the facility needs to expand or move to a location outside the Schottegatbay (due to increasing ship sizes or changing land policies), the landlord (CPA) should be actively involved to assess viability of such plan and the ensure integration in the overall port master plan of the island [CPA].


5 Dispute of land ownership between CDM and CPA has been solved



3.10 Bunkering

Strategic Position: For Curaçao the bunkering industry is an important addition to its broad maritime service profile. It complements other activities in the port and, if organized well, bunkering services can attract additional tonnage to the island (‘bunkers-only’) or in combination with service/repairs at CDM. Besides direct income to Curoil and PDVSA as main supplier, bunkering provides employment, tax income and direct income for CPA (port dues), CPO (pilotage) and KTK (towage for bunkering clients and bunker barges). Besides, by means of revenues it has a relatively strong contribution to national GDP (2.5%; source: RMG, 2007). Bunkering takes place ‘ex pipe’ at designated locations in the Schottegatbay, St. Annabay and the Megapier, while bunker barges are also deployed for bunkering in the port area and offshore. A considerable risk to the position of Curaçao as a bunkering hotspot is the possible closure of the refinery on the island. In that case Curoil becomes fully dependent on supplies from abroad and the number of vessels (and potential bunker clients) calling the port reduces dramatically. A rehabilitated refinery shall continue to attract potential bunkering clients and in case more modern (clean) fuels are then produced, Curoil’s dependence on foreign supplies further reduces. Policy Recommendations: The following policy measures are considered applicable in the bunkering segment:

1) Take into considerations the effects on the business of Curoil, when assessing the future of the refinery. [CPA, Curoil, Government]

2) Ensure the good condition of bunkering assets and equipment. [Environmental Agency, HVI, CPA] 3) Ensure operations in accordance to environmental permit. [Environmental Agency, CPA] 4) Explore possibilities to use vacant fuel tanks and jetty at Bullenbay for bunkering activities; both ‘ex

pipe’ and offshore bunkering. This is expected to reduce congestion and potential pollution at St. Annabay, providing space for cruise vessels and mega-yachts. Besides, this move is expected to be beneficial for the business profile of Curoil. [CPA, RdK and Curoil]







CURAÇAO HARBOUR POLICY

SECTION B: SELECTED POLICY OPTIONS



1 Institutional Structure



1.1 Introduction

1.1.1 Background

Curaçao has a long-lasting history regarding the development of the maritime cluster. It is one of the most diversified maritime clusters in the Caribbean and it has some major players within their boundaries. The maritime cluster generates much added value and employment for the Curaçao economy. Furthermore, Curaçao and its port authority CPA went through some development stages resulting in an institutional position which is in line with ‘best practice’- standards in the sector. Nevertheless, as is demonstrated in this section, improvements need to be incorporated in order to develop a port complex which is sustainable from economic and financial perspective. Normally, the process of port reform involves private sector participation in operations and investment in equipment and facilities. The public sector’s role is to own, develop, and maintain basic port infrastructure and common-user facilities. There is no standard recipe due to the diversity of ports, the variation of services they provide and the complexity of their institutional settings. In Curaçao the private sector is already well established and plays its own role. In order to realise the goals of the Curaçao Government, this analysis investigates whether the current Curaçao institutional framework can be further improved. The basis for the analysis is – as in any other port reform – the optimal allocation of responsibilities and risks between the private and public sector. Effective risk allocation requires risks to be assigned according to which party has the greater capacity to mitigate the risk. Following this analogy, the private sector should typically assume commercial and operational risks, while the public port authority takes on a facilitating role aimed at improving the overall performance of the maritime cluster and its constituents and coordinating private investments.

1.1.2 Reading Instructions

Following this introductory section, the institutional framework of the Curaçao Maritime Cluster is discussed, including the main legal documents. The ‘as is’ analysis included in the report of phase 1 of this project (“Strategic Position”) forms a basis for this section. The subsequent sections cover selected institutional topics followed by practical policy recommendations at. The topics are:

• the position of the CPA; • the position of the Harbour Master; • the position of KTK; • the mission statement of CPA; • the business case of CPA.

The final section concludes this chapter and contains detailed policy recommendations and an outlook to the implementation phase.



1.2 Institutional Framework Curaçao Maritime Cluster

Many stakeholders are involved in the development, management and operation of a port. The way the tasks, responsibilities and authorities are allocated amongst these stakeholders is determined by the institutional framework of the port. It concerns public and private interests and all rules, procedures and practices that structure and dictate their relationships. It covers political, economic, regulatory, administrative, legal and commercial considerations. The Institutional framework for Curaçao is concisely presented in the following figure:

Source: MTBS, Curaçao Harbour Policy 2012-2021, report 1: Strategic position

At the highest level, port governance in Curaçao is arranged by the so called Beheersovereenkomst, dated December 1984. An updated version is currently being developed. This Beheersovereenkomst assigns port management tasks from the national government of Curaçao to the Curaçao Ports Authority (CPA). In this section, the main recommendations for upcoming revisions are presented. The CPA is a separate limited company of which the shares are held by the national government (95 %), represented by the Ministry of Economic Development, and Korpodeko (5 %). The Articles of Association describe the purpose, the core business and the division of powers among Board of Directors, Supervisory Board and General Meeting of Shareholders. The CPA develops business activities via concession agreements, lease agreements and other types of contracts with the terminal and plant operators who are primarily private companies. These concessionaires pay concession and lease fees to the CPA and generate operational income by the handling and storage fees which they receive from shipping lines and other clients.

Shipping lines Shipping lines

Curacao Port Authority:Execution statutory core tasks

Nautical task (Harbor Master):• Havenreglement• Vaartuigenreglement• Binnenvaartverordening• Etc.

HavengeldLiggeld

Commercial task:• Concession agreements• Lease contracts

Concession & lease fees

Private services

Fees

National Government Curacao:Regulation: assignment of tasks to CPA, inspection terminals/vessels to MAC/Milieudienst,etc.

•Beheersovereenkomst (old/new)•Articles of Association

Director CPA pays account to shareholders

Harbor Master pays account to ‘Bevoegd gezag’

Nautical service providers(towage, pilotage)

Handling fees • Loodsdienstverordening• Concession agreement KtK

• 100 % ownership• AoA/Regulation

Terminal and Plant Operators



CPA is responsible for traffic guidance, arranged via port regulations. Closely related to safety and security in the port, traffic guidance is a typical public task. Besides vessel traffic guidance, CPA provides tug assistance and pilot services via its affiliates KTK and CPO. The Harbour Master, which forms part of the port authority, is responsible for traffic guidance, safety and order in the port basins. The Maritime Authority Curaçao (MAC), which forms part of the Ministry of VVRP, is responsible for inspection and supervision as well as the safety and order in the waters outside the port basins. Concerning the Harbour Master tasks, particularly three documents are relevant: the Havenreglement, the Vaartuigenverordening and the Binnenvaartverordening. Furthermore, for pilotage the Loodsdienstverordening and the Articles of Association of Curaçao Pilots Organisation (CPO) are relevant. For towage, the concession agreement between CPA and Kompania di Tou Korsou Holding (KTK) and KTK’s Articles of Association apply.

1.2.1 Port Regulations

In order to arrange the port activities in general and to ensure safety and security, three port regulations exist. These port regulations are old and have not been updated for many years. The original Havenreglement is dated 1936, latest review is dated 1975. The last review of the Vaartuigenverordening is dated 1952 and the latest review of the Binnenvaartverordening was conducted in 1976. Contents and division of authority among CPA, CPO, Harbour Master, Maritime Authority and the Environment Agency need reconsideration. Clear separation of tasks is required. Overlap in responsibilities between these public entities should be avoided in order to create an efficient and client oriented environment. Such an effective environment is one of the main prerequisites to attract private sector investments.

1.2.2 Beheersovereenkomst

The original (first) Beheersovereenkomst came into force on December 27, 1984. This document forms the legal basis for executing port management activities. This first Beheersovereenkomst is currently under discussion. Main reason is that costs of management of the port area are not recovered out of the proceeds of (berthing) dues, resulting in funding challenges for the CPA. Revision of the Beheersovereenkomst is based on the following principles:

• CPA is entitled to manage all relevant harbour basins, related real estate and territorial water; • all costs of management, maintenance, cleaning and recovery are on the account of CPA; • CPA is entitled to levy charges and other types of consideration in order to recover costs.

The public legal entity ‘Land of Curaçao’ is owner of the land underneath the waters known as St. Anna Bay, Waaigat, Schottegatbay, Caracasbay, Fuikbay, Spanish Water, St. Michiels Bay, Bullenbay, Piscadera Bay, Boca Gandi, San Juan and Santa Martha Bay, including all assets built on or attached to these (wharves, quays, jetties, bridges). These areas are defined as ‘Beheersgebieden’. The first Beheersovereenkomst assigns



management of the aforementioned Beheersgebieden to CPA. The revised Beheersovereenkomst arranges the same for the territorial waters at sea. The right to manage the Beheersgebieden includes commercial activities, stevedoring activities and towage, mooring and piloting activities. CPA is obliged to execute its management tasks in the interests of Curaçao and its economic development. The right to manage the Beheersgebieden is combined with a ‘Beheersplicht’: the obligation to keep them in good state, so use can be optimized. All costs concerning this ‘Beheersplicht’ are on the account of CPA. CPA is entitled to levy charges and other kinds of consideration, for which general terms and conditions apply. CPA is allowed to ask the land Curaçao for leasehold and usufruct rights. Granting of these will not unreasonably be withheld. Reconsideration of the ‘Beheersovereenkomst’ is urgently needed as can be experienced especially at the Spanish Water where problems persist with the enforcement of legislation. Boats are moored in the bay without permission and pollute the waters and the environment. Regulation and enforceability is lacking. CPA requires the authority to act as controlling entity in this situation. The nuisance should be eliminated in order to develop the Spanish Water as a preferred place for mooring leisure boats.

1.2.3 Working Group “Protecting Public Interests in Ports and Inner Waters”

As indicated many legal documents are currently outdated and misaligned with other regulations and policies. Some laws are even inactive as they are currently under negative status (since 10-10-10). The Ministry of Transport (VVRP) has recently established a working group which is currently dealing with these matters. “Borging Publieke Belangen in Havens en Binnenwateren” (“Protecting Public Interests in Ports and Inner Waters”). It is acknowledged that this initiative is the preferred platform to address the topics covered in this section. It is highly recommended that this working group acts as an interdepartmental working group, including representatives of the other governmental organisations such as Ministry of Economic Development, CPA and the Environment Agency.



1.3 Position Curaçao Port Authority

1.3.1 Current Situation

CPA is structured as a separate limited company with a two tier board according to Curaçao law, very much in line with Dutch corporate law. The Articles of Association do not restrict shareholding to public legal entities. The CPA has both commercial and public responsibilities. The main statutory tasks of the CPA are:

• development, construction, management, maintenance and operation of the Curaçao harbours and all related real estate, also for the purpose of promoting tourism;

• provide towage and pilotage services and maintain safety and security6.

Development and exploitation of ports is - to a large extend - a commercial activity that can be arranged according to principles for private companies. This is the case with CPA. Maintaining safety and security however is a strictly public task: any conflict of interest with commercial activities should be avoided. When positioned within a port authority, the Harbour Master should not report to the bodies of the company (Board of Directors, Supervisory Board, General Meeting of Shareholders), but directly to some public entity (in Curaçao, ‘Bevoegd Gezag’ this would be the Ministry of VVRP). The CPA has a two-tier board. Daily management of the CPA is assigned to a Board of Directors and supervision of the Board of Directors is realized through a Supervisory Board. Tasks, powers and responsibilities of the Board of Directors, the Supervisory Board and the General Meeting of Shareholders concerning investments, finance, business plans, annual accounts, appointing and dismissing of directors, entering into cooperation’s, et cetera are described in the Articles of Association. All bodies of the company are obliged to act according to the Curaçao Corporate Governance Code.

1.3.2 Current Port Management Model Curaçao

Ports are usually classified (Worldbank, Port Toolkit) into three categories: landlord ports, tool ports and service ports. In a typical landlord port the port authority provides land, furnished with berths and jetties, while superstructure and cargo handling is provided by private parties. If the port authority also provides the superstructure, like pavement, buildings, cranes and rolling equipment, it is classified as a tool port. And if the port authority also provides labour, handles the cargo by itself and thus acts as an integrated terminal operator, it is classified as a public service port. In a private service port all these responsibilities reside at the private sector and the role of the government is marginalized, as seen in the UK. Nautical services such as towage and pilotage can be provided by the public or the private sector.

6 These are two different tasks that ask for different governance structures and should be combined only with utmost care. Taking care of order and safety is a strictly public task; towage and pilotage are typically executed by privatised companies, aiming at (maximum) commercial profit.



Port management model Curaçao

Type Infrastructure Superstructure Operations Nautical services Service port: private Private Private Private Majority private Landlord port Public Private Private Public/private Tool port CPA CPA CPS CPA (KTK, CPO) Service port: public Public Public Public Majority public

The choice for the preferred port management model depends on various (local) considerations, including socio-economic structure, locations, types and volumes of cargo, need for finance, competitive environment, national dependency on port, et cetera. Some general strengths and weaknesses of the models can be recognized as described separately.

Classification of Ports

A public service port is entirely public in terms of ownership, financing, cost recovery and management and focuses entirely on the public interest. In this model, public sector is responsible for all port services, including the development of port infrastructure, operations and maintenance. It bears all risks and responsibilities, including the market risks (cargo volumes, prices, competition). The obvious strengths of public service ports are the unity of command and its strong focus on public interest. On the other hand there is no competition and there is no market orientation, which leads to waste of resources and does not stimulate innovation. It also strongly depends on public funding. Because the public sector provides all services, the authority receives all revenues from port dues and handling fees. In the tool port model the port authority is responsible for all port activities, except supply of labour and operational handling, which is carried out by private companies. The tools for the operations are provided by the public port authority, which therefore bears investment risks, both for infrastructure and equipment. Private involvement in a tool port usually is arranged through concession agreements or management/operations contracts. In the landlord port model the port authority is responsible for port planning, regulation and provision of infrastructure, while specialized private companies take care of operational activities such as cargo handling and nautical services. The main advantage of this model is that both public and private sector invest in their key assets and therefore both bear a significant part of the risk and have a strong incentive to optimize their performance. This management model usually leads to the most efficient way of cargo handling with a strong market orientation and it typical leads to long term commitment of operators to ports because of their own investments in superstructure. The landlord model also reduces the need for public funding. In the private service port model all infrastructure, superstructure and labour is in one private hand and as a result, there is hardly any need for public funding. Main downside of this model is that there is just one focus and that is the shareholder focus, the focus on making profit. It is hard to formulate and implement a public policy. The private service port model may lead to monopolies and bears the risk of abuse of power and speculation with land, so it asks for strong public regulation to protect public interest. The public role in port development after full privatisation is limited to general public tasks like supervision of the safety and environmental issues.

Source: MTBS; Curaçao Harbour Policy 2012-2021, report 1: Strategic Position



The relation between port management models and port financing is presented in the next figure. It shows the components of port infrastructure, the parties who supply them (left) and the sources of income from which the investments are financed (right).

• The bottom (orange) covers the basic infrastructure, supplied by the public sector. This typically includes connections to the sea and the hinterland, defence against the sea, et cetera. The costs of breakwaters, dikes and main roads are usually funded from the proceeds of taxes and in such cases, the responsibility for this typically resides at the Government.

• If a port authority supplies the infrastructure in the yellow bars, it is considered a landlord port. The costs of infrastructure for collective use, which is not rentable, are usually being paid out of the proceeds of port dues. If the infrastructure is dedicated to a specific user it is rentable. Therefore the costs of land works, quay walls, jetties, et cetera are usually being paid out of the proceeds of leases.

• If the port authority also supplies the superstructure in the green bars, it is a tool port and if also labour is included it is a public service port. The costs of superstructure and labour have to be financed out of private sources, typically cargo handling and storage fees charged by the operator to its clients (typically shipping lines).

Curaçao: According to publications on its website CPA is considered a landlord port authority. However, CPA is also responsible for (part of) the superstructure and the equipment, which it makes available to the private operator. Besides, CPA also provides nautical services through KTK (and CPO). It therefore resembles a tool port. For the longer term, CPA is striving to act along the principles of the landlord model: The actual management of core assets is transferred to the legal entity CPA NV. CPA is granted with legal and financial autonomy, though some clauses in the Articles of Association imply far reaching government control.

Supplier Components port infrastructure Funding from:

Private sector Private sources



Port authority Lease

Port authority Port dues

Public sector Taxes, PPS(State, province)

Infrastructure, rentable(land, berths, quay walls, jetties)

Connections to sea and hinterland, defense against sea(breakwaters, dikes, sea locks, main roads/canals/river/rail crossing port)

Superstructure, not movable(pavement, buildings, crane ways, sheds, conveyor belts)

Superstructure, movable(cranes, rolling equipment, IT)

Infrastructure, not rentable(basins, inner roads/rail/bridges/locks/viaducts, nautical infra)

Labour, management(workforce)



Port Reform: In recent decades cargo handling has been largely outsourced by public port authorities to the private sector. The management models of many ports in the world changed from the public service port or tool port to landlord port. As just discussed, the operations in a landlord port are transferred to the private operator. This leads to greater efficiency in cargo handling and extra capital availability from the private investor. Moreover, it provides a basis for the port authority to establish itself as a cluster coordinator, facilitating port efficiency improvements and port developments. These advantages are also recognized by the World Bank, Asian Development Bank, and the EU. It is generally recognized that value creation can be realized through port management model reform: In a landlord system an optimal allocation between the public and private sector is being pursued. The public objectives to pursue public-private partnerships (PPPs) include:

• introduction of private sector finance; • increasing efficiency through operational excellence; • clear separation of tasks between regulator and operator; • optimal allocation of the risks involved; • attracting additional volume through market players.

The private objectives to enter into these PPP initiatives include:

• financial: a solid Return on Investment; • strategic: securing capacity in the market; • value: long-term growth investments in market with relatively high entrance barriers.

The switch of ports to a landlord management model has various benefits:

1. Leveraged allocation of responsibilities and risks between public and private partners; transfer of risks to construction, finance, and operation of the facility to the private sector;

2. Better and more efficient port management; 3. Increased service levels for infrastructure users; 4. Increased efficiency in operations through training and labour retrenchment; 5. Increased competitive power; 6. Increased potential for growth; 7. Improved allocation of limited public funds in capital intensive industry; 8. The attraction and use of foreign investment and technology.



1.3.3 Required Changes for a Consistent Institutional Position

Curaçao: By leasing cranes and equipment to concessionaires and providing nautical services via its affiliates, CPA actually acts as tool port and for nautical services as a public service port. This situation has lead to a sub-optimal port environment:

• It does not fully benefit from the specific know-how of the private sector in operations; • Commercial risks are left within the CPA who does not control these risks; • Public funds are used for investments in and maintenance of superstructure and equipment, while

normally these expenses can also be absorbed by the private sector; • Too much governmental control and influence in operations which lead to a sub-optimal business

environment for existing and potential operators/investors. The ship-to-shore gantry cranes and other equipment at the container terminal are provided by the CPA. The cranes are around 30 years old and are approaching their operational lifetime. Regular breakdowns have a negative impact on the operation through decreased service levels, low productivity-levels, increased vessel turnaround times and high costs. An often heard argument from the public authorities to remain responsible for the equipment of the terminal is that they would like to have some kind of control / influence in the operations. The desired level of control can however much better be arranged via the concession agreement instead of through the provision of equipment. The way this can be arranged via concession agreements is further elaborated in section 1.7.2. The CPA puts much focus on tug service (and to a lesser extent to pilotage services). Typically the balance sheet of a port authority is dominated by tangible fixed assets such as port areas (land), port basins (water) and nautical infrastructure such as breakwaters, access channels, quay wall and jetties. Contrary to most port authorities the tangible fixed assets of CPA are dominated (61%) by tugs and pilot boats. These services also generate the greater part of the annual revenues of CPA (respectively 63% and 7%). Typically, in landlord ports, the dominating revenue items are port dues and land lease fees. As a consequence, a large part of the CPA management focus resides on the nautical services they provide through KTK (and CPO). As a consequence, CPA has only very limited time and resources left for other typical port authority core functions, such port planning, port marketing, market research, contract management, stakeholder management and ensuring the operators can perform and are in fact performing according to their contract. The consequences can be observed on a regular basis:

• Lack of an overall and integrated port development plan; causing the central government to continuously depend on external experts port-related intelligence (including this harbour policy plan);

• No enforcement of concession agreements and a poor focus on efficiency improvements; • No enforcement of laws and regulations which lead to undesirable situations, e.g. at the Spanish

Water; • Too little attention for commercial activities of the port, i.e. canvassing of new clients and promotion

of the Curaçao ports.



Therefore the following items are recommended in relation to the institutional position of CPA:

• All equipment and superstructure which is required for the terminal operations should be procured, owned and maintained by the private sector;

• A more balanced approach should be taken into account regarding tug services and core (landlord) port authority tasks. One of the options is to separate or even divest the tug services. This and other options are elaborated in section 1.5 Position KTK.

Following these recommendations, the CPA becomes a Port Authority which is truly organised along the landlord principles and in accordance to international best practises. Governmental control The land of Curaçao owns 95% of the shares in the CPA. The CPA – as a corporatized Port Authority – is granted with legal and financial autonomy. Nevertheless, especially clause 13.8.b of the Articles of Association implies far reaching government control. In short, the General Meeting (in which the Government is represented by the Minister of Economic Development) can reconsider any decision which was taken by the Board of Directors of the CPA. This hampers effective decision making and may deter financiers providing CPA with credit facilities. Besides, it may also deter private PPP partners, when they assess the position of their public partner in their investment project.

Articles of Association CPA, Clause 13.8:

The following are subject to approval from the General Meeting: a. any decision that might fundamentally change the identity or character of the company; b. any decision by the Board of Directors as the General Meeting may decide; c. to exercise controlling rights on shares, held by the Company in the capital of companies with which the Company is linked in a group, insofar as this concerns granting approval to the Board of Directors of such a company for a decision that would require approval on the basis of this Article if the resolution were to be passed by the Board of Directors of the Company. Allocation of tasks between CPA / MAC / Environmental Agency The allocation of the public tasks and responsibilities which relate to nautical safety and enforcement of rules and regulations between CPA/Harbour Master, MAC and the Environment Agency are often unclear. Especially after 10-10-10 when Curaçao became an autonomous country within the Kingdom of the Netherlands, the division of tasks and responsibilities, including the authorities for decision making and the governance structure is unclear. A striking example is the lack of clarity regarding tasks and responsibilities for reporting of the (effects of) pollution in the Schottegat. The Ministry of Transport (VVRP) is currently preparing a working group to create intelligence on these topics. It is highly recommended that this working group acts as an interdepartmental working group, including representatives of the other governmental organisations such as Ministry of Economic Development, CPA and the Environment Agency.



1.4 Position Harbour Master


In Curaçao, the Harbour Master heads the Harbour Master’s office, which is an independent department within the CPA. Employees of this department are however on the payroll of the CPA. The Harbour Master is accountable to its competent authority, which is the Minister of VVRP. The Harbour Master is also the head of the Curaçao Pilots Organization (CPO), a limited liability company under CPA, responsible for pilotage. Kompania di Tou Korsou (KTK), another 100 % affiliate of CPA, is responsible for towage. Included in this mandate are the responsibilities for mooring and unmooring. There is no organisational relation between the Harbour Master and KTK. The Harbour Master is responsible for ensuring the efficient, safe and secure flow of traffic through port and coastal waters and, on behalf of the government or port authority, for coordinating all marine services. When part of a port authority, the harbourmaster usually also serves as head of the pilotage service. In the event that the pilotage service is not part of the port authority, the harbourmaster is responsible for coordination between this service and port users. Finally, the harbourmaster is sometimes responsible for regulatory oversight of the carriage and storage of dangerous goods in the port area as well as for ensuring the proper use of port reception facilities. In Curaçao, the Harbour Master is responsible for execution of the harbourmaster tasks, which include traffic guidance and safety and order on water in the port areas. The Maritime Authority Curaçao (MAC), which resides within the Ministry of Transport (VVRP), is responsible for inspection and supervision (port-state control and flag-state control) and safety and order on water outside the port areas. Besides its nautical tasks, the Harbour Master currently holds the responsibility for the ship register for smaller vessels (i.e. fishery boats and recreational boats). This responsibility is however being transferred to the MAC. With the primary nautical services provided through CPA’s affiliates CPO and KTK, two kinds of tension may occur:

• Tension between the Harbour Master’s responsibility for safety and security on one hand and the business (profit) focus of CPO and KTK on the other hand;

• Tension between the Harbour Master’s authority to instruct any entity in the port for safety and security purposes on the one hand; and his responsibilities to the efficient execution of nautical services (towage) on the other hand.

1.4.2 Recommended Changes to the Position of the Harbour Master

The Harbour Master should be free to operate in his jurisdiction as independently as possible from the commercial management of the port. To carry out emergency measures in the event of accidents and industrial disasters, the Harbour Master should have full freedom of action and possess the ultimate authority and responsibility for directing all necessary activities.



In view of the public character of the Harbour Master’s responsibilities, this function is rarely privatized. To do so would raise a conflict of interest between public tasks (safety, environment, and equal treatment under the law) and private interests within the port industry. For example, since turn-around-time of ships is an important cost factor, the Harbour Master shall always be under pressure to grant preferential treatment to shipping lines. Impartial and consistent application of operational safety measures for ships is essential to the safe functioning of any port. The Harbour Master therefore should not function within a purely commercial environment, but must have freedom of action to carry out public tasks in an unimpeded and unbiased manner. As limited company owned by the Curaçao government, CPA functions as an enterprise. It has corporate objectives such as profit maximization. Therefore the traditional public tasks of the port authority should be organised in a different manner. There are several options, which are seen in ports worldwide: • Within the port authority (CPA) under a service level agreement, reporting to the Ministry of Transport

(VVRP). This is the structure in for example Rotterdam. • Within the maritime authority (MAC), under the responsibility of the Ministry of transport (VVRP). This is

the structure in for example Kenya. • As an independent Harbour Master bureau, reporting to the Ministry of Transport (VVRP). This is the

structure in for example Bermuda. General conclusion here is that it does not matter how the Harbour Master’s function has been organized, as long as the Harbour Master and its staff should be able to do his public duties fully independent from any commercial activity of the port. Since the Harbour Master is already physically positioned within the CPA-organisation, it has advantages to keep this situation as it is. Synergies exist having the Harbour Master within the port authority. Strategic planning of the Curaçao harbours, collecting port dues and other day-to-day operations partly contain activities which are carried out by, or in close cooperation with the Harbour Master and its staff. Therefore it is recommended not to physically separate the Harbour Master functions and landlord port authority functions. This also applies in a corporatized environment. In that case a service level agreement between the Harbour Master and the Port Authority should be in place to avoid any potential conflict of interest. This structure can be compared to the system in Rotterdam. In the official regulations for the Executive Board of the Rotterdam Port Authority it has been addressed that “the Harbour Master has his own responsibility for the performance/exercising of public duties and powers and his own advisory authority towards the Executive Board (of the port authority) with regard to inter alia the smooth, safe, clean and secure handling of shipping and the security of port facilities. The Chief Operational Officer (COO) (of the port authority) shall make people and resources available to the Harbour Master in accordance with the service level agreement concerned on the basis of the number of people and quantity of resources must be sufficient to ensure proper performance of the public duties”. In Curaçao the Harbour Master also heads the CPO. Pilotage services are an essential part of traffic management and contain public duties. These services are sometimes privatized; however in most cases the public authorities are strongly involved in these operations. It is not recommended to privatize or corporatize these activities; privatization carries the risk of creating a private sector monopoly and a conflict of interest between commerce and safety. Furthermore such a monopoly has the ability to bring port operations to a complete stop which represents a major risk for ports.



1.5 Position KTK


On Curaçao, tug assistance is provided by Kompania di Tou Kòrsou (KTK), a 100% subsidiary of CPA. KTK was established in 1985 when CPA took over the responsibilities for towage from Shell. KTK is a state-owned towage company with the CPA as its sole shareholder. KTK holds a concession with CPA, providing it with the monopoly (since 2004) on towage and mooring services in all ports of Curaçao. The company has its own fleet of 9 tug boats and 6 mooring vessels. The mooring boats are also used to transport pilots to and from vessels calling the ports of Curaçao. KTK has operations around the island (80% of KTK turnover, following from its concession with CPA) and it has international operations (20% of turnover). The local activities basically relate to provision of tug assistance, mooring services and the transport of pilots to vessels arriving at or departing from ports in Curaçao. The international activities relate to moving floating craft from A to B and to harbour towage provided to clients in ports in the region. Besides these regular operations, KTK also provides services to vessels in distress in the region. Since 1999, KTK became involved in international operations, with temporary towage projects in the region. Most notable here is KTKs recent attempt to penetrate the market in Panama. KTK established itself in Panama and signed a five year agreement with the shipping line Evergreen to provide tug assistance on an exclusive basis. KTK allocated two tugs to this venture, but after having incurred (substantial) commercial losses, the contract was cancelled and the venture was dissolved in August 2011. The tugs are now leased out to the Maveco Group, which is using the vessels in Venezuelan ports. On average, KTK provides the following services around Curaçao on an annual basis:

• 2,500 tug assistances (around 80% of all vessels larger than 50 GT calling Curaçao); • 3,200 mooring assistances (nearly 100% of all vessels larger than 50 GT calling Curaçao).

From the point of financial performance, it should be noted here that the operations of KTK contribute significantly to the overall turnover of CPA: 60% of annual turnover of CPA results from towage services provided by its subsidiary KTK. The competitive environment around Curaçao is clear: KTK has an exclusive position and no other towage organizations are allowed to provide towage services in the ports if Curaçao.



1.5.2 Recommended Changes to the Position of KTK

Towage is typically not carried out by port authorities, but by independent state-owned or private firms. Some of them are local firms providing services in a single port and some of them are global players, providing services in multiple ports in a country or even as a global business (e.g. Smit, Svitzer, Fairplay). Between the port authority and the towage company some form of license or concession is used to ensure operational performance and to protect the market (if deemed necessary). Through its 100% shareholding in KTK, CPA is basically responsible for tug services in Curaçao. This structure is considered not to the benefit of the overall maritime cluster:

• KTKs international activities leave the company and its shareholder (CPA) exposed to significant commercial and financial risks. These risks should not be underestimated, when considering KTK’s overall contribution to its owner’s top-line: over 60% of CPA’s revenues come from KTK. Compared to the exclusive towage mandate in Curaçao, the international business is highly competitive and therefore risky. This risk should not be borne by the landlord port authority.

• With such strong financial dependence on towage, CPA has too much focus on this part of the business. As a result the Port Authority is unable to attend to its Landlord tasks sufficiently. Few resources are spend by CPA on highly relevant topics such as enforcing (concession) contracts, facilitating efficiency improvements, land management, port marketing, stakeholder management and market analysis.

o The current mission statement of CPA is a testament to this imbalance: it primarily positions the Port Authority as the provider of efficient towage services in the ports of Curaçao (see 1.6).

o Another example further stresses this point: The government, individual politicians and the society in general currently have no internal counterpart for port business development matters. This includes topics such as the transshipment potential of the island, the future of the Isla refinery, LNG potential, the development of the marina sector, the ferry potential et cetera. The landlord port authority should cover, or at least coordinate, these strategic matters, reducing the need to involve external expertise for such matters.

o A third example of this mismatch concerns ongoing issues in the ports of Curaçao. Topics such as the pollution in the Schottegat Bay, the performance of the container terminal and the busy traffic in the St. Anna Bay receive far too less attention from the landlord port authority then they deserve. The tugs are however performing fine.

Considering the above it is strongly recommended that KTK is separated from CPA. It significantly reduces the risk exposure of the port authority and it allows the CPA to fully focus on its tasks as landlord port authority and the primary cluster coordinator.

Practically the separation is not expected to be a difficult task: After setting-up or upgrading the concession agreement between CPA and KTK, the shares of the company can either be moved directly under MEO or another governmental organisation (next to CPA itself) or it may be decided to sell (part of) the shares to private sector.



The concession between CPA and KTK needs to be established/upgraded to protect the public interests by ensuring towage service levels in the ports of Curaçao and to provide sufficient protection to the separated and possibly privatized tug company (exclusivity rights). With regards to securing service levels, the following topics should be covered in the agreement (amongst others):

• minimum client waiting times • minimum crew size; • minimum bollard pull; • communication equipment and channels; • roles and responsibilities relating to the vessel traffic management system; • tariffs charged by KTK to its clients (shipping lines), which need to be regulated; • concession fees from KTK to CPA.

Considering the possible involvement of the private sector, a few observations are made:

• In the past the tug services in Curaçao were already provided successfully by the private sector. Both Smit and Svitzer were active in that respect.

• Selling any shares should be done following a competitive tender procedure, through which the CPA can ensure protection of the public interest and a maximization of the value from such deal.

• Any income from selling (part of) the shares of KTK to the private sector may be used by CPA to invest in other promising sectors such as the marina business, or, in case the container cranes are not transferred to CPS, funds may be used to finance the rehabilitation of the cranes and the pavement of the terminal.

• When preparing financial bids, the private sector shall always takes into account uncertainties of the underlying business. This includes the uncertainty of the future of the Isla refinery. With over 80% of overall towage business 7sourced from the petrochemical cluster at Isla and Bullenbay, (temporary) closure of the refinery would have a significant negative impact on the demand for towage and therefore on the performance of the company and the value of the shares. From a strategic point of view, it may be decided to postpone any private involvement until there is more clarity on this future. Separation of KTK from CPA is still however recommended at this moment.

7 In 2011 over 500 vessels were handled at the refinery all requiring tug assistance, the same applies for over 300 vessels which moored at the Bullenbay Oil Terminal.



1.6 Mission Statement Curaçao Port Authority


In its vision, CPA is “...the preferred choice for customers in the Caribbean and Central American region by providing the highest expertise, quality and most reliable and professional service to all in-harbour, coastal and ocean towage, salvage and emergency response jobs, barge and pontoon transportation and other jobs.” The mission statement covers activities of CPA, KTK and CPO and states its main purpose of existence is:

• to provide marine towage services to facilitate mooring and unmooring of vessels; • to expand the commercial opportunities of the company with strategic marketing of towage services

to be provided in the region, on demand and in full compliance with customer requirements and industry codes of practice.

• to assist in the overall CPA efforts to attain unprecedented levels of social and economical benefits of our ports with the development and transformation of the existing Curaçao Harbour into the most unique international gateway or hub for cargo and cruise vessels of the southern Caribbean region.

• to operate our entire fleet in a safe, environmentally responsible, competitive manner under continuous improvement criteria in all our work processes.

• to attract develop and retain highly qualified, committed and motivated people; • to have an ethical commitment towards our people, partners, stakeholders, suppliers, clients,

institutions and the community of Curaçao. Both in its vision and its mission statement, emphasis is put on its objective to be seen as a reliable and professional provider of tug services. Since Curaçao’s economy and standard of living is heavily dependent on imported goods one would expect phrases like efficient and professional development and management of the port in order to facilitate smooth, reliable and efficient handling of cargo flows against lowest possible costs to be key in vision and mission. The statutory core business of CPA is however:

• Development, construction, management, maintenance and operation of the Curaçao harbours and all related real estate, also for the purpose of promoting tourism;

• To provide towage and pilotage services and maintain safety and security.



1.6.2 Recommended Changes to the Mission Statement of CPA

Great diversity exists among missions and objectives of port authorities. Economic objectives, such as maximisation of handled tonnage and added economic value are the most common. Port Authorities have three traditional functions, i.e. the landlord, the regulator and the operator. Port authorities gradually moved away from providing cargo-handling services. These have in most cases been privatised or liberalised. Operational activities of port authorities therefore focus mainly on the provision of those ancillary services which are to the benefit of the entire port community, such as provision of public utilities, maintenance dredging and in some cases pilotage. The landlord function can be considered as the principal function of contemporary port authorities. Port authorities are generally restricted in their ability to sell port land. The landlord function therefore relates essentially to the ability to lease land to third parties, which most port authorities are able to do with the underlying lease or concession contracts as the most important governance tools they have at their disposal. The increased focus on negative externalities of port operations has reinforced the regulator role of port authorities in the fields of environment, safety and security. The Harbour Master’s office plays an important role in this. Many port authorities do have their own safety, security and environmental departments and most of them also issue their own regulations in these three fields, but there are not many that go beyond mere transposition of legal requirements. Very few port authorities transpose their functions beyond their own borders, whether this concerns investment in hinterland networks, direct investment in other ports, providing certain services in other ports or export of regulatory and other expertise.

Mission Statement Port of Rotterdam Authority

“The Port of Rotterdam Authority develops, in partnership, the world-class European port”. We continuously improve the port of Rotterdam, to make it the most efficient, safe and sustainable port in the world. We create value for customers by developing logistical chains, networks and clusters. We do this in Europe as well as in growth markets worldwide. The Port Authority is an entrepreneurial port developer, and as such the partner for world-class customers in the following market segments: the petrochemical industry, energy (oil and gas), transport & logistics. In this way, we strengthen the competitive position of the Netherlands as a whole Be the entrepreneurial developer: In the past, the Port Authority took on new roles to improve the quality of the homebase. Examples include Portbase, the Traffic Management Company, Keyrail and property development. In the period ahead, the Port Authority will continue to create value for clients. We do this by fleshing out new roles and taking on new tasks, mainly in connection with the construction and utilisation of infrastructure.

Source: website Port of Rotterdam Authority Most striking is that the Port of Rotterdam Authority sees itself as a catalyst for improving the quality of Rotterdam as node and part of the logistical chain for all seaborne trade, which is destined to or coming from the hinterland. It has economical goals for the region and has public tasks. Operations are left to the private sector.



Mission Statement of the Port Authority of Jamaica Our Mission: “Developers and regulators of the world class facilities and services that ensure the sustainable growth of Jamaica’s maritime industry and maximum satisfaction of all stakeholders.” Our Vision: “The western hemisphere’s beacon of maritime excellence” The Port Authority of Jamaica is a statutory corporation established by the Port Authority Act of 1972. It is the principle maritime agency responsible for the regulation and development of Jamaica’s port and shipping industry. The Port Authority is responsible for the safety of all vessels navigating the ports of entry and regulation of the tariffs charged on goods passing through the public wharves.

Source: website Port Authority of Jamaica In line with the mission statement of Rotterdam, the main characteristics of this mission statement are again a mixture of public, economic and facilitating/regulating roles. Mission Statement of CPA The current mission statement of CPA is already presented in the previous section. Focus is on providing tug services and it also contains some economic objectives. It does however not relate to the core business of a port authority, i.e. managing and developing the land of the port, ensuring all operators can and will perform according to industry best practices and the safe and secure traffic management (besides a statement regarding the safe operation of CPA’s own fleet). Also a vision on port development is lacking. In line with the recommendations on the position of KTK and the actual adoption of landlord port management model, it is recommended to focus the mission statement on the typical landlord port authority activities:

• Role of the port authority (and sometimes other stakeholders) to realize the objectives. • Contribution to the economic development of the Island in general and to the maritime cluster more

specific; • Providing the necessary basic infrastructure; • Nautical management (safety and security in the port); • A vision on the development of the port (hub, regional port, satellite port, which commodities,

logistics and/or industrial developments, etc);



1.7 Business Case Curaçao Port Authority


Costs of port management are currently not recovered out of proceeds of dues and charges, resulting in funding problems. Furthermore, the profit and loss accounts of the CPA are dominated by the tug services, both at the income side as at the costs side. This makes the CPA quite vulnerable and largely exposed to commercial risks.

1.7.2 Recommended Changes to the Business Case of CPA

In order to establish a (financial) healthy Port Authority, it requires a long term viable and sustainable business case. One of the achievements to be strived for is full cost recovery. Therefore it is recommended to:

1. Increase overall revenues: o land lease: by concentrating all land in CPA and charging suitable rates to the

concessionaires/lessees o royalties: by attracting more cargo and charging a decent per ton/TEU rates to the operators o berth dues &port dues; attracting more trade to the port

2. Involve strategic (private) partners who: o absorb and manage commercial risks o invest private capital in port assets o improve operational service levels o reduce and rationalize cost levels o improve competitive position o attract more cargo and vessels

3. Develop an integrated Port Development Plan which defines the attractive port sectors and its interrelations; and which is used to allocate land to future port business, protecting them from other use.

4. Engage in integral management of all port areas (‘Beheersgebieden’, e.g. Spanish Water); 5. Integrate and concentrate rights to develop port related land within CPA.

These changes relate to the two functions of the Landlord port authority:

1) The landlord port authority as the contract manager 2) The landlord port authority as the regulatory authority



Contract Management Increasing the revenue base and attracting strategic partners can be arranged through ‘value based’ contract and transaction management. The concession agreement is the most appropriate instrument to arrange these items. The following principles should be incorporated in any new or upgraded concession agreement that is closed between the CPA and a private operator/investor. Intelligent risk allocation: The private sector is well positioned, given its technical know-how and business process management skills, to take responsibility for the operation of the terminal (i.e. take on the operating risks). The private sector is however not willing to take just any risk. It shall not take on sovereign or political risks. These risks are than best left to the government. Intelligent risk allocation, based on principle that the party best able to manage these risks should indeed bear them, reduces costs and increases value-for-money. As a consequence, for the situation in Curaçao this means that the cranes and equipment at the container terminal should be transferred from the CPA to the private operator (CPS). Performance-based payment mechanism: The private sector can be best incentivized through both “carrots and sticks”. Above-par performance should improve the private sector's profits (e.g. through discounts on concession fees). Sub-par performance should trigger penalties, which suppresses the private sector's financial performance. Such penalties should be set to ‘tickle’, then ‘hurt’, but not ‘kill’ a private operator. Output specifications: Output-based contracting leaves room for the private sector to decide how to deliver the required services. This (i) provides the government value-for-money (as it has the opportunity to award the contract to the bid that creates the most value); and (ii) allows the private sector to maximize its profits (subject, of course, to its compliance with the output specifications). In essence, output contracting allows the government to tap into the private sector's creativity to deliver the agreed public service at lower costs, or to provide better quality at the same cost. Key Performance Indicators (KPI’s) should be included in the concession agreement. These KPI’s secure certain service levels, such as productivity of the terminal, vessel waiting times, vessel turn-around-times, truck turn-around times or certain maintenance levels. Other conditions: The term of the contract is an important item for a private investor. The term should be based on the expected pay-back time of the investments (capex) and it should allow the operator/investor to secure a decent return on its investments. Currently unlimited exclusivity rights in time, trade and place exist in the concession agreement. Provision of these kinds of rights should be done in a diligent manner: It shall create monopoly-situations which could result in higher (non-competitive) handling fees and decreased service levels, due to a lack of competition. Moreover, it shall be legally impossible to attract new (international) investors.



Competition / functioning market: The benefits of involving the private sector through a PPP arrangement only materializes if there is an adequate number of private sector entities which are willing and able, to provide the envisaged public service. The reason is that this creates a competitive environment for tendering the public service. This should provide the public sector greater value-for-money. As a result:

1. With the optimal allocation of risks between the contract parties and the introduction of value based concession agreements, significant value can be created financially and economically.

2. A public awarding procedure can introduce competition which can result in more attractive conditions for the conceding authority.

Rent is a fixed income component for leasing land to concessionaires. These revenues contain a low risk profile, due to the fixed character. Port Dues represent a higher risk profile. Port Dues depend on the amount of vessels calling at Curaçao and therefore contain a commercial risk. With value-based contract management, combined with a competitive tender procedure, low risk revenues (rent) can be increased. In addition, the port dues (higher risk) can be transferred into lower risk revenues when the CPA requires volume guarantees from private investors and thus creating economic value. The first concession agreement that can be established around these principles is the new contract between CPA and CPS. This contract is currently being re-negotiated and it is expected to be finalized shortly. More policy recommendations with respect to these re-negotiations can be found in section 3.1 of the first part of this report.

Port Dues

Renttender process

100%

100% + x

Current

situation

‘value-based’ contract

management

Guarantee:

Low risk

Low risk Low risk

High risk

High risk



Regulatory Authority It has been widely accepted that competition is generally the preferred mechanism to protect the public interest and ensure high quality of service at competitive prices (The World Bank, 2007; ADB, 2000). However, competition may not be feasible in all port environments due to physical constraints or small cargo flows. The port sector is vulnerable to monopolistic practices due to the high costs of establishing a port and the economies of scale of port construction and operations. The World Bank (2007) suggests that strict regulation is necessary in cases where private operators provide an essential public service from a position of strong market dominance (i.e. monopolies). Curaçao is an example of an economy which is susceptible to such market dominance by a single private operator. The island economy has only limited demand for cargo-handling capacity due to the small size of the market. Being an island further excludes any competition for this market from other ports abroad. The port operators in Curaçao are therefore monopolists in their sector. In the case of CPS this is absolutely clear: besides a natural monopoly, its monopolistic position is also legal, through the exclusivity rights for commercial cargo handling on the island. Generally, three tools exist to regulate the market and avoid monopolistic behaviour:

1. Competition FOR the market: The most important method is creating competition for the market and capturing the benefits in a concession contract for the duration of the contract. The World Bank (2007) states that where competition “in the market” for specific categories of port services is not workable, competition “for the market” is an effective option for protecting the public interest. Competitive bidding allows the port authority to maximize the economic benefits of competition and to minimize the risks associated with monopoly service when the agreement is formalized in a long term concession contract.

2. Public sector to be involved in the business: Actively promote competition, by continuing to provide common-user facilities and basic services for users who cannot obtain acceptable services from the private service suppliers. An obvious disadvantage of this method is that is contradicts the aim to decrease the role of the public sector.

3. Strict regulation of monopolies: Establish a regulatory framework that monitors the quality of service provided by monopolists and approves change in charges to port users. This requires a transparent regulatory body. It has been found however (ADB, 2000) that such authorities are often subjected to conflicting political pressure.

In European practice, competitive bidding (tendering) is the most common procedure used in concession granting today. For the concessioning of large cargo terminals it has been established that 74% of the terminal concession awarding procedures in Europe used public tendering or competitive bidding as awarding procedure (ITMMA, 2008). In 83% of the cases, an open call for tender was used. This is also the generally recommended approach according to ESPO. Recent European cases (2011) include the container terminal in Gothenburg, the dry bulk terminal in Bourgas and the liquid bulk terminal in Rotterdam. A huge advantage of competitive bidding is that it allows the port authority to set the bidding parameters thus having the possibility to create the optimal market environment.



1.8 Conclusions

1.8.1 Institutional Structure Curaçao Maritime Cluster

Curaçao is blessed with a diversified maritime cluster. The cluster comprises of various private and state-owned companies and it governed by various public bodies. The Curaçao Port Authority (CPA), the alleged Landlord, is a dominant entity in this scheme. Besides the CPA, various other bodies govern specific aspects of the cluster, such as the Harbour Master, the Maritime Authority (MAC) and the Environmental Agency (Milieudienst). Various observations have been made in relation to the current institutional setting:

1) CPA’s mission does not reflect its relevance for Curaçao’s economy, it is focussed more on nautical services.

2) The institutional setting is arranged through management of waters (the Beheersgebieden), not through management of land.

3) The management of the port area is fragmented. The Landlord port authority does not manage the entire port area, some important port areas (refinery, oil terminal, dry dock, scrap terminal) are managed and controlled by other government controlled entities (RdK, CDM).

4) The ownership of land in the port area is fragmented (national government, CPA, RdK, CDM, private); 5) Although CPA positions itself as a Landlord, it actually acts as a Tool Port (and for nautical services as a

Public Service Port). As a Landlord Port, CPA should facilitate port users by providing port infrastructure and leave commercial risks to private operators. As a Tool Port, CPA leases cranes and other equipment and superstructure to its operator(s) and provides nautical services via its affiliates. In its current form, the CPA is responsible for re-investments in and maintenance of the cranes and the terminal pavement, but considering the state of the assets, it is currently struggling with this task.

6) Within the CPA organisation focus is much on towage and piloting services instead of on typical Landlord tasks such as port development, port marketing, contract compliance, stakeholder management, et cetera. Consequently, these topics are not dealt with properly and as a result, the Government and the private sector have no reliable counter-part for port related business, leaving development opportunities untapped and leaving the government in regular need for external expertise on port-related matters.

7) The financial performance/sustainability, hence the focus, of the CPA strongly depends on nautical services.

8) Various port regulations are outdated and require modernization and alignment with other documents..

9) Within the CPA organisation, responsibility for safety and order conflicts with the efficient provision of nautical services and the overall profit maximization of the corporatized port authority.

10) The statutory structure of CPA is in line with modern company law. CPA’s legal and financial authority is restricted by the government’s authority to instruct headlines of financial, social, economic and personnel policy. Furthermore, subject to approval by the General Meeting is any decision by the Board of Directors as the General Meeting may decide. Positions and responsibilities of Board of Directors and Supervisory Board should be clear and transparent, not only for the purpose of management of the company, but also for the purpose of arranging finance.



1.8.2 Policy Recommendations

CPA as landlord Port Authority; all operation related activities separated from CPA In order to improve the overall performance of the Curaçao maritime cluster, it is recommended that the CPA fulfils its claims as to being the landlord port authority of Curaçao by further moving towards a pure landlord and focusing fully on core port authority activities:

• Port planning; • Leasing out land to private operators. • Traffic management;

As a consequence non-core activities should be separated from the CPA. The provision of tug services by KTK should be separated from CPA and possibly even left to the private sector. The same applies for the installation and maintenance of equipment at terminals, such as the STS gantry cranes at the container terminal. The governmental control over these operational assets should be transferred to the private sector. The changes are expected to greatly contribute to a more healthy risk profile for the public sector, it creates a more attractive investment climate for the private sector and it reliefs the State budget. In addition the CPA has more resources available to carry out crucial tasks for a landlord; port master planning, canvassing new clients, secure safe maritime transportation, and most importantly: to enforce rules and legislations and ensure contract compliance by its concessionaires. Following these principles, the land positions in relation to existing and future port business should be concentrated within the CPA. A landlord Port Authority acts as a facilitator enabling the private sector to operate in a competitive manner. One of the pre-requisites for private sector participation is a modern and effective legal framework. Reconsideration of the port regulations is urgently required. The same applies for a clear division of tasks without overlap between CPA, MAC and other public entities. A connection to the working group exploring legislator upgrades established by the VVRP should be strongly considered. Organisational separation of the Harbour Master The position of the Harbour Master should be reconsidered. Due to his public duties he should have full freedom of action to carry out his public tasks in an unimpeded manner. Since this public mandate conflicts with commercial goals of a corporatized port authority like CPA, a strict organizational (not physical) separation is required. This could be arranged by a Service level Agreement between CPA and the Harbour Master(‘s office). Introduction of a long term viable and sustainable business case for the CPA In order to establish a (financially) healthy Port Authority, it requires a long term viable and sustainable business case. This means there is a need to assess the funding need of the landlord port authority, taking into account its future cost base and investments plans. Following from the future funding requirements, port dues can be adjusted and existing contracts may be re-negotiated. Through ‘value-based’ contract management overall revenues for CPA are expected to grow; the risk profile is expected to decrease and new strategic partners/investors may be attracted to the island.



Competence Building at the Port Authority The Landlord Port Authority is the designated public body for all types of port related matters. In its capacity and following its public mandate it should be a competent counterpart for both the private sector and the government for port-related matters such as performance improvements, environmental sustainability, and business development. To this end, the CPA needs to be able to engage with its concessionaires on their business and markets and it should be able to provide the government with its expert opinion in relation to business developments posited by governmental bodies and/or individuals. To internalize the required intelligence and expertise, CPA may wish to establish strategic partnerships with other (larger) port authorities or, more exotic, minority interests in CPA may be offered to an experienced port management company. From a practical and strategic perspective, a strategic partnership is recommended here. Capacity Building on inter alia the following subjects is required:

• Marina sector; • Container (transshipment) expertise; • Commercial and promotional activities (canvassing clients, perform market consultations); • Implementation of value based contracting; • Port master planning; • HSSE.

Introduction of a Regulatory Authority As seen around the world, a small and isolated economy is susceptible to the negative effects of intimate relations amongst public and private entities and individuals. The economic risks should be endorsed by the government and general policy measures should be made to further protect the public interest. The (re-)establishment of a Competition Authority or Regulatory Board covering all relevant aspects of the sensitive economy is recommended. This authority or board may be involved in sensitive matters relevant to the entire economy. This includes the maritime cluster, in which it can deal with concession contract (re-) negotiations, contract compliance issues, arbitration and tariff policies. The organization should be independent and may be directly linked to international organizations such as the UNCTAD, the OECD, the ICN (International Competition Network) or ECA (European Competition Authorities). Modernizing and aligning port legislation and regulations: As indicated, many legal documents are currently outdated and misaligned with other regulations and policies. Some laws are even inactive as they are currently under negative status. The Ministry of Transport (VVRP) has recently established a working group which is currently dealing with these matters. “Borging Publieke Belangen in Havens en Binnenwateren” (“Protecting Public Interests in Ports and Inner Waters). It is recommended that MEO and the CPA become actively involved in the working group.



1.8.3 Implementation Considerations (outlook phase 3)

Various topics are relevant when considering the implementation of the policy recommendations. These include:

• Valuation of KTK In light of a possible separation from CPA and possible future private involvement

• Service Level Agreement between CPA and the Harbour Master In light of a possible formal (not physical) separation of the Harbour Master from the CPA

• Various strategic subjects in relation to the Strategic Business Plan of CPA o Reviewing the existing Draft Business Plan o Restating the Mission of CPA o Redesigning the organizational structure of the CPA o Outlining the island’s Port Master Plan o Developing the Outline Business Case for CPA o Establishing new tariff levels for port dues and berth dues o Establishing new policy on concessionary payments o Exploring Strategic Partners for Competence Building CPA o Developing value-based concession contract for future concessionaires

• Re-negotiation of the concession agreement between CPS and CPA

Independent advisory and mediation based on contract value o Valuation of the cranes and other public assets potentially to be transferred o Tariff Structure o Contract Term o Dispute Resolution o Key Performance Indicators

• Active participation in Working Group “Borging Publieke Belangen in Havens en Binnenwateren”

(“Protecting Public Interests in Ports and Inner Waters) Ensuring the interests of the cluster are managed and protected when upgrading and aligning legislation

• Establishing the independent Competition Authority or Regulatory Board






2 Container Transshipment Hub



2.1 Introduction

2.1.1 Initial Concept: Curaçao Container Hub Vision

Situated along existing international and regional shipping routes and in close proximity to many regional markets, the island of Curaçao may be able to attract containerized transshipment cargo and act as a hub connecting regional feeder ports to global trade routes.

Curaçao located along existing trade routes

An initial view on the position of the island in regional shipping patterns (pictured above) shows that the island is indeed located along various shipping routes. The busiest routes are however situated at the northern and western parts of the region. Further exploration shows that the lines passing or calling the island connect to (busier) routes…

- in the west: inter-continental vessels from Asia and the West Coast of the Americas traversing the Panama Canal or regional vessels calling a port at the Caribbean/Atlantic entrance of the Panama canal [A];

- in the east: vessels calling at ports at the eastern side of South America [B]; - in the north: inter-continental vessels coming from the US east coast and Europe or regional vessels

calling at a northern port in the Caribbean [C]; - in the south: vessels calling at continental ports close to the island (Venezuela) [D].

CuracaoA B

C

D




This chapter covers an analysis concerning the potential positioning of Curaçao as a regional container hub. This topic has been selected as a policy option deserving further research, since it has been a topic of intense discussion on the island for a prolonged period of time. In the next section, the overall economic and financial considerations with respect to the hub vision are covered. In a subsequent section, the required investments are further elaborated, followed by an analysis on the minimum amount of transshipment volumes required to justify any investments. The analysis continues with an assessment of the regional container market with a focus on the potential source of these required transshipment volumes. This section is finalized with specific policy recommendations and initial considerations with respect to the implementation of this vision which is further addressed in Phase 3 (Implementation Plans) of this project.

Transshipment facilities at Freeport, Bahamas



2.2 Considerations for Policy Development

2.2.1 Commercial Considerations

The transshipment concept Transshipment trade attracted to the island can complement the existing import/export base trade which is already handled on the island. The additional transshipment trade relates to economies of scale which strongly prevail in the shipping industry: transshipment, or hub-and-spoke strategies allow shipping lines to deploy large vessels on long inter-continental journeys between regional hub ports, while connecting these hubs with local feeder ports by smaller regional vessels. This structure is used to bring down overall cost of transport, which is considered vital in the highly marginalized and competitive business of international shipping. Transshipment means that the cargo is not directly shipped between origin and destination: in the case of the Caribbean, an intermediate call at a hub port is introduced to de-consolidate large batches of containers with the same destination. This additional call comes at additional costs: additional port dues and marine services with respect to the mainline and feeder vessels and additional handling and storage of the cargo at the hub port. In the case the hub port is not situated directly at the direct-call shipping route, the cargo (vessel) needs to deviate to a hub and additional voyage costs need to be taken into account as well (fuel and charter). A requirement for successful application of transshipment schemes is that despite all these additional costs for ‘hubbing’, the overall costs per container remains lower than a direct call; or, in case of competition between hubs: the call of and deviation to a specific hub needs to render further costs savings compared to an existing hub. For a transshipment port development project, the sustainability of these costs savings also needs to be considered: changing cost levels, increasing vessels sizes and increasing trade at and expansion of feeder ports may render an existing transshipment scheme obsolete. Considering the above, both hubs and feeder ports compete for the same cargo: regional hubs compete directly for transshipment trade, while feeder ports are inclined to receive direct calls instead of feeders. Both hub and feeder ports therefore have a natural tendency to drive down their costs and to expand to receive direct calls of large vessels.

Container transshipment: the hub-and-spoke concept



2.2.2 Technical Considerations

The New Panama Canal The planned expansion of the Panama Canal is considered one of the main drivers for increased transshipment trade from Asia in the Caribbean basin:

- Over 60% of global container trade currently takes place in Asia, with China accounting for half of it; - The Panama Canal is the only maritime gateway directly connecting Asia with the Caribbean; - International shipping lines continue to increase the size of vessels to further capitalize on economies

of scale and drive down the per-unit transport costs. The expansion program consists of the construction of two new sets of locks: one on the Pacific and one on the Atlantic side of the Canal. The program also entails the widening and deepening of existing navigational channels in Gatun Lake and the deepening of Culebra Cut. It is expected that the works are finalized in 2014/15 and from that moment, larger vessels shall be capable of traversing the canal between the Pacific and the Atlantic (including the Caribbean Sea). The industry norm for vessel sizes in that area shall increase from the then obsolete Panamax to New Panamax:

From Panamax to New Panamax by 2014/15



Increasing vessel-sizes in the expanded Panama Canal by 2014/15 Existing Locks Panamax New Locks New Panamax Length 320m (1,050ft) 294m (965ft) 427m (1,400ft) 366m (1,200ft) Width 33.5m (110ft) 32m (106ft) 55m (180ft) 49m (160ft) Draft 12.5m (41ft) 12m (39ft) 18m (60ft) 15m (50ft) TEU 5,000 12,000 The actual effect on container shipping patterns is still unknown and largely depends on drivers such as the global container fleet development, available port capacity, container traffic projections, the costs of passing the expanded canal, et cetera. It is however expected that in general terms, overall vessel size in the region shall increase and that trade with Asia shall capture additional market share from other origins/destinations (e.g. US/Europe).

The Panamax Hanjin Malta (>4,000 TEU) and the New Panamax MSC Lauren (>12,000 TEU)



2.2.3 Economic Considerations

The establishment of a container transshipment hub on Curaçao is expected to generate the following economic effects:

1. Further diversification of the maritime cluster While many Caribbean islands solely depend on tourism, the economy of Curaçao is already rather diversified with a strong presence of the petrochemical cluster (ISLA/Curoil) and the industrial cluster (CDM/MCC). The development of a container transshipment hub and downstream commercial activities shall further enhance the diversity of the island’s economy and the maritime cluster specifically. Improved economic diversification reduces the island’s exposure to macro-economic shocks and reduces the overall impact of negative trends in specific sectors. Moreover, a diversified economy also provides more diversified opportunities for the population.

2. Increased direct employment Developing a transshipment hub requires capacity expansions and results in increased operational activities. The hub is expected to generate additional direct employment complementing the 130 jobs on the existing container handling facility. The actual number of direct jobs created should not be overestimated: transshipment trade is a highly marginalized business, so automation of operational processes is often pursued to drive down labour costs.

3. Increased indirect employment & reduced cost of living Although transshipment trade itself has no principal relation with the hub port (besides reduced costs), it is often observed that secondary economic activities are developed around successful transhipment hubs. This usually relates to the service industry for the terminal and the vessels (e.g. maintenance, repair/cleaning, supplies, et cetera) and to the cargo being transshipped at the hub (e.g. in free zones where packing/re-packing and value added services take place, et cetera). Another source for additional indirect employment may be caused by the improvement of the logistical position of the island itself: by upgrading from a feeder port to a hub port, the island is called by deep-sea mainline vessels directly connecting the island to the world economy. This may drive down the total transport costs for importers and exporters on the island, which may further strengthen the entrepreneurial basis of the island and reduce the cost of living for the population.

4. Positive effects on the balance of payments The successful development of a transshipment hub is expected to render positive effects on the island’s balance of payments: the direct and indirect jobs are expected to render tax income and social contributions to the government and drive down demand for social allowance for otherwise unemployed. Further income is expected from taxation of other economic activities (e.g. corporate tax) and in a more direct sense through income for governmental agencies such as the CPA (port dues), KTK (towage) and CPO (pilotage). Parallel to these potential sources of income, the potential costs also need to be taken into account. These include additional costs for services provided by governmental bodies (e.g. CPA, KTK, CPO); the economic costs in relation to the environment; and of course any investments made by the government in the new facility and connecting infrastructure.



2.2.4 Financial Considerations

1. Financial Feasibility The establishment of a transshipment hub depends on heavy investments in new port assets. The investments of several hundreds of millions of dollars need to be covered by direct and indirect income generated by the project. In other words: the project needs to be financially feasible. This especially applies to private investors, which typically only invest when sufficient financial returns on investments can be made. For governments financial feasibility is also important, although secondary positive economic effects are sometimes used to compensate for financial infeasibility/losses of public investments. The ability of a government to do so however strongly depends on its economic performance and its existing indebtedness.

2. Project Bankability: Sustainability of Cash Flows The ability of a port to attract transshipment cargo depends on its ability to reduce the total costs of transport compared to existing trade patterns (using existing hubs or direct calls). Since the development of such a hub requires significant investments and debt financing, the project’s ability to reduce transport costs also needs to be sustainable for at least the term of the loans required to develop the facility (typically 7-15 years). If this is not the case, banks shall be reluctant to finance such a project (the project is then considered ‘not bankable’ and shall probably not materialize). Considering the competitiveness of the transshipment industry, transshipment cargo is typically ‘foot-loose’: it has no specific relation to a certain hub and shall be moved to other hubs or directly moved to its port of destination if that provides a cost advantage to consumers and transporters. Two main market-developments are considered relevant for the assessment of the sustainability of transshipment volumes: capacity developments and price developments. Capacity Developments: The hub-position of ports is continuously threatened by other hub developments in the region, but also by expansions of feeder ports and the overall increase of trade through feeder ports: new hubs may be developed in the area or existing hubs may be expanded/deepened freeing up capacity and/or allowing even larger vessels to call; a feeder port may be deepened or expanded so it can receive larger mainliner vessels; or container volumes in a certain feeder port may grow to such a size that it justifies direct calls by mainliners, rendering their former transshipment hubs obsolete due to their higher costs of transport (transshipment requires an additional port call and route-deviation, while direct calls do not). Price Developments: International shipping is a global business and is closely connected to global economics and price developments. Most notable here are the vessel charter rates and the bunker costs, which to a large extent determine the freight rates and which are considerably volatile. The overall freight rates strongly interrelate to the appeal of a certain port as a transshipment hub and financial benefits of transshipment schemes may erode when prices change over time. Other relevant prices are the transshipment tariffs charged by the operator, the port dues charged by the port authority, the tariffs of the nautical service providers. Taking into account these considerations, changing trade patterns can therefore have dramatic effects on the performance of a transshipment terminal and investments in such terminals therefore is considered ‘significantly riskier’ than in traditional import/export terminals which serve the economic activities in the port’s hinterland.



2.3 Capacity Development

2.3.1 Greenfield Terminal Development

The concept for positioning Curaçao as a container transshipment hub relates to attracting significant additional container volumes to the island. Considering the current container handling capacity utilization of around 80% and a spare capacity of around 20,000 TEU, the hub-concept also relates to investments in the expansion of the island’s container handling capacity: there is currently no room to absorb significant transshipment volumes.

Container handling capacity utilization on Curaçao 2000-2011

Successfully developing a container transshipment hub requires the port to receive large New Panamax Container vessels. These are currently however not capable of passing the bottlenecks in the St. Annabay: there are draught (underground cable), width (cruise vessels in channel), length (tight bend after the bridge) and height (bridge) constraints preventing them from entering the Schottegatbay. As a consequence, to become a regional transshipment hub, a new transshipment terminal needs to be developed outside Schottegatbay.

St. Anna Bay: impassable bottleneck for New Panamax container vessels



2.3.2 Draft Terminal Layout

In this section a preliminary impression of a terminal layout is developed. The visual is used as a basis for a high-level investment estimate for the terminal. The following assumptions are made to develop this image:

• Bullenbay is considered the best location for the new transshipment terminal: o it is situated at the leeward side of the island: protection from wind and waves reduces

terminal down-time and possibly reduces the need to invest in capital intensive breakwaters o the area is already in use as a port (Bullenbay Oil Terminal): this facilitates re-zoning of

adjacent land; reduces the need to use land more suitable for tourism or nature; and allows efficient deployment of nautical services by KTK and CPO. Besides the required safety zone around the oil terminal, no reciprocal negative operational effects are expected between handling liquid bulk and containers (in contrast to dusty dry bulk activities)

• At least 2 berths of 400 meters are required to provide sufficient berthing capacity to receive New Panamax mainline vessels and feeder vessels (waiting times for mainliners are not tolerated);

• At least 200,000 m2 of terminal area is required for container storage, customs zones, truck-interface, car parking, maintenance areas, offices and other on-terminal facilities;

• At least 100,000 m2 of additional area is required for supporting services for the terminal, the vessel and the cargo (e.g. a free zone);

• At least 8 New Panamax ship-to-shore gantry cranes are needed for the efficient handling of deep-sea container vessels and regional feeders;

• Rubber-tired gantry cranes (RTGs) are used as primary yard equipment to allow efficient stacking.

Transshipment facilities at Kingston, Jamaica



Tentative location of the container transshipment terminal and free trade zone at Bullenbay

Preliminary layout of a container transshipment terminal at Bullenbay



2.3.3 Main Investment Items

To develop the new terminal, the following invest (capex) items need to be taken into account:

Possible Capex Items Item Description/Consideration Breakwater Breakwaters are needed to protect maritime infrastructure and vessels berthed at

terminals from waves and strong currents. Since the Bullenbay site is situated on the leeside of the island, the terminal has a natural protection against these elements and a breakwater may not be needed here. Detailed bathymetrical research needs to confirm this. If a breakwater is actually needed, this would have dramatic effects on the overall investment levels.

Dredging Works Dredging works are executed to allow deep-draught vessels to approach the terminal and to be moored and operated along the berths. Considering the maximum allowed draught of the New Panama Canal of 15.2 meters and a 15% safety margin (keel clearance), the required depth is assumed at around 17 meters to allow the terminal to receive the largest New Panamax vessels 24/7. At the Bullenbay site deepwater is in very close proximity to the shore and none or only very limited dredging works are expected to be required. Despite the low expected dredging volumes, the rocky soil probably makes dredging works more expensive compared to dredging more sandy soil.

Land Works The terminal area is used for container handling and storage and as a result it should be a flat terrain at around 5 meters above sea-level capable of carrying the weight of large cranes and dense stacks of fully laden containers. The required area typically extends to 500 meters behind the quay wall and consists of aprons where the cranes are situated; stacking areas for storing the containers; interface areas for loading and unloading trucks; internal roads; parking areas for cars and idling trucks, offices, workshops and gates. Considering the sloped terrain at the Bullenbay site, significant land works are expected to be required. A solution comprising of a multi-level terminal area would most probably result in increased operational costs, limiting the appeal for transshipment cargo.

Quay Wall The quay wall is the main interface between the ship and the shore and it needs to be

a strong piece of infrastructure capable of dealing with the forces of moored containers vessels and operating container cranes. For the efficient operation of a transshipment terminal, at least two berths are required for vessels with a length of up to 366m, which is the New Panamax size. 2 berths of 400 meters are considered sufficient, providing a total quay length of 800 meters.

Paving The paving of the terminal covers the stacking areas, the apron and internal roads and

parking/idling areas. The bearing capacity of the paving varies between the function of the area with high carrying capacity on stacking areas and lower capacity on regular parking spaces for cars of employees and visitors.

Buildings Various buildings shall be developed on the terminal: gate houses for trucks moving in and out the terminal; workshops for maintenance of equipment and containers; offices for terminal management; control tower for operational staff and offices for governmental services such as the customs and fyto-sanitary services.

Gates & Fences The terminal area needs to be ISPS compliant and therefore it needs to be fenced to prevent external individuals to enter the terminal. Sufficient gate capacity needs to be provided to prevent truck-waiting times at peak hours.



Item Description/Consideration Utilities The terminal needs to be connected to primary utilities such as electricity, fresh water

and sewage. This includes off-terminal and on-terminal connections and back-up generators.

Connecting roads The road to Bullenbay is currently the only road connecting the terminal to the rest of the island. For efficient movement of import/export containers and for accessibility by employees, visitors and residents, this road might need to be improved.

Gantry Cranes This is the primary cargo handling equipment on the terminal. The cranes are used to

move containers between ship and shore. The size and capacity of the cranes should be in accordance to the expected container vessels calling the terminal. Between 8 and 10 cranes can be installed on the envisaged 800 meters of quay wall. Their operational capacity varies between 100,000 and 120,000 TEU per crane per annum, depending on their quality (and price).

Yard Equipment Yard equipment is used for stacking containers in the yard. Rubber-tired gantry cranes (RTGs) are typically used on transshipment terminals, as they can provide dense stacking and limit the requirements for precious (levelled) land. The terminal can be efficiently operated with between 20 and 30 RTGs. Their prices and operational capacities vary depending on the supplier and the bargaining power of the buyer.

Small Equipment Other equipment is also required at the terminal. This includes tractor/trailer combinations for moving the containers between the stack and the quay cranes and empty handlers to stack the empty containers in the yard.

HSSE Equipment Health, safety, security and environmental equipment are needed. This includes,

CCTV systems, first aid equipment, spill-response material, et cetera IT IT becomes more and more dominant on container terminals. Besides the Terminal

Operation System (TOS), various other systems are nowadays required. If the terminal is automated, the IT costs increase substantially.

Preliminaries/Incrementals This is an assumed factor by which the total investments are increased due to

unforeseen costs, uncertainties with respect to quantities and prices and additional costs for the preparation prior to the construction (e.g. engineering, financial consultancy, legal advice). At this early stage, an increment of 25% is assumed.



2.3.4 Preliminary Investment Estimates (capex)

To address the preliminary feasibility of the hub concept, some insight in the required investments (capital expenses, capex) is needed. Without going into too much detail on each investment item and in absence of detailed surveys of the soil and the bathymetry at the proposed site, the following investment items are considered, with a bandwidth for quantities and prices:

Preliminary investment estimates (capex)

item unit

min quantity max quantity min price max price min capex max capex

units units usd/unit usd/unit usd usd

Dredging Works m3

- 1,000,000

3 10

- 10,000,000

Land Works m3

5,000,000 10,000,000

4 6

20,000,000 60,000,000

Breakwater m1

- -

25,000 75,000

- -

Quay Wall m1

800 800

50,000 60,000

40,000,000 48,000,000

Paving m2

400,000 400,000

60 80

24,000,000 32,000,000

Buildings

1,000,000 2,000,000

1,000,000 2,000,000

Utilities/Gates/Fences

1,000,000 2,000,000

1,000,000 2,000,000

Road connection m

4,000 8,000

1,000 1,500

4,000,000 12,000,000

Gantry Cranes #

8 10

7,500,000 10,000,000

60,000,000 100,000,000

Yard Equipment (RTGs) #

20 30

1,500,000 2,000,000

30,000,000 60,000,000

Tractor/Trailers #

60 90

100,000 150,000

6,000,000 13,500,000

Small Equipment #

5 10

150,000 250,000

750,000 2,500,000

HSSE Equipment

2,500,000 5,000,000

2,500,000 5,000,000

IT

2,500,000 5,000,000

2,500,000 5,000,000

Preliminaries & Incrementals

25% 25%

47,937,500 88,000,000

Total Preliminary Capex

239,687,500 440,000,000



The envisaged overall investments are visualized below in three separate cases. For each case, the potential corresponding terminal capacity is shown as well. The variation in capacities relates to variations in quantity and quality (price) of the equipment, while the variation in investment levels is largely determined by uncertainties with respect to required quantities and local unit-prices for infrastructure and superstructure.

3 capex and capacity cases Low Capex Case Average Capex Case High Capex Case

Capex (USD) 240,000,000 340,000,000 440,000,000 Capacity (TEU/annum) 800,000 1,000,000 1,200,000

USD 990m Greenfield terminal development by APMT at Moin, Costa Rica



2.4 Preliminary Top-Down Viability: Minimum Transshipment Volumes

2.4.1 Inputs: Assumptions

Taking into account principal and preliminary assumptions, the required minimum transhipment traffic on the terminal can be estimated. This estimation can give an initial outlook on the viability of the hub concept: if the required amount of transhipment volumes does not exceed the available terminal capacity, the transshipment case may be considered viable and additional research can be justified. The following high-level assumptions are used in this concise top-down analysis:

1. The expected investments range between USD 234m and USD 425m (average: 330m);

2. Terminal capacity varies between 800,000 TEU per annum (low capex) and 1,200,000 TEU per annum (high capex). In an initial case, all this capacity is allocated to transshipment containers (all import/export containers remain at the existing site at Schottegatbay) and in a subsequent case, a capacity of 100,000 TEU per annum is allocated to import/export containers, leaving the remainder available for transshipment (700,000 – 1,100,000 TEU/annum).

3. The construction period continues throughout in 2013 (20%), 2014 (40%) and 2015 (40%); terminal opens in 2016;

4. Regular import/export volumes are set at 80,000 TEU by 2016 and growing by 1% per annum. Traffic build-up is in 2 years: 50% in 2016 and 100% from 2017 onwards;

5. The transshipment volumes are determined in this analysis (output). Traffic is built-up in 5 years: 20% in 2016, 40% in 2017, 60% in 2018, 80% in 2019 and 100% from 2020 onwards;

6. The revenues per regular import/export TEU assumed at USD 200 (including quay move, storage and gate move);

7. Based on an international and regional benchmark (next page), the transshipment tariffs range between 60 USD and 80 USD per move (revenues per transhipment TEU range between 120 and 160 USD);

8. The operational costs are assumed at USD 40 per TEU for regular import/export containers and at USD 50 per TEU for transshipment containers (2 crane moves);

9. The landlease fees payable by the operator to the Landlord (CPA) are assumed at 5 USD/m2; total terminal area assumed at 800x500 = 400,000 m2. Payments start in 2015;

10. A discount factor of 15% to take into account the financing costs of the investments (debt & equity);



* Regional and international transshipment tariff benchmark: Port Transshipment Tariff

(USD per 2 moves)

USD per move Regional Ports Port of Spain 118 59 Point Lissas 110 55 Caucedo 200 100 Curaçao 120 60 International Ports* Antwerp 122 61 Rotterdam 139 70 Bremerhaven 156 78 Hamburg 156 78 Wilhelmshaven 156 78 Gothenburg 169 85 Gdansk 142 71 Klaipeda 142 71 * tariffs in USD, but converted from EUR FX: 1.3)

Manzanillo International Terminal, Panama



2.4.2 Outputs: Minimum Required Transshipment Volumes

Case 1: Transshipment-Only The output of the analysis is provided below. The table shows the transshipment volumes which are needed to justify the development of a transshipment hub at Curaçao in accordance to the development principles presented earlier in this chapter.

- Red squares show options which require more transshipment volumes than available capacity (making the outcome not viable from a technical perspective)

- Green squares show options which require less transshipment volumes than available capacity (making the outcome potentially viable from a technical perspective)

Preliminary Top-Down Viability: Required Transhipment Volumes (case: transshipment only) From this analysis, a preliminary conclusion can be drawn that there may be a basis for large-scale transshipment of containers on the island. However,

- the project has extremely tight budget constraints and leaves no room for cost-overruns or additional investments (no scenarios in the USD 340 and 440 million cases are viable)

- a significant amount of transshipment cargo needs to be attracted to the island (over 700,000 TEU per annum and sustained for the coming 12 years);

- a relatively high transshipment tariff needs to be charged to the users, leaving barely any room to compete (no scenarios in the USD 70 and 60 per transshipment move cases are viable);

240 340 440

60 1,105,465 1,657,986 2,112,240

70 859,806 1,289,545 1,642,853

80 703,478 1,055,082 1,344,153

800,000 1,000,000 1,200,000

CAPEX (usd x 1,000,000)

T/S

Tarif

f (us

d)

Available Transshipment Capacity (TEU)



Case 2: Transshipment and Import/Export A second case is assessed in which all the import/export (I/E) volumes are moved to the new facility at Bullenbay. Since the tariffs for I/E traffic are generally much higher than the marginalized transshipment rates, it is expected that inclusion of these volumes shall somewhat improve the challenging case the hub is facing without I/E volumes. From a risk perspective, the I/E base load of around 80,000 TEU per year would also improve the case: these volumes are much more secure/certain than the volatile and foot-loose transhipment volumes. Consequence of this case is that container handling activities at the existing facility in the Schottegat Bay are suspended by 2016. The outcomes of this second case are presented below:

Preliminary Top-Down Viability: Required Transhipment Volumes (case: transshipment and import/export) From this analysis, a preliminary conclusion can be drawn that there may be a basis for large-scale transshipment of containers on the island. However,

- the project has tight budget constraints and leaves little room for cost-overruns or additional investments (no scenarios in the USD 440 million case is viable)

- a significant amount of transshipment cargo needs to be attracted to the island (between 510,000 and 860,000 TEU per annum and sustained for the coming 12 years);

- there is little room to charge competitive transshipment rates (no scenarios in the USD 60 per move case are viable);

- container handling activities at the existing location need to be suspended by 2016 and all the import/export volumes need to be shifted to the new facility.

240 340 440

60 800,010 1,352,531 1,806,785

70 622,230 1,051,969 1,405,277

80 509,097 860,702 1,149,772

700,000 900,000 1,100,000

CAPEX (usd x 1,000,000)

T/S

Tarif

f (us

d)

Available Transshipment Capacity (TEU)



In the next section further viability-checks are executed: market research is done to assess where these required transshipment volumes may be sourced from.

Curaçao Container Hub terminal capacity utilization 2015-2025

In this development outlook, the terminal shall have a utilization rate of over 90%, leaving no further room for additional import/export or transshipment trade. The dependence of the terminal on footloose transshipment is also clear: nearly 85% of all traffic on the terminal shall be risky transshipment trade, while only 15% shall be more secure import/export trade.

0%

20%

40%

60%

80%

100%

-

200,000

400,000

600,000

800,000

1,000,000

1,200,000

2015 2017 2019 2021 2023 2025

TEU

Base I/E Volume Required T/S Volumes capacity



2.5 Container Transshipment Market

The top down analysis of the previous section indicated that at least 510,000 and 860,000 TEU of transshipment volumes needs to be secured and sustained for at least 12 years by the new facility. This section aims to deliberate on the potential feeder market which can be considered most relevant for transshipment business via Curaçao. Four main drivers are considered when analyzing the short term and long term market potential for Curaçao as a container transshipment hub:

Drivers for regional transshipment potential Curaçao # Driver Description Focus Relevant Ports/Projects 1 Capitalizing on

Geographic Position Being closer to feeder ports than existing hubs provides a basis to capture T/S volumes

Short (capture

trade)

Aruba, Bonaire, Puerto Cabello, La Guaira, Maracaibo, Guanta

2 Capitalizing on Existing Constraints

Capacity constraints at existing hubs may form a basis for capturing additional T/S volumes

Short (capture

trade)

Caribbean islands north of Trinidad & Tobago Continental destinations south-east of Trinidad & Tobago

3 New and Improved Hubs

New and additional hub capacity may reduce the capture potential of 1 and 2 in the future

Long (sustain trade)

Trinidad & Tobago

4 Direct Calls at Feeder Ports

Feeder ports of 1 and 2 may be expanded to receive direct calls from deep-sea vessels

Long (sustain trade)

Venezuela



2.5.1 Caribbean Hubs

The picture below shows the overall competitive arena in the Caribbean basin: it shows the main container transshipment hubs in the region and its operator. The most prominent hubs are outlined in red. Outlined in white are feeder or import/export ports which have an international operator. As a reference, Curaçao is also included.

Container Hubs in the Caribbean Basin

Most striking here is the presence of many hubs at the western and northern side of the Caribbean basin and the overall involvement of international stevedoring and liner organizations in the management (and development) of the container terminals.

CRISTOBAL: HPH

KINGSTON: CMA CGM

Suape: ICTSI

CAUSEDO: DPW

Cartagena

PORT OF SPAINPORT LISSAS

MANZANILLO: SSA

Moin: APMT

Miami: APMT

Pecem: APMT

Pramaribo: DPW

FREEPORT: HPH

BALBOA: HPH

Buenaventura:ICTSI

COLON: EVERGREEN

Havana: TCB

RODMAN: PSA

Curacao

Miami: CMA CGM

Cayenne: CMA CGM

Guadeloupe &Martinique CMA CGM

San Juan



This concentration of hubs correlates to the regional trade fuelled by the US and Mexican economies and the international deep-sea routes between the Far East, North America and Europe, which traverse the basin. Being situated close to these international trunk routes limits the need for time-consuming, hence costly deviations from international sailing routes, making these locations very suitable for large-scale container transshipment to the surrounding markets.

Container Hubs situated close to major trade routes and major markets

A consequence of Curaçao’s southern position is that the hub at Curaçao should not focus on serving feeder ports at the western and northern sides of the basin. Although some transshipment trade for these northern and western markets may materialize on Curaçao, it is rationally expected that primary opportunities reside towards the east and the south of the basin.

Curacao

CristobalManzanillo

ColonBalboa

Rodman

Kingston Causedo

Freeport

Port of SpainMoin

Miami

500nm / 900km

250nm / 450km



2.5.2 Feeder Potential in the South and the East

Three opportunities to capture container transshipment trade reside at the eastern and southern side of the Caribbean basin:

1) Brazil: The growth of the Brazilian economy and the development of its major ports near Rio de Janeiro and Sao Paulo (Santos) are expected to draw more deep-sea traffic from the Far East through the New Panama Canal along the southern side of the basin, passing Curaçao. This may be considered an opportunity for Curaçao to position itself as a container hub and serve regional feeder ports.

2) Trinidad & Tobago: Trinidad & Tobago is the traditional transshipment hub for the eastern Caribbean islands and for various continental destinations in Venezuela, (French) Guyana, Surinam and northern Brazil. Port of Spain and Point Lissas are currently however struggling with their capacities and apparently service levels (efficiency) have suffered as a consequence. Port expansions, although announced, have not yet materialized and as a result some transshipment volumes may be captured by other hubs, including Curaçao.

3) Venezuela: Venezuela has a vast economy and a tremendous trade potential. The political situation has however caused a slump in trade. The country’s ports are currently not capable of receiving the largest tonnage and due to the political risks and severe delays, shipping lines (and their insurers) are reluctant of sending their large tonnage to Venezuelan ports. Significant port developments have been announced, but until they materialize and as long the adverse political situation persists, Curaçao may have a preferential position towards transshipment to/from Venezuelan ports.

The potential feeder market for Curaçao is indicated below.

Primary and secondary feeder market for a Curaçao Container Transshipment hub

The primary feeder market is considered to be the neighbouring islands (Aruba and Bonaire, together just over 50,000 TEU/annum) and Venezuelan ports to the south (over 1m TEU/annum). To the east, secondary feeder potential resides where Trinidad & Tobago fails to serve as the designated hub: at the eastern Caribbean islands and at the continental ports all the way down to northern Brazil (together around 1m TEU/annum).

Colon2.8 mTEU

Curacao80,000 TEU

Kingston1.9 mTEU

Aruba50,000 TEU Bonaire

4,000 TEU

Port of Spain0.6 mTEU

Maracaibo60,000 TEU

Suape0.3 mTEU

Caucedo1.0 mTEU

Puerto Cabello810,000 TEU

La Guaira340,000 TEU

Guanta60,000 TEU

Cartagena1.6 mTEU

500,000 TEU

500,000 TEU



2.5.3 Regional Port Developments

Port developments in other ports are relevant from two perspectives:

1) Upgrading feeder ports to direct-call ports: As indicated earlier, hub-and-spoke or transshipment schemes can be a result of a need to deconsolidate large volumes of trade to destinations with modest demand It can also result from infrastructural bottlenecks at ports which currently serve as a feeder port, while they should be called directly when considering their trade potential. Infrastructure developments in such ports allows them to receive larger tonnage limiting the need for transshipment and hub ports in the area.

2) Upgrading/developing other hub ports: With the expansion of the Panama Canal, the infrastructure upgrades are needed at the existing hub ports. Without such upgrades the larger New Panamax vessels will not be able to call at these hubs providing an opportunity to other hubs in the region, including Curaçao. Greenfield hub developments in the area, similar to the vision of Curaçao, are however a threat to new and existing hubs: they may capture cargo and limit their regional hub potential.

The table below shows a concise overview of selected port development project in the region:

Selected port development projects in the region Country Port/Status Project Budget Status Venezuela Puerto Cabello

(direct/feeder) Dredging works, additional deep-sea berths and new equipment

> USD 500m Contract signed with China Harbour Engineering Company

La Guaira (direct/feeder)

Dredging works, additional deep-sea berths and new equipment

> USD 400m Contract signed with Texeira Duarte (Por)

Colombia Cartagena (hub/direct)


> USD 650m Contracts to be signed

Trinidad & Tobago

Point Lissas (hub/feeder)


Unknown Request for Expression of Interest published

La Brea (hub)

Greenfield transshipment hub development

Unknown Request for Expression of Interest published

Jamaica Kingston (hub/direct)


> USD 100m Ongoing, financed by CMA CGM

Dominican Republic

Caucedo (hub/direct)

Dredging works, additional deep-sea berths and additional equipment

Unknown Ongoing, financed by DPW & IFC

Panama Atlantic Entrance (various hubs)


> USD 200m Contracts signed

Costa Rica Moin (hub/direct)


> USD 990m Contract signed with APMT



2.5.4 Venezuela: Primary Feeder?

Following the market scan in previous sections, it can be concluded that the primary feeder market for Curaçao is Venezuela: spill-over from eastern feeder destinations currently not being served from Trinidad & Tobago may only be temporary while other markets in western and northern ports are served by other hubs and face overcapacity. Although significant port projects are under way at Venezuela, a closer look at this market seems justified. A concise SWOT is used for this assessment. The SWOT is based on the potential of Curaçao as its main transshipment hub.

SWOT for Curaçao as a hub for Venezuela Strengths

of Curaçao as a Hub for Venezuela Weaknesses

of Curaçao as a Hub for Venezuela

• Proximity of Curaçao to Venezuelan ports • Nautical accessibility of the island compared to

Venezuela • Possibility of private sector involvement • Relatively stable economy & governance

• Slow economic performance Venezuela (+2%) • Poor economic outlook Venezuela (inflation

>30%) • Relatively high costs (labour, utilities, tax)

Opportunities of Curaçao as a Hub for Venezuela

Threats of Curaçao as a Hub for Venezuela

• Significant container volumes are handled in the

Venezuelan ports (>1 million TEU) • Development of a new terminal on Curaçao

providing efficient and cost effective transshipment capacity on the island

• Curaçao as a safe haven for international shipping lines with capital-intensive and time-sensitive vessels and cargo

• Reduction of overall transport costs for Venezuelans

• Volatile (high) port prices in Venezuela (e.g. + 250% in 2011)

• Port developments in Venezuela • Liberalization Venezuela (leading to port

developments) • Rising oil prices (foreign exchange leading to port

developments) • International disputes between Venezuela and

the international community (no trade allowed; probable)

• International conflicts between Venezuela and the international community (severe regional consequences, highly improbable)

• Regional conflict between Venezuela and Curaçao (severe local consequences, less highly improbable)

Considering this SWOT analysis, it is stated that Curaçao is indeed strategically located to serve as a transshipment hub for Venezuelan ports. The size and sustainability of this transshipment trade is however highly uncertain, depending on planned port developments in Venezuela and of course the political situation of the country.



2.6 Conclusions

2.6.1 Potential of a Transshipment Hub on Curaçao

Following this analysis, it is concluded that from a technical point of view, a significant amount of transshipment trade needs to be secured for a viable hub on the island: at least between 510,000 and 860,000 TEU per annum of transshipment trade needs to be sustainably sourced from the region to Curaçao. These volumes need to be secured while taking into account that transshipment tariffs cannot be as competitive as seen in the region (less than USD 70 per move is not viable) and that overall capital expenditure levels need to remain extremely low considering the required investments in new deep-sea facilities (more than USD 340m is not viable). Another consequence is that all import/export containers are shifted to the new facility and that the operations at the existing facilities are suspended once the new facility opens. The required transshipment volumes need to be sourced from the regional market. The identified potential market for Curaçao currently constitutes a total trade of around 2.5 million TEU on an annual basis. This potential market needs to be divided in a primary feeder market at close proximity to the island (<1.5 million TEU per annum) and a secondary feeder market to the east (> 1 million TEU per annum). The latter is considered highly contestable and not sustainable on the long term, considering the geographic position of the Curaçao vis-a-vis competing initiatives on Trinidad & Tobago. The primary feeder market includes neighbouring islands, but is dominated by Venezuela. The potential and sustainability of transshipment trade for Venezuela is clouded by uncertainly relating to the future of the country’s economy and port infrastructure. The perception of this future is expected to vary significantly amongst potential investors depending on their nature (shipping line, terminal operator, financial investor) and their origin (local, Europe/US, Venezuela, Asia). From a conceptual point of view, it seems difficult to develop a bankable business case for the hub project as outlined in this analysis. As a consequence, taking into account the public interest, the Government should be very prudent when pursuing further implementing of the container hub vision, now and in the future. This prudence predominantly relates to the Government spending public funds on risky port infrastructure development project. This prudence is further elaborated in the next section.



2.6.2 The Role of the Government

In many port development projects, the government co-invests in port assets. If this should be considered by the Government of Curaçao is further addressed in this section. In port public-private-partnerships (PPPs), public sector (Government) typically invests in assets… … which economic life significantly exceeds the concession contract term … which are considered ‘strategic assets’ and cannot be legally developed/owned by private sector … which are considered ‘common-user’ assets, serving more users/operators in the port … which are not subject to significant market risks residing outside the home economy … to improve overall project feasibility though their lower cost of finance compared to a private investor … to improve overall project feasibility though their ability to cover financial losses with economic benefits … to remain in control of the port land on the longer term (Landlord Port Authorities) In the table below, the applicability of these considerations is explored: Consideration

Economic life exceeds contract term? limited Only for quay wall and the land. Also for the breakwater and dredging (if required).

Strategic assets? no Development of port infrastructure by private sector not specifically prohibited by law in Curaçao

Common-user assets? no Dedicated facilities and dedicated channel only

Lower cost of finance public sector? limited Curaçao currently has limited borrowing capacity

Low and domestic risk profile? no High share of transshipment cargo required, which is footloose and has a significantly risk exposure

Economic benefits to cover financial losses? limited Transshipment has limited positive economic impact compared to import/export facilities

Government to control the land? yes CPA is considered a Landlord Port Authority and as such should remain in control of the land

Based on this concise analysis, it is assumed that there is only limited rationale for the government to co-invest in a new transshipment terminal on the island and that the preferred implementation structure would be a Build-Operate-Transfer model in which the private sector is responsible for the majority of the investments (and risks) and the government only provides the land for development of the terminal and possibly the connecting roads and the utility connections. The public sector receives port dues from the vessels calling the terminal as well as a fixed landlease fee for the land used for the terminal. KTK and CPO also receive income from nautical services offered to vessels calling the terminal.




Position on Curaçao as a Container Hub Although strategically located along existing maritime trade routes in the Caribbean basin, Curaçao’s position as a preferred location for a deep-sea container transhipment hub serving regional feeder ports remains disputable. With feeder-potential strongly depending on delayed but still expected port expansions elsewhere (Trinidad & Tobago) and on the highly uncertain political/economic future of its primary feeder destination (Venezuela), the outlook for Curaçao as a transshipment hub currently looks bleak. Especially since many of the threats and weaknesses remain outside direct control of the Government of Curaçao. Despite all the risks involved, the upside of a successful container transshipment centre on the island is clear: In the case the hub project is successfully implemented the island can expect significant direct and indirect financial and economic benefits. Market Consultation The government is recommended to organize a market consultation, following this harbour policy project. During the market consultation, the hub project shall be presented to relevant market players. Their interest and the conditions for their involvement shall be tested and matched with the conditions of the Government. The applicability of a market consultation for the Government of Curaçao resides in the facts that:

1) the risk exposure of the hub initiative is assessed differently throughout the industry and strongly depends on the background and preferences of the potential investor.

2) the discussion of the hub potential of the island has been going on for decades. Many local and international experts, stakeholders and outside agencies have shed their thoughts on it, through official and unofficial research mandates; in confidential and public reports and in the media. It is expected that not all of these individuals shall consider this policy project as the definitive answer to the container hub discussion and as a result, the market itself should answer this question.

Considering the continuous political and economic change which is visible throughout the region, circumstances may differ from time to time. The Government is therefore recommended to continuously monitor how the market perceives the island’s container transshipment potential. CPA, the landlord port authority which keeps track on relevant market developments in each segment is the logical governmental body that should be designated such a task. Land Allocation Independent from the outcome of the market consultation, the Government (the Landlord) is recommended to allocate a (40-50ha) plot of waterfront land at Bullenbay for future development of a container terminal. In the longer term, there may be a need to relocate the existing facilities outside the Schottegatbay (e.g. due to a lack of space, or port-city interface issues, or persistent nautical bottlenecks) and in the short to medium term, the island may want to remain prepared for an eventual investor in a transshipment hub. Having allocated sufficient land for such project also improves the appeal of the island for such development. Basic geological and bathymetrical research should be done to determine the exact location of this plot in the Bullenbay area and the Landlord (CPA) should continuously consider the outlook for container business vis-a-vis other port use in that area (e.g. dry and liquid bulk).




This section contains an outlook for phase 3, in which detailed implementation plans are developed for selected policy options. First: Market Consultation The market consultation should be held in a limited period following this policy research in which potential investors/clients are consulted in a structured way. Topic of discussion is clear: the potential of Curaçao as a container transshipment hub. In more detail, research is done under which conditions the private sector is willing to (co-)invest in a new container terminal. Subjects normally include the market, the legal framework, concession contract elements (level of competition, tariff setting etc) and organisation of the tender procedure. Subsequently, it should be analyzed to which extend these conditions can be met/matched and to which extend they do not contradict with the conditions as set by the Government. Relevant organizations to consider include shipping lines, terminal operators and financial investors. Considering the size of the investments and the required transshipment volumes, focus should reside on large international organizations with experience with similar project and with access to significant transshipment volumes. Based on the market consultation the business case can be updated and, if the market has shown interest after all, further implementation steps can be made (next page).

Example of potential participants of a market consultation Type Company

Shipping Lines

Maersk MSC CMA CGM COSCO Hapag-Lloyd China Shipping Evergreen ...

Terminal Operators

PSA Hutchison Port Holdings (HPH) Dubai Ports World (DPW) APMT ICTSI Ports America SSA Marine CTB CPS (local) ...

Financial Investors

Macquarie Infrastructure Group (MIG) RREEF NOATUM ...



Second: Further Implementation Steps In the case private sector has indeed shown structured and sincere interest in the project and conditions do not significantly contradict to the Governments goals/objectives, the following steps need to be taken:

1) Further feasibility analyses and master planning; 2) Updated business case development; 3) Development of a strategic container capacity plan for the island; 4) Development of the concession contract; 5) Development and implementation of the transaction procedure.

Each of these steps is shortly covered here. More details can be found in the Implementation Plan.

• Further feasibility analyses and master planning: more certainty on the location and the technical feasibility of the project is needed. Technical experts need to execute geological and bathymetrical research to make more detailed cost estimates, which can subsequently feed into the updated business case. An initial environmental impact assessment is also required at this stage.

• Updated business case development: with more structured inputs available, the business case can be expanded and elaborated. This provides a more detailed idea of the financial feasibility and the bankability of the project; but also towards the project’s ability to render concessionary payments to the government and towards the required length of the underlying concession contract to allow the investors to ensure their required returns.

• Development of a strategic container capacity plan for the island: predominantly relating what to do with the existing facility at Schottegatbay and the existing contract with its operator. In the case the import/export volumes are indeed shifted to the new facility, the existing location can be abandoned and used for alternative activities (port-related, or industrial/commercial/residential). If the alternative creates value to the government, this value can be used to cover public expenses in the new project (e.g. investments in roads or compensation for the existing operator, if applicable). In the case it comes as a cost, it needs to be taken into account in the overall business case of the project.

• Development of the concession contract: The concession contract formalizes the relation between the operator/investor and the landlord providing the opportunity to develop and operate the terminal. The contract shall be the basis for a long term public-private partnership and as a consequence it should cover all relevant topics throughout the project’s life: DBFOMT: Design the facility, Build the terminal, Finance the investments, Operate the business throughout the concession term, Maintain the assets and Transfer the assets back to the landlord at the end of the concession period. Besides these life-cycle subjects, all other legal matters should be carefully resolved through this agreement, including but not limited to legal titles and dispute resolution throughout the concession period.



• Development of the transaction procedure: using a structured transaction procedure the government can select the preferred private partner for development and operation of the terminal. A competitive process should be organized to select the preferred bidder, while unlocking as much economic value as possible. The procedure should cover the entire process:

1) Formally marketing the project and the transaction process through a Project Information Memorandum and a marketing campaign

2) Short listing the most relevant partners through a Request for Pre-Qualification

3) Developing a detailed Request for Proposal including a draft concession contract

4) Execute a Competitive Dialogue phase with pre-qualified investors and finalizing the concession contract based on its outcomes

5) Selecting the preferred bidder based on a one or multiple Bidding Rounds

6) The landlord (CPA) signing the concession agreement with the preferred candidate

7) The contract becoming effective after conditions precedents are met (e.g. financial close, detailed designs, contractor and supplier selection, volume guarantees, environmental clearance, et cetera)

Example of a structured transaction procedure for a complex port infrastructure project

preparation + market consultation

pre-qualification

5-10 Candidates 3-6 Candidates

contract “dialogue”

3-6 Candidates

Draft Contract

proposal

Final Contract

BAFO

Proposal



Annex: Port Fact Sheets

Port Willemstad, Curaçao Relation Home port for I/E base cargo Curaçao hub Terminal CPS Container Terminal Operator CPS Clients (lines) Evergreen, Hamburg Sud, ZIM, CSAV, CMA CMG Type Feeder Port I/E traffic 2011 83.350 TEU T/S traffic 2011 10,747 TEU I/E cost/move 141 USD/TEU T/S cost/move 60 USD/TEU Connections Feeder Destinations

Distances Puerto Cabello/La Guaira @ 120 NM Specifications Quay Length: 450 meters Depth: -11 meters New-Panamax Ready? No, due to various nautical bottlenecks at St. Annabay Constraints Draft, height, width restrictions Developments New Transhipment port Bullenbay?

Colon

Curacao

Kingston

Oranjestad Bonaire

Port of Spain

Maracaibo Puerto CabelloLa Guaira



Port Oranjestad, Aruba Relation Expected main feeder port for T/S cargo Curaçao hub Terminal Oranjestad Operator ASTEC Clients (lines) KING OCEAN, SEAFREIGHT LINE, CABOVEN, EUROPE WEST INDIES LINES MAERSK LINE, SEATRADE, CMA CMG Type Feeder port Traffic 2011 53.952 TEU Connections Feeder Destinations

Distances Hub 1: Manzanillo, Panama @ 620 NM Hub 2: Cartagena @ 380 NM Hub 3: Caucedo @ 360 NM Hub 4: Port of Spain @ 550 NM Hub 5: Kingston @ 500 NM

Curaçao @ 55 NM Specifications Quay Length: 280 meters Depth: -9.75 meters New-Panamax Ready? No, Limited draft & length Constraints Primarily Cruise Port, congestions in the port area Developments Unknown

Curacao

Kingston

Oranjestad

Port of Spain

Maracaibo



Port Kralendijk, Bonaire Relation Expected main feeder port for T/S cargo Curaçao hub Terminal Port of Kralendijk Operator Bonaire Port Authority Clients (lines) RoRo service to Curaçao Type Feeder port Traffic 2011 4,000 TEU (Curaçao RoRo) Connections

Distances Curaçao @ 45 NM Specifications Quay Length: RoRo Berth New-Panamax Ready? No, container berth absent Constraints Only RoRo berth present, no container handling equipment Developments Unknown



Port Puerto Cabello, Venezuela Relation Expected main feeder port for T/S cargo Curaçao hub Terminal BOLIPUERTOS Operator Instituto Puerto Autonomo de Puerto Cabello (IPAPC) (recently nationalized by Venezuelan government

/ BOLIPUERTOS) Clients (lines) Maersk, CFS, MSC, CSAV, ZIM Type Direct Call & Feeder Port Traffic 2010 809.454 TEU Connections

Trunk Lines Far- East – Puerto Cabello (CSAV, CMACMG)

Distances Hub 1: Manzanillo, Panama @ 820 NM

Hub 2: Cartagena @ 580 NM Hub 3: Caucedo @ 500 NM Hub 4: Port of Spain @ 400 NM Hub 5: Kingston @ 800 NM

Curaçao/Bonaire/Aruba @ 120 NM Specifications Quay Length: 184 +184 +184 + 180 + 205 + 205 + 205 meters Depth: -10.7 meters New-Panamax Ready? No ; limited draft of 10.7 meters Constraints Several delays in the port Developments Investment of 520m USD for container handling facilities and extra berths (Chinese private partner)

Colon

Puerto Cabello

Caucedo

Cartagena

Manzanillo

Point Lisas

Jacksonville

Kingston

La Guaira

Far East(CMA CGM)

http://www.ipapc.gov.ve/



Port La Guaira, Venezuela Relation Expected main feeder port for T/S cargo Curaçao hub Terminal La Guaira Operator BOLIPUERTOS Clients (lines) Maersk, CFS, MSC, CSAV, ZIM Type Feeder port Traffic 2010 333.539 TEU Connections Feeder Destinations


Curaçao/Bonaire/Aruba @ 120 NM Specifications Quay Length: 1,400 meters Depth: -8.5 meters New-Panamax Ready? No limited draft of -8.5 meters Constraints Developments 400m USD investment to increase container capacity to 600.000 TEU per year (Portuguese partner)

Colon La GuairaCartagena

Manzanillo

Caucedo

Jacksonville

Kingston

Puerto Cabello



Port Guanta, Venezuela Relation Expected main feeder port for T/S cargo Curaçao hub Terminal Guanta Operator BOLIPUERTOS Clients (lines) Maersk, ZIM Type Feeder port Traffic 2011 58.500 TEU Connections Feeder Destinations


Curaçao/Bonaire/Aruba @ 280 NM Specifications Quay Length: 1,000 meters Depth: -11,89 meters New-Panamax Ready? No , limited draft Constraints Congested, appalling conditions of the port Developments unknown

CartagenaManzanillo

Caucedo

Guanta

Kingston



Port Maracaibo, Venezuela Relation Expected main feeder port for T/S cargo Curaçao hub Terminal Maracaibo / La Ceiba Operator BOLIPUERTOS Clients (lines) CSAV, ZIM, CFS Type Feeder port Traffic 2011 58.300 Connections Feeder Destinations


Curaçao/Bonaire/Aruba @ 250 NM Specifications Quay Length: 195 meters Depth: -10.2 meters New-Panamax Ready? No, limited draft + bridge Constraints Mainly oil terminal, draft restrictions Developments Unknown

Maracaibo

Caucedo

Jacksonville

Kingston

Puerto Cabello

La Guaira

Guanta





Port Port of Spain, Trinidad & Tobago Relation Expected competitor T/S cargo Curaçao hub Terminal Port of Spain Operator PPOS Clients (lines) CMA CGM, MSC, CSAV, Bernuth, Hapag-Lloyd, ZIM, Hamburg Sud, Marfret, China Shipping, Seaboard

Marine Type Transhipment Hub I/E traffic 2011 161,634 TEU T/S traffic 2011 218,203 TEU I/E cost/move 173 USD/TEU Import. 112 USD/TEU Export T/S cost/move 59 TEU Connections Feeder Destinations

Distances Puerto Cabello/La Guaira @ 400 NM Curaçao @ 480 NM

Specifications Quay Length: 650 meters Depth: -12 meters New-Panamax Ready? No Constraints Located in close to city centre, no room to increase capacity Developments Unknown (Expansion of Point Lisas/ Greenfield development La Brea)

Kingston

Puerto Cabello

Caucedo

Manzanillo Cartagena

Port of Spain



Port Point Lisas, Trinidad & Tobago Relation Expected competitor T/S cargo Curaçao hub Terminal Point Lisas Operator PLIPDECO Clients (lines) Maersk Type Feeder port/ Transhipment hub I/E traffic 2011 144.000 TEU T/S traffic 2011 36.000 TEU I/E cost/move 168 USD/TEU Import. 105 USD/TEU Export T/S cost/move 55 USD/TEU Connections Feeder Destinations

Distances Puerto Cabello/La Guaira @ 400 NM Curaçao @ 480 NM

Specifications Quay Length: 500 meters Depth: -12 meters New-Panamax Ready? No Constraints Unknown Developments Expansion of the port to receive new Panamax vessels (Greenfield development La Brea)

Kingston

ParamariboManzanillo

Point Lisas

Guanta



Port Caucedo, Dominican Republic Relation Expected competitor T/S cargo Curaçao hub Terminal DPW Caucedo Operator DP World Clients (lines) CSAV, MSC Type Transhipment Hub Traffic 2010 1.004.901 TEU I/E cost/move unknown T/S cost/move USD 100/TEU Connections Feeder Destinations

Distances Puerto Cabello/La Guaira @ 500 NM Curaçao/Bonaire/Aruba @ 400 NM

Specifications Quay Length: 922mtr + 300 mtr Depth: -13,5 meters New-Panamax Ready? No, limited draft Constraints unknown Developments Dredging to Panamax and additional terminal capacity to 3,2 million TEU

Caucedo

Port of Spain

Kingston

Maracaibo

Freeport

Bridgetown



Port Kingston, Jamaica Relation Expected competitor T/S cargo Curaçao hub Terminal The Kingston Container Terminal Operator Kingston Container Terminal Services Ltd Clients (lines) CMA CGM, ZIM, CSAV Type Transhipment hub Traffic 2010 1.891.770 TEU Connections Feeder Destinations

Distances Puerto Cabello/La Guaira @ 700 NM Curaçao/Bonaire/Aruba @ 570NM

Specifications Quay Length: 1300 + 535 + 475 mtr Depth: -13 meters New-Panamax Ready? YES in 2014 , CMA CGM invested US$ 100 MN Constraints Strikes, congestion within the port days (delays) Developments - Planned investments US$ 100 MN by CMA CGM (Fifth Phase Expansion)

- land reclamation in preparation for future port expansion at Fort Augusta The construction of the container terminal shall increase capacity by a further 2 million TEUs, taking the total capacity to 5.2 million TEUs.

Guanta

Puerto Cabello

La Guaira

Cartagena

Point Lisas

Havana

Rio HainaCaucedo San Juan

Kingston

Barranquilla

Maracaibo

CuracaoAruba

ParamariboManzanillo

Veracruz

Port of Spain



Port Cartagena, Colombia Relation Expected competitor T/S cargo Curaçao hub Terminal Cartagena Operator SPRC/ Contecar Clients (lines) MSC, Hamburg Sud, ZIM, CSAV, Type Transhipment Hub & Direct Call Port Traffic 2011 1.853.342TEU I/E cost/move 120 USD/TEU T/S cost/move unknown Connections Feeder Destinations

Distances Puerto Cabello/La Guaira @ 580 NM Curaçao/Bonaire/Aruba @ 450 NM

Specifications Quay Length: 922 mtr (SPRC) + 420 mtrs (Contecar ) Depth: -13,7meters New-Panamax Ready? No, but dredging works already started to PanaMax draft Constraints Unknown Developments Dredging to new Panamax draft

Puerto Cabello

La Guaira

Rio Hina CaucedoKingston

Colon

Port of Spain

Cartagena



Port Manzanillo, Panama Relation Expected competitor T/S cargo Curaçao hub Terminal Manzanillo International Terminal Operator MIT Clients (lines) APL, Hapag-Lloyd, Neptune Line, CCNI, Hyundai Marine, Nordana, CMA CGM, K-Line, NYK Line, Crowley,

King Ocean, NYK Ro-Ro, CSAV, Maersk Line, OOCL, China Shipping, Marfret, SC Line. Eukor Car Carriers, MOL Liner, Seafreight Agencies, Frontier Line, MOL Bulk, Xpress Container Line, Hamburg Süd, MSC, ZIM

Type Transhipment Hub Traffic 2011 3.371.714 TEU Connections Feeder Destinations

Distances Puerto Cabello/La Guaira @ 820 NM

Curaçao/Bonaire/Aruba @ 700 NM Specifications Quay Length: 1240 mtr + 400 mtr Depth: -14 meters New-Panamax Ready? No, limited draft Constraints Unknown Developments 200 Million Dollars (PanaMax proof)

Manzanillo

GuantaPuerto Cabello

La Guaira

Point Lisas

Cartagena

CaucedoKingston

Port of Spain



Port Colon, Panama Relation Expected competitor T/S cargo Curaçao hub Terminal Colon Container Terminal Operator Colon Container Terminal S.A. Clients (lines) Evergreen, ZIM Type Transhipment hub Traffic 2011 3.371.714 TEU (including Manzanillo) Connections Feeder Destinations

Distances Puerto Cabello/La Guaira @ 820 NM

Curaçao/Bonaire/Aruba @ 700 NM Specifications Quay Length: 982 meters Depth: -15 meters New-Panamax Ready? Yes Constraints Unknown Developments Unknown

Curacao

Puerto Cabello

La Guaira

Rio Haina Caucedo

Baranquilla

Cartagena

Kingston

Port of Spain

Colon



Port Suape, Brazil Relation Expected competitor T/S cargo Curaçao hub Terminal PORTO DE SUAPE Operator ICTSI Clients (lines) MSC, CMA CGM, North Star, Unimare, Hamburg Sud Type Transshipment Hub / Direct Call Port Traffic 2011 417.666 TEU Connections

Distances Hub 1: Caucedo @ 2800 NM Hub 2: Port of Spain @ 2200 NM Hub 3: Kingston @ 3100NM

Puerto Cabello/La Guaira @ 2500NM Curaçao/Bonaire/Aruba 2600 NM

Specifications Quay Length: 660 meters Depth: -15,5 meters New-Panamax Ready? Yes

Constraints Infrastructure is designed to reach an annual throughput of 1.5 million TEU by 2031 Developments

Caucedo

Rio de Janeiro

Santos

Fortaleza

Kingston

Maracaibo

Suape






3 Yachting & Marinas



3.1 Introduction

One of the main conclusions of the phase 1 report is that the yachting sector has been identified as a sector which deserves further attention and elaboration. In phase 1, it was established that there is a limited number of berthing and anchorage facilities, there are limited yacht promotion activities and current rules and regulations on the island are insufficiently tailored to yachting sector. Nonetheless, it is widely recognized among individuals active in related sectors on the island, that Curaçao offers the potential to develop a yacht tourism sector that would contribute to the economy. This chapter assumes a top-down approach. First it aims to identify the potential markets in the Caribbean, Curaçao could attract. It follows by focusing on yachting sector development on an island wide level and proposes a yachting infrastructure development plan. Lastly, it concentrates on current challenges in the sector that mainly relate to the rules and regulations. The sections in the chapter are allocated as follows:

• In section 3.2 a high level vision for Curaçao as yachting destination is discussed. Analyzing the yachting sector in the Caribbean, it questions which markets Curaçao can potentially attract;

• In section 3.3 a vision for sector development is proposed. It continues by analyzing potential structures and locations for Greenfield marina developments and concludes with a preliminary yachting infrastructure development plan;

• In section 3.4 the most relevant current challenges on Curaçao related to the yachting sector are discussed and potential solutions proposed;

• Section 3.5 concludes the chapter by making policy recommendations providing an outlook to the implementation stage.

Heineken Regatta Curaçao, 2011



3.2 Vision for Curaçao Yachting Sector

This section starts with a rationale for the development of the yachting sector. Afterwards three potential markets are analyzed: yacht storage, yacht chartering and super yachts. Each market potential is assessed by using a SWOT analysis that stems from research done in the preparation of phase 1 (“Strategic Position”) complemented with additional policy research.

3.2.1 Preliminary Rational for Curaçao as Yachting Destination

Yachting has been identified as one of the important tourism growth sectors for Curaçao in the “Strategic Tourism Master Plan for the Island of Curaçao 2010 – 2014”. It is estimated that around 10 million yachting holidays are enjoyed/consumed each year. The market has experienced growth in recent years and is projected to continue to grow in the near future. The Caribbean ranks second after the Mediterranean as the top destination for yachting, although it is the preferred region by U.S. residents. Although no studies have analyzed the potential economic impact of the yachting sector on Curaçao, it is observed that in the region, yacht tourism can be a significant economic driver for an island economies in the Caribbean:

• in St. Maarten, the economic impact of the yachting industry is estimated at $55m (ECLAC, 2002) and accounts for the employment of 2.5% of the total workforce;

• in Trinidad & Tobago the impact is estimated at $20-25m and directly generates jobs for 1100 people (ECLAC, 2002);

• in Grenada the direct revenue from yachting is estimated at $13m and creates 250 jobs (ECLAC, 2003). Yacht tourists differ from cruise tourists as their length of stay is longer and a larger share of their expenditures are spent at local businesses. It can be estimated by comparing with other sources that a yacht tourists spends an average of around $70 per day and around 60% of the expenditures by yacht tourists is spent outside the marina. The average stay of yacht tourist is estimated at between 7 and 20 days (ECLAC, 2002; 2003). Super yacht tourists spend significantly more. Generally stated, the yachting tourism sector is worth developing since:

• it contributes to the national accounts through tax collections from: o Increased tourist expenditures; o Increased flights to and from the airport; o Increased property values.

• it benefits the national accounts through growth of small businesses: o Businesses directly related to yachting (sail makers, repairmen etc.); o Business indirectly related to yachting (restaurants, bars, hotels, etc.).

• it reduces the economy’s dependency on the existing economic activities by further diversifying the maritime cluster.



3.2.2 Curaçao as potential yacht storage hub

SWOT related to yacht storage market potential

Strengths Weaknesses

• Curaçao located below the hurricane belt • Safe environment for yachts; relatively low crime rates • Well connected international airport

• Distance from main sailing routes in the Caribbean (East) • Limited number of berths available on island • Sea surrounding Curaçao difficult to navigate • Curaçao lacks a strong reputation in the international

yachting sector

Opportunities Threats

• Yacht insurances increasingly demand yachts to be stored below hurricane belt

• Upcoming economies Central and South America; increased investments in yachts and berths abroad

• Development of Trinidad & Tobago and Venezuela as marina storage hubs

• Expansion of the ‘Caribbean Box’ by insurance companies

During the hurricane season, yacht owners in the Caribbean seek a safe haven for their investments. The hurricane season generally lasts from June 1st through November 30th. During this period, yacht owners can opt to store their yacht on the land or in the water. Being a hurricane storage location can yield significant revenues, especially when the yacht owners and/or its crew are required/persuaded to spend some time on the island while ordering repair and maintenance services. Furthermore, It also generates revenues in an otherwise low season, as the cruise market eases during the hurricane season. Curaçao is said to be on the outskirts of the hurricane belt or the “Caribbean Box” which ranges from 12.4 to 23.5 north and from 55 to 87 west. More specifically, Willemstad is located around 12.1 north, just below the ‘box’. However, there are no guarantees that hurricane shall not occur at Curaçao. The chances of such occurrence however, are significantly lower compared to most other Caribbean islands, such as for example St. Maarten, as can be seen in the figure below. What matters most are the insurance rates charged by the insurance companies for the storage at the geographical location. A threat lies in the event that a hurricane does cross the island, the dimensions of the ‘Caribbean Box’ alter; insurance rates go up and Curaçao loses its favourable position.



Trajectories of tropical depressions, storms and hurricanes between 1985 and 2005

(the Saffir-Simpson scale relates to the strength/severity of the event) Although there are more islands or countries favourably located in the Caribbean, the ABC islands are also considered to be one of the few safe options with relatively low crime rates and a relatively stable government. The political and socio-economic situations on the alternatives Trinidad & Tobago and Venezuela are increasingly less attractive. Curaçao can benefit from these developments. In the long run however, political and social environments may alter and the competitive advantage on this aspect might diminish. Curaçao has a well developed maritime cluster. Technical skills for the maintenance and repair of yachts are present on the island. However, it must also be noted that for exclusive yachts it is not uncommon that specialists are flown in from abroad to execute specific repairs. Taken into account the strengths of Curaçao – its favourable location, safe environment, a maritime cluster – and the identified opportunities – the fiscal incentives to store yachts outside the hurricane belt – it seems that Curaçao is well positioned to benefit from this market when additional facilities are created and Curaçao is promoted as a hurricane yacht storage destinations.

Curaçao



3.2.3 Charter Market

SWOT related to the yacht charter market

Strengths Weaknesses

• Curaçao located below the hurricane belt, • Safe environment for yachts • Well connected international airport • Attractiveness of island and surrounding islands • Roundtrip availability ABC Islands • Long coastline compared to neighbouring islands

• Distance from main sailing routes in the Caribbean • Limited number of berths available on island • Sea surrounding Curaçao difficult to sail, especially for

less experienced charter tourists • Lack of facilities in marinas to accommodate large

groups of tourists • Curaçao lacks a strong reputation in the international

yachting sector


• Popularity of chartering yachts in the Caribbean • International market players employ network

philosophy • Development of marinas on surrounding islands • Crowded Eastern Caribbean islands

• Continued underdevelopment of the marina sector in the region

• Increased openness of the island can attract smuggling activity

• Increased nuisance in the marinas

Chartering a yacht is a popular activity in the Caribbean. For some marinas, almost 90% of their berthing income is resulting from chartered yachts. The charterers are mainly tourists from the USA and Europe, almost at an equal share. A handful of charter companies dominate the charter market. Most commonly, these tourists sail up (South to North) or down (North to South) and around the Eastern Caribbean islands for a couple of weeks as depicted in the figure below.

Main sailing flows of charter tourists in the Eastern Caribbean

800 km’s

Main sailing flows: yachts sail south..

…and / or north

USA EU



One of the major weaknesses of Curaçao in relation to attracting the yacht charter tourist in the Caribbean is its distance from the main sailing routes. Between Curaçao and Grenada, there is 800 km of rough seas. This stretch is not easily traversed by the inexperienced sailors, who prefer the calm Eastern Caribbean Islands which offer a low barrier sailing experience. It is possible for the relatively inexperienced sailor, to sail from island to island, navigating only on sight. These inexperienced yachtsmen (which constitute the bulk of the market) are unlikely to endeavour the crossover to the Leeward Antilles. Attracting the charter tourists that commence their trips on the Eastern Caribbean islands is therefore unlikely. However, Curaçao does have potential to attract its own charter tourist (as depicted in the following figure).

Curaçao as yacht charter hub destination

A major requirement for functioning as a charter hub – a destination where yacht tourists embark on their sailing trip and return to at the end of the trip – is a well connected international airport. Curaçao has an airport that has frequent flights to and from Europe and the USA. In addition, a hub destination requires a well developed tourist infrastructure as the tourists are likely to spend a day or two on the location before they embark on their trip. Also in this respect, Curaçao can comply to the requirement being a popular tourist destination (many hotels and resorts in various price classes). The product Curaçao can offer is a trip around the island, or even around the ABC islands. Bonaire is at a 40 km distance and Aruba at a 75 km distance. The tourist product in the region is well developed and generates sufficient interest. However, as mentioned earlier, the seas between the islands can get quiet rough. According to the local sailors, navigating to and from Bonaire is very manageable (in one day a full return trip), but sailing back from Aruba to Curaçao, can be quite difficult and is not meant for the inexperienced sailor. At least two days are needed for a return trip. Sailing along the southern coastline in Curaçao is regarded as very ‘sailor friendly’. When a destination wants to promote the charter possibilities, it is important to consider the qualities of the total product. Hence, the yachting possibilities and experiences in Bonaire, Aruba and Small Curaçao should all be considered. Additional development of the regional yachting product would positively affect the demand for chartering yachts from Curaçao. Curaçao can also benefit from the overcrowded marinas on the Windward Islands. As chartering is widely popular in that region, the marinas suffer from overcrowding. Experienced yachtsmen might consider the opportunity to turn to a different region for their holidays. If Curaçao can attract an international marina operator active in the Leeward Islands, Curaçao could benefit from the network philosophy employed by these marina operators. It also attracts key clients of such an international operator, who have a preference to sail to the various destinations of this specific international operator.

USA

EU



There are also disadvantages of this charter market, as it attracts different kind of tourists than regular yachtsmen. Charter yachts tourists often arrive in large groups at the location and they can cause disturbance in the marina. Marinas need to be equipped to deal with tourist peaks. The availability of sufficient showers, toilets, dressing rooms and waste disposals seems to be a minimum. Along the shores, yachts with large groups of people on them can cause nuisance with would decrease the attractiveness of the island’s natural products. Strict rules and regulations enforced by the public authorities are required to limit the negative impacts of yachting. Taken into account the strengths of Curaçao – its well developed accessibility, its neighbouring islands and its long coastline – and the opportunities – the popularity of charter activities, the overcrowded Eastern Caribbean – it seems that Curaçao is well positioned to capitalize on the potential of this market, albeit focused on the more experienced sailor as the rough seas are not inviting to everybody. One must be careful however with uncontrolled growth of this market as it can be detrimental to one’s yachting product and negative effects may spill over to other tourist sectors such as the regular hotel tourists. Proper facilities must be installed to retain the nuisance created by these tourists to a minimum.



3.2.4 Super yacht market

SWOT related to super yacht market Strengths Weaknesses

• Curaçao located below the hurricane belt • Safe environment for yachts • Well connected international airport • Attractiveness of island and surrounding islands • Availability of yachting services (maintenance, repair and

bunkering)

• Distance from main sailing routes in the Caribbean • Limited number of berths available on island • Limited super yacht facilities available • Current regulations concerning yachting are not yachting

friendly • Presence of refinery make certain locations less

attractive (view & pollution)


• Growing market of super yachts • Increased number of Venezuelan yacht owners who

invest in berthing abroad • Possible future closure of the refinery • Development of marinas surrounding islands • Marina developments in Central and South America

• Continued underdevelopment of the marina sector in the region

• Continued pollution of natural waters of Curaçao by liquid bulk sector

• Increased piracy activity close to the mainland

Another market that Curaçao could focus its effort on is the market for super yachts. In this document, yachts in excess of 30 meters are considered ‘super yachts’. The so-called category of ‘ultra’ yachts (carrying over 200 passengers) is not taken into consideration as it involves only a very small fraction of the market and they can be dealt with as regular cruise vessels. Super yachts are transient in nature. During the course of the year, super yachts move between continents and rarely stop somewhere for an extended period of time (e.g. more than 2 months). A typical super yacht originating from the USA or Europe, enters the Caribbean in December from the North (Greater Antilles and Leeward islands), traverses the eastern Caribbean islands to the south before continuing to the Mediterranean just before the start of the hurricane season. The Leeward Antilles – the ABC islands – are not a port of call in this sailing pattern. Curaçao in that respect is located too far into the Caribbean. Due to their transient nature, super yachts often do not have a homeport. A homeport in this respect is a marina in which the yacht is present for the majority of the year. When they do have a homeport, it is most often in fiscally attractive environments. A latest development in this respect is the marina in the bay of Kotor in Montenegro that targets super yachts specifically. As Italy and Greece do not offer similar fiscal benefits, marinas in Montenegro are well positioned to attract these larger vessels. However, in that respect, interviewed individuals active in the Caribbean marina sector, recognize a potential in being ‘the marina of Venezuela’. Increasingly, wealthy Venezuelans invest in super yachts and berthing locations abroad as Venezuela is not considered as attractive location. Curaçao can benefit from this development.



Commonly, super yachts tend to gravitate to ‘hot spots’ of the rich and famous such as Monaco, Cannes, Venice, Ibiza, Malta, Miami, Bahamas, St. Barths etc. Such destinations are primarily tailored to the upscale segment of the yachting tourists. The marinas often offer a wide variety of services, 5-star accommodation, restaurants and bars, and can offer exclusivity, safety and privacy. In the yachting season, events are organized in and around the marinas that attract the super yachts. Super yachts are highly attractive for a marina. Firstly, the per square meter revenue that the super yachts generate can be up to four times as much as from regular yachts. Secondly, super yachts are manned by wealthy people who spend a significant amount in the marina on leisure amenities (restaurants, bars and supplies) but are also frequent and heavy users of the utilities provided by the marinas such as water and electricity. Lastly, a super yacht draws attention. People are drawn to these multimillion dollar vessels which improves the appeal for the marina and its surroundings to other visitors.

Existing (blue) and potential (orange) super yacht sailing flows

The location of the island Curaçao is considered a weakness in relation to attract the ‘western’ super yachts. However, the yachting sector in South and Central America is experiencing rapid growth. Marinas are being developed along the eastern coast line of Central America. Several interviewed individuals in the marina sector in the Caribbean have identified this upcoming market as a potential for Curaçao. The workshop held on the 5th of July 2012 also confirmed this belief. For this market, Curaçao is well-located close to the mainland. One of the major strengths of the island is that it has a strong maritime cluster. It can offer repair services, maintenance, provisions, bunkering, cleaning etc. The quality of the fuel delivered to the super yachts has to be of fine quality. This type of fuel is not produced in the refinery of Curaçao, it is imported. Nevertheless, yacht owners are not hesitant to spend a premium on gasoline. For repair and maintenance services, it is not uncommon for super yacht owners to demand that personnel appointed by them execute the services. These experts would then be flown onto the island. A maintenance-related service which is currently not offered yet is dry-docking of super yachts. On the island there is no dry-dock specifically developed for mega-yachts. If Curaçao aims to target the super yacht segment, dry dock facilities would strengthen its competitive position.

…depart to Mediterranean

Western yachts start in the north…

Curacao could benefit from

growing market of South American

yachts



Taking into account the strengths of the island – the location, the maritime cluster and the well connected international airport – and the opportunities – the growing super yacht market and the development of the marina sector in Central and South America – it seems that Curaçao is well positioned to take advantage from this upcoming market in the region. However, focusing on this market is a high risk high reward strategy, as the required investments, risks and revenues are significant.

3.2.5 Conclusion

From this analysis, it is clear there is a sizeable potential for Curaçao to develop its yachting sector. The potential to capture certain niche markets is present. As Curaçao is large enough to accommodate multiple marinas, it can also tailor to multiple markets. Hence, a selection of the above market is not necessary and it can even be recommended for the island to develop a diversified yachting sector in which different types of yacht tourists can be accommodated. A diversified yachting sector decreases the risk profile for the economy. Risks involved with the different strategies require a careful master planning of the different activities.




3.3 Marina Development on Curaçao

A major weakness of Curaçao as a yachting destination is that it currently does not have the facilities and the infrastructure to accommodate additional yachts. Marinas are reported to be at full capacity. If the government of Curaçao aims to develop the yachting tourism sector on the island, additional facilities (especially berthing facilities) must be created. Through additional facilities, economies of scale can be realized and the more the yachting sector develops, the more small business benefits.

3.3.1 Marina Development Structures

The development of a Greenfield marina can be characterized as a large infrastructure project. In addition, as marinas are always developed on the waterfront, it often deals with public land. However, as the relevant public bodies have no expertise in the development or operation of marinas, a partnership between the public and private sector seems inevitable. Private sector involvement should not be an end in itself, but only a means to achieve specific and well defined public objectives. Involvement of the private sector in marina development and operations can yield among the following benefits:

• Private sector optimizes marina planning and layout; • Private sector optimizes the level of service; • Private sector introduces private capital which reliefs public funds; • Private sector can bring in customers from their network abroad; • Private sector is better positioned to respond to changing competitive landscapes.

In short, the basic aim of governments in increasing private sector participation is to establish a more competitive and financially sustainable system of marinas. The nature of private sector involvement in the port sector shall be prescribed by the adoption of a specific institutional model supported by a clear marina and yachting policy.. In public private partnerships (PPPs) relating to marina development, the marina operator can be involved in two ways:

1. Under a (Design) Build Operate Transfer Structure, the marina operator invests in all assets, including the nautical and landside infrastructure. This includes the buildings on the land, the pontoons in the water, the electricity connections, water and sewage accessibility etc. Often the marina operator is involved in the design phases well. At the end of the contract, the assets are transferred back to the public authority. Such concessions typically have a long term (> 30 years), as the private party requires the time to achieve its desired return on investment. This structure is not the most common as marina operators are generally not the investors. In the eastern Mediterranean this structure is widely applied. For example, Camper & Nicholsons Investments owns a 25 year lease on the Cesme Marina in Turkey and invested a total of €13 million. The same holds for the Didim and Dalaman marina managed by the Doğuş Group.



2. Under a management contract, the marina operator is only responsible for managing the marina. The construction and the ownership of the asset remain public responsibilities. The concession contracts for these structures have a short term ( < 10 years), as the private sector does not invest in the assets. However, some longevity in the contract is desired, due to the transaction costs and the operational expertise gained by experience. This type of contracts are more common in the Caribbean as IGY marinas usually operates on the basis of these type of contract, a recent example is in Costa Rica, marina Papagay. Camper & Nicholsons operates the Yas marina in Abu Dhabi under a 10-year management contract. In this case, the luxurious marina was developed by the state owned company Aldar Properties. MDL marinas just recently signed the contract to operate Marina del Gargano in Italy.

It must be noted that marina development are most often private initiatives in which case the private sector owns the property and opts to construct a marina. Naturally, approval for the development plans must be provided by governmental authorities. As a consequence, even in private initiatives, the government has the control to prevent over development of marinas. In order to maximize the value to the public sector in a public-private partnership, a competitive tender process can be initiated. Commonly in a competitive tender process, private parties are invited to prepare a proposal that consists of a business plan and a financial offer. The business plan describes ‘what’ the private party envisions to do with the asset. The financial offer can consist of upfront payments, annual concessionary payments, fixed and/or variable payments. Alternatively, a bidding parameter can also be the level of the berthing fee charged to its customers. If the public authority aims to maximize occupancy rates in the marinas, such could be an alternative although one must carefully consider the incumbents on the island and the dynamics of the competitive environment. In the end, the conceding authority determines the best offer according to pre-determined criteria. By creating competition for the asset, the maximum amount of the surplus value made by the private operator is extracted and transferred to the public authority. Public Authority in Curaçao In Curaçao, the Curaçao Ports Authority (CPA) seems to be best positioned to assume the role of the public authority in the development of marinas on the island.

1. Through the new “Beheersovereenkomst” the CPA shall be granted the management rights of all the waters, inner waters and upland areas. This would make the CPA the landlord to all private companies developing and/or operating marinas on public property.

2. The CPA envisions an increased landlord function as also described in Chapter 1. Hence, the exploitation of land would fit in their new business model.

3. The CPA is a reliable public partner for a private investor/operator.. CPA is well experienced in contract negotiations with the private sector (but currently lacks any expertise with regards to marina-developments and operations).

However, the CPA is currently not active in the marina sector. Marina developments are also not mentioned in its new business plan. The government, as the majority shareholder of the CPA, can steer the CPA towards exploitation of new possibilities in this sector. A necessity for this would be that the CPA also attracts its own experts with knowledge and experience in the marina sector (capacity building).



Entering the yachting and marina market means that the CPA diversifies its portfolio of revenue sources. At this moment, CPA depends heavily on income generated directly or indirectly from activity in the refinery (port dues, towage income through KTK). With the future of the refinery uncertain, the CPA would be wise to look at other markets in which it could invest. The yachting sector would fit in their profile as landlord port authority as it relies on the development and efficient operation of port infrastructure. Collection of concessionary payments from marina operators may provide a decent return on investments. In addition, it would give the CPA the opportunity to oversee all maritime developments of the islands and therefore plan maritime developments most efficiently. International Marina Operators If the CPA decides to tender the development of a Greenfield marina, it is recommended that it would conduct a market consultation among international marina operators. Attracting an international brand name for one’s marina can create publicity for the destination and the brand name of the operator shall also attract new visitors. Yachtsmen already berthing in one of the other marinas operated by this new operator would likely receive discounts whenever they would berth in the new marina in Curaçao. Moreover, travelling yachtsmen would recognize the brand name of the operator and opt to call this marina as they have had positive previous experience with its operator. At the marina, they feel that they can expect a certain level of services and safety which are very important elements to the travelling yachtsmen. In the world, there is only a handful of internationally operating marina operators. Examples of such are Island Global Yachting (very active in the Caribbean and Northern America), Camper & Nicholsons (increasingly active in the Caribbean and Mediterranean), MDL Marinas (mainly active in the UK and Italy) and Mourjan Marinas (mainly active in the Middle East).



3.3.2 Possible Greenfield Marina Locations

Island Vision For the development of the marinas, a long term vision is required. The vision should reflect the objective of the government of Curaçao with respect to the development of the yachting tourism sector. The long term objective can be formulated as follows: In the long term, the island of Curaçao aims to offer a complete yacht tourism product that results in a unique, enjoyable and enthusing experience for the customer and maximizes socio-economic value to the country:

• Curaçao offers a vibrant yachting centre in Punda, Willemstad. Yacht tourists visit the capital and are enthused by the marina and the yachts. A sailing trip can commence from city centre of marinas nearby;

• Curaçao offers sufficient berthing capacity and anchorage facilities that stimulates yachtsmen to visit multiple destinations on the island and to store their yachts during the hurricane season;

• Curaçao distinguishes itself by the high service level provided to the tourists and yachts.

The yachting tourism product can be allocated to different geographical areas on the island:

1. Inner core: Waaigat and Schottegat Bay – economic centre of the island; 2. Outer core: Piscadera Bay, Caracasbay, Fuikbay and Spanish Water – touristic developed areas outside

the island’s capital; 3. Outer shell: all other inner waters along southern coastline – remote locations with little

development; 4. No potential: all waters along northern coastline – due to nautical characteristics, rough winds and

waves, the northern shore is unfit for marina development.

Outer shell

Outer core

Inner core

Vision marina development on Curaçao



In this section, a Greenfield marina development is discussed for each of the first three defined areas:

1. Inner core – Schottegat Bay suffers from the polluting activities of the refinery. Hence, it is currently not considered as an attractive location for marina development. The Waaigat location is selected for further exploration in this section.

2. Outer core – Piscadera Bay is not an attractive location due to the air pollution of the refinery and the wind direction that pushes that air towards the bay. Caracas Bay is an attractive location and private initiatives (Palapa Marina) are already in development. The same holds for Fuikbay where a 400-berth marina is planned. Spanish Water offers multiple locations possible locations. In this section, a hypothetical case of a marina development in the Spanish Water is presented. It must noted that land positions are ignored in this analysis.

3. Outer shell – as a hypothetical case for marina development in the outer shell, Santa Martha Bay is elected. Bullenbay is considered as a cargo destination, not a touristic destination. Other locations along the coastline should offer anchorage facilities that would enhance the total yachting product of the island.




Inner Core - Het Waaigat Het Waaigat is located near the heart of the city Willemstad on the side of Punda as shown on the figure below. It is a natural basin connected to the St. Annabay. Around Het Waaigat are small local businesses, a post office, markets, a theatre and a large parking. The nautical accessibility is limited due to the presence of two bridges limiting the width to 8 meters. In the close up picture below, it can be seen that the span of Het Waaigat reaches a maximum width of 350m and 175m across. Het Waaigat can accommodate around 200 vessels. In addition, super yachts can berth alongside in the Annabay (indicated by the yellow square in lower picture).

Het Waaigat (right), including super yacht berths (left, yellow)

Willemstad

Otrobanda

Punda

Annabaai

Schottegat

Waaigat

>350m

175m



In the past decades, efforts have been undertaken to develop Het Waaigat. The foundation ‘Desaroyo Waaigat’, headed by local yachting aficionado, involved citizen and former director of Banco di Caribe Eddy de Kort. His initiatives have allegedly led to the replacement of the Wilheminabridge, which can now be opened. Furthermore, the foundation started the restaurant Pampus in the north eastern corner of Het Waaigat to stimulate the leisure activity in the neighbourhood. There have also been plans to improve the circulation of the water by installing a connection from the south eastern corner of the Waaigat towards the sea. Lastly, sewage pipes that lead to Het Waaigat are now closed off. In 2006, The Ministry of Economic Affairs has invited IMD Consultancy to prepare a master plan for the development of Het Waaigat. The decision making process concerning Het Waaigat has been well documented in “Besluitvorming en maatschappelijk draagvlak bij stedelijke gebiedsontwikkeling op Curaçao” (van Hunen, 2011). There are three main arguments to start development of the marina sector in Het Waaigat.

• It is widely believed that such waterfront development would stimulate the development of the surrounding neighbourhood. Currently, that neighbourhood in Punda is relatively underdeveloped. The marina can function as a major economic catalyst to the neighbourhood, drawing more people to that particular area, which would benefit the local businesses and local home owners.

• A marina in the heart of a city is an appealing destination for yachtsmen who generally enjoy being in cultural, economic and consumption centres.

• The opening of an inner city marina in Willemstad would generate headlines in the media and draw significant amount of attention. This promotion not only serves the marina, but Curaçao as a whole.

Below, a hypothetical design of a marina in Het Waaigat is presented.

Hypothetical design of a marina in Het Waaigat



Outer Core – Spanish Water Spanish Water is located about 10 km south east from Willemstad. It is a natural basin that provides shelter from winds and waves and as a result, Spanish Water is a popular shelter destination for yachts. Tourist infrastructure is present in the vicinity of the water in the form of hotels, resorts, residential houses, restaurants, bars etc. Individuals familiar with the inner waters complain about the large crowds and randomly anchored yachts. They pollute the environment by the disposal of garbage and sewage. At Spanish Water, several marinas are already present. 1 - Barbara Beach Marina (Hyatt Marina) Located at the Santa Barbara Plantation on the entrance to Spanish Water, this compact super yacht marina facility offers six berths for large yachts up to 36.6 meters in length. The marina is part of the Hyatt Resort development plan. The second stage development plan includes a 400 berth marina facility with 20-25 major super yacht berths and general boat repair and yard facilities in the protected waters of nearby Fuikbay. 2 - Seru Boca Marina The Seru Boca Marina is located in the protected waters of Spanish Water Bay. The marina consists of floating pontoons which can accommodate 120 yachts, with the largest berths being able to accommodate super yachts up to a maximum of 45meters in length with a maximum draft of 4.5 meter. The marina is located on the 4,000 hectare Santa Barbara Plantation and Seru Boca Estate. 3 - Kima Kalki A small, safe marina for yachts up to 24 meters with 30 berths in a protected bay at Spanish Water. There are sail maker and mechanical services provided with customs and immigration clearance.

The Spanish Water – hypothetical location of a Greenfield marina indicated by yellow square

1

2

3

550m

450m



There are various locations for Greenfield marina development at Spanish Water. One option is the north eastern corner, indicated by the yellow square in the above figure (other options are certainly possible, this option is merely hypothetical8). Spanish Water offers sufficient depth but in the access channel nearby the Hyatt Hotel, there is a certain point in the turn where the depth suddenly decreases rapidly. This is seen as a dangerous point for inexperienced yachtsmen. Marina development in Spanish Water would add to the existing water sport and leisure infrastructure. However, Spanish Water, due to the random anchorage, is already considered crowded. Regulation must be enforced to control the order on the water when even more yachts are required to pass the water. Anchorage facilities can be created in the Spanish Water in order to be able to control and regulate anchoring in the water.

Heineken Regatta Curaçao 2011

8 It must be noted that the surrounding land is currently private property. Public authorities can thus only assume a facilitating role in this development.



Outer Shell – Santa Martha Bay Santa Martha Bay is a natural inner water located about 30 kilometres north west of Willemstad. The bay is close to the village Soto. There is relatively little activity surrounding the water. A possible location for a Greenfield marina development on the water would be the north east corner of the water (depicted by the yellow square in the figure below), although little is known about the current land positions. The location would offer sufficient land and water surface. The depth of the location is not known at this point.

Santa Martha Bay – hypothetical location indicated by yellow square

A marina in this region can provide a stimulus to the neighbouring local economy. However, the marina could encounter difficulties in the start-up phase as currently the area is underdeveloped and would not attract many visitors. In the identified outer shell of the island, anchorage facilities should be developed to enhance the yachting product of the island. Currently, it is not allowed to anchor everywhere due to the corals in front of the coast. Installing anchorage facilities would enable enjoying the entire southern coast of Curaçao and thus completing the yacht tourism product.

600m 200m



3.3.3 Critical Success Factors for Development of Greenfield Marinas

Greenfield marinas are successfully developed when the following critical success factors are met:

1. Location Similar to real estate developments, location is the key for marina development (“location, location, location”. As customers of the marinas want to go where other people go, marinas often gravitate towards bustling areas. Attractive destinations can be attractive for a variety of reasons. Some destinations are large and attractive cities such as Barcelona, some destinations are less metropolitan but offer unique annual events such as in Cannes, and other destinations offer unique leisure attractions, such as Ibiza. The location determines to a large extent the ability of the marina to attract yachting tourists.

2. Accessibility Accessibility needs to be addressed from a nautical perspective and a landside perspective. From a nautical point of view, the marina needs to be easily accessible by yachts. This implies that the access channel to the marina is of sufficient depth and that no obstacles are in the way such as bridges or cables. Prevailing currents also need to allow safe manoeuvring of the vessels. From the landside, the vicinity of an international airport is critical, as nearly all charter yacht tourists fly to and from the island. In addition, as some yachting tourists have specific requirements, many supplies are also flown in.

3. Capacity Sufficient berthing capacity is required to capitalize on economies of scale. As the marinas require with significant investments, many berths are required to optimize revenue generation. A minimum of around 250 berths is an industry standard for financially viable marina initiatives.

4. Land availability The marina business is continuously shifting from being a parking spot for one’s yacht to offering a complete leisure product. As the leisure amenities and the extra services require land around the berthing facilities, the availability of land is absolutely crucial in large scale marina developments.

5. No large infrastructural requirements Capital expenditures such as breakwaters in the sea or large dredging works can be too significant for the private operator to recover in a medium term time period. If there is a requirement for such works, these most likely need to be funded by the public sector. However, the overall financial and economic attractiveness of projects decreases when such investments are indeed required.



3.3.4 Preliminary Review of the Possible Locations

Preliminary review of possible locations according to the critical success factors

Het Waaigat Santa Martha Bay Spaanse Water

Location Best location, all amenities present.

Remote location Good location, tailored for leisure activities

Accessibility (air/road)

Well connected airport with frequent flights to USA and EU



Accessibility (nautical)

Hampered by bridges and depth Unknown (additional surveys required)

Good except for minor problems access channel

Capacity Difficult to realize the minimum capacity

Sufficient waterfront area seems available

Sufficient waterfront area seems available

Land Availability

In the “as-is” situation, no land available, would require urban works and planning

Sufficient land seems available Sufficient land seems available

Harbour works

Dredging & circulation required Seems to be of sufficient depth and no breakwater required

Seems to be of sufficient depth and no breakwater required

From an investors’ perspective, according to the preliminary review of the potential locations along five predefined critical success factors, it seems that the location on Spanish Water is most favourable.

• Spanish Water is already the heart of the leisure yachting sector in Curaçao and with it natural space and depth it offers an attractive location for Greenfield marina development;

• Het Waaigat, scoring quite unfavourable, offers an interesting case as it serves the public good: the revitalization of the area. The location is unambiguously considered as the best on the island but it would require substantial efforts to complete this project;

• Santa Martha Bay, although it offers a unique natural shelter, it is considered to be ‘too far from the action’. Currently, there is little activity in that region on the island and therefore it is not considered to be the most favourable option at this point.



3.3.5 Preliminary Valuation

In order to provide a preliminary estimate on the financial viability of these marina developments, a high level valuation is carried out. Below, the main inputs of the valuation exercise are presented. Concerning marina layout and the occupancy of the berths, the following is assumed:

• Het Waaigat can accommodate 200 berths, Santa Martha Bay marina 350 and marina in Spanish Water 450

• Majority of the berths are for vessels between 10 and 18 meters LOA. Het Waaigat can offer less capacity to larger vessels due to its technical restrictions.

• Average utilization throughout the year is assumed at 70%: 65% utilization for permanent berthing and 5% utilization for transient berthing.

• Current marinas on Curaçao are reported to be at 100% utilization.

Yacht berthing assumptions

Berthing Assumptions Het Waaigat Santa Martha Bay Spanish Water

Berths 200 350 450

Loa ≤8 2% 2% 2%

8<Loa≤10 4% 4% 4%

10<Loa≤12 18% 18% 18%

12<Loa≤15 32% 24% 24%

15<Loa≤18 24% 28% 28%

Loa>19 20% 24% 24% Dry Berths 0 200 250

Average Annual Utilization 70% 70% 70% Concerning the tariffs charged by the marinas, the following is assumed:

• Tariffs are based on a $5 per meter LOA per day currently charged at a marina in Spanish Water. The new marina in Spanish Water charges similar rates (for category LOA>19, avg. boat size of 25m LOA is assumed);

• A premium is applied for Waaigat due to its premium location; • A reduction is applied to Santa Martha Bay due to its remote location; • Permanent berth holders receive a 25% discount on annual tariffs.

Tariff assumptions

Tariff Daily (USD) Het Waaigat Santa Martha Bay Spanish Water

Loa ≤8 50 35 40

8<Loa≤10 60 45 50

10<Loa≤12 70 55 60

12<Loa≤15 85 70 75

15<Loa≤18 110 85 90

Loa>19 150 115 125



Concerning the operational expenditures of the marina, the following is assumed:

• For every 20 to 30 berths, 1 FTE is required, but marinas can take advantage of economies of scale; • Costs for maintenance, utilities, and third party services are defined as a percentage of revenues and

are based on input gathered from financial statements from other marinas.

Operational expenditures assumptions

Opex Assumptions Het Waaigat Santa Martha Bay Spanish Water

FTE 9 12 14

as % of revenues Regular Maintenance 4% 4% 4%

Utilities (Fuel, Electricity, others) 1% 1% 1%

Sewerage / Refutes 1% 1% 1% Marina Administration Expenses 5% 5% 5% Expenses related to Upland area 1% 1% 1%

Collection Losses 1% 1% 1%

Insurance Premiums 1% 1% 1%

Preliminary Feasibility

Below, the main inputs of the feasibility exercise are presented.

• A 40-year lease is a reasonable term for an infrastructure project; • A private WACC of 12% is considered along industry standards;

General assumptions

Valuation inputs Concession period 40 yr

Inflation 2%

WACC Private 12%

WACC Public 8% Below, the main outputs for the three scenarios of capital expenditures are presented. Concerning the valuation exercise it is further assumed that:

• The private capital expenditures are proportional to the amount of wet berths: $10,000 per berth in the low capex scenario to $20,000 per berth in the high capex scenario;

• The public capital expenditures are spend on land preparation, dredging (especially for Waaigat) and buildings, they vary between $1,000,000 in the low capex scenario to $10,000,000 in the high capex scenario;

• The concession fee is calculated so that the private investors meets their required return that is equal to its WACC and hence the private NPV results in $0;

• Project NPV is the sum of the private and public net present values.



Rough Order of Magnitude Capex Levels: Low Case

Scenario - Low Capex (x $1,000) Het Waaigat Santa Martha Bay Spanish Water

Capex Operator 2,000 3,500 4,500

Capex Public 1,000 1,000 1,000

Total Capex 3,000 4,500 5,500 Annual Concession Fee 748 915 1,003

NPV Operator 0 0 0

NPV Public 10,329 13,719 15,121

NPV Project 10,329 13,719 15,121

Rough Order of Magnitude Capex Levels: Medium Case

Scenario - Medium Capex (x $1,000) Het Waaigat Santa Martha Bay Spanish Water


Capex Public 5,000 5,000 5,000

Total Capex 8,000 10,250 11,750 Annual Concession Fee 652 748 788

NPV Operator 0 0 0

NPV Public 5,328 7,481 8,120

NPV Project 5,328 7,481 8,120

Rough Order of Magnitude Capex Levels: High Case

Scenario - High Capex (x $1,000) Het Waaigat Santa Martha Bay Spanish Water


Capex Public 8,000 8,000 8,000

Total Capex 12,000 15,000 17,000 Annual Concession Fee 556 581 573

NPV Operator 0 0 0

NPV Public -565 351 226

NPV Project -565 351 226



From this exercise, some first conclusions regarding the viability of the marina sector can be drawn:

• The proposed marina developments seem to be financially feasible, except in the high capex scenario for Het Waaigat;

• The net present value of the project ranges from around -$500,000 to $15,000,000 per marina dependent on the marina and the required capital expenditures;

• The total concessionary payments the concessioning party could receive on an annual basis vary between $500,000 per annum to $1,000,000 per annum per marina.

• The amount of the capital expenditures has a large effect on the valuation of the business case; • As Santa Martha Bay and Spanish Water offer more berths and offer the possibility for dry storage,

the valuations for these marinas is more favourable. • Even though the marina in Het Waaigat can be unfeasible in the high capex scenario from a project

finance perspective, it is import to also consider the economic benefits (as done in next subsection). Furthermore, from the information obtained via interviews and the workshop, it can be assumed that the low capital expenditures scenario for Het Waaigat is the most unrealistic one.

3.3.6 Economic Considerations

From the public perspective, there is a strong case to be made to favour the development of Het Waaigat. A development of a marina on that particular location would generate the most economic value to the local population, whereas the other two alternatives would generate less economic value. The value unlocked at a new location at Spanish Water is most likely to be absorbed by the real estate developers already present. If the business case of Het Waaigat would demand the involvement of the Curaçao government, the government must consider whether the potential benefits of the development of the marina outweigh the costs. Among the potential benefits are:

• More tourists visit and consume in the area which stimulates local small businesses such as restaurants, bars, theatres and marketplaces;

• Willemstad as a whole becomes a more attractive destination: increased amount of tourists implies increased usage of cabs, car rentals, hotel bookings, flights to the airport, day excursions to remote locations;

• Improved urban area increases property values and attracts other businesses; An Economic Impact Study should be undertaken to assess the economic effects of the development of the marina. Compared to the more stand-alone and private developments at the other locations, Het Waaigat, as an potential economic catalyst for the area north of Het Waaigat, may be a good example of a project in which the government can play an active role as co-investor/co-developer: Some capital expenditures that are needed but which are too much of a financial burden for a private operator, may be taken up by the conceding authority, the CPA in this case. These public investments may include the dredging, the connection for circulation and the redevelopment of the parking and road infrastructure around Het Waaigat.



Potential public investments outside Het Waaigat include the development of buoys at remote locations along the southern shore of the island and the dredging of the access channel of Spanish Water. The buoys keep the yacht bound to the island by providing yacht tourists with idyllic destinations along its southern shores. Dredging this access channel shall benefit multiple marinas and yacht owners in and around Spanish Water and as such, can be seen as ‘common-user’ infrastructure, which is indeed typically funded by the authorities and recovered through license fees, berthing taxes or concession fees.



3.3.7 Yachting Infrastructure Development Plan

The development of the yachting infrastructure should assume a phased approach as depicted below:

• Phase 1: Inner core development and anchorage facilities along the southern coast - In the first phase, the priority infrastructural development should be undertaken. Priority is the development of the inner core marina, Het Waaigat, and the installation of anchorage facilities along the southern coast. The marina Het Waaigat functions as a catalyst for the development of the yachting sector on Curaçao; it attracts tourists and creates media attention. The anchorage facilities are required to upgrade the yachting experience and to protect the natural assets. Given the economic considerations for development of Waaigat marina and the start-up of a new sector, public authorities should actively invest and develop. Role public authorities: Active

• Phase 2: Outer core developments – In the second phase, outer core developments can be pursued. As the private sector is already involved in developments on these locations, the government and the CPA can assume a facilitating role. Their aim should be to accommodate for sustainable growth of the yachting sector. Hence, the authorities should be mindful of generating overcapacity or a crowding-effect. Role of public authorities: Facilitating

• Phase 3: Outer shell developments – In the third phase, marina developments in remote locations can be realized. Private initiatives should be facilitated by the public authorities if it contributes to sustainable growth of the yachting sector and the local economy. The public authorities can choose to actively participate in such initiatives when the public benefits are greater than the public costs. Role of public authorities: Facilitating / Active

Preliminary Yachting Sector Development Plan



3.4 Yacht Customer Setting

3.4.1 Introduction

The current yacht sector faces various challenges in its daily operations. These challenges tend to have a negative impact on the customers’ experience. After all, the yachting sector is a service industry where ‘customer is king’ and all efforts should be focused in serving the customer. In this section the main challenges are discussed that were brought up during interviews, in literature and during the workshop held on July 5th, 2012:

• Difficult check-in procedure for visiting yachtsmen; • Lack of anchorage possibilities around the island; • No promotional activities for yachting on the island; • Long term stay is not stimulated due to the expiration date on tourist visa; • Island personnel is inexperienced with yachting sector demands; • Lack of organizing capacity from yachting sector; • Polluted waters.

3.4.2 Current Challenges

Yacht Tourist Registration Currently, yacht tourists arriving at Curaçao have to go through an extensive check-in procedure. The registration procedure requires three authorities; immigration, customs and the safety inspection (Haven Veiligheids Inspectie, HVI). All of the authorities are situated at different locations and there is no single office where all the services are offered at a convenient location. There is a need for collaboration amongst the authorities. On other Caribbean islands, the check-in procedures are organized better. A couple of elements can be considered for further improvement of the check-in process

• Customs, Harbour Master and safety inspection services come to the yacht after arriving at the marina and all procedures are handled at the vessel;

• A one-stop-shop at a prime yacht location. That location can also be labelled as the port of call, the port where all visiting yacht tourist have to report, before moving to their final destination around the island. There can be multiple ports of call.

• Pre-arrival registration through internet. On the Eastern Caribbean islands, multiple destinations have joined forces to install an internet registration process where once all the necessary data is uploaded, an easy check-in at new destinations is made possible.

Anchorage Anchorage by yachts is currently prohibited along the largest part of the islands coast. The reason for this is the coral fields which stretch along the coast, forming sensitive ecosystems and forming a basis for the tropic appeal of the island. The lack of anchorage points however, limits the yachting experience and it invites for illegal anchoring, with detrimental effects on the vulnerable coral fields. A practical solution is the installation of offshore mooring facilities: designated areas where yachts can attach their yacht to buoys or available



mooring lines. These solutions especially apply to places where there is no marina nearby, for example in the western part of the southern coast line (e.g. West Punt, Santa Cruz Bay, Santa Marta Bay, San Juan Bay, St. Marie Bay etc.). With the installation of such buoys and lines, combined with the available marinas, the yachting tourist shall be able to traverse the entire southern coast of the island, offering a complete yachting experience without traversing the rough seas to nearby islands or even the mainland. This package is expected to be appealing to the majority of the yachting tourists, who typically have limited sailing skills, but significant budget to spend on the island. The investments in the buoys and lines can be recovered through a licensing system: The yachtsmen would require a license to make use of the buoys and lines. The license can be obtained through a pre-sale through internet or direct on board sale by the authorities at the port of call (Het Waaigat or Spaanse Water). In extension to this, private marinas may be allowed to sell licenses in their marinas on behalf of the authorities. . Island personnel An item that was elaborated during the workshop on the 5th of July 2012, was the attitude and mentality of relevant authorities and their lack of experience with the yachting sector. This relates to personnel of the safety inspection services, coast guard, customs, provision of consumer goods, etc. It has been widely agreed that the yachting sector demands a different – more customer friendly – approach than the commercial cargo vessels calling the island. Very basic examples of such are not to enter the yacht with one’s dirty/oily shoes on and not to wear dirty clothes. Yachtsmen demand to be treated with a certain level of service and respect and they must feel welcome, or they will never come back. Positive customer experiences are vital for the island as a developing yachting destination. The benefits of positive word-of-mouth amongst yachting enthusiasts have been experienced by the island first hand. After the super yacht “A” had been well taken care of during its stay on Curaçao, the owner referred the island to another friend, who soon after visited the island with his super yacht as well. The revenues generated by these stays were significant. During the workshop it was agreed that the mentality of the relevant authorities should change. These are the first faces visiting yacht tourists encounter on the island; hence it is up to them to make a good first impression. Some shipping agents have already engaged in activities to train their personnel for the accommodation of yachts and yachting tourists. Perhaps there is a need for a national training program about the do’s and don’ts when dealing with yacht tourists. Long term stay Currently, a tourist is only allowed to remain on the island for 3 months per year. This has conflicted with the yachting sector in the past in multiple scenarios. Firstly, when someone wants to do some extensive repairs on its yacht, it requires time. As some owners want to be present for the repair activities, it could conflict with their tourist visa. Secondly, the hurricane season pushes yacht tourists outside the hurricane box for multiple months per year. If, after sailing for 6 months on the Caribbean, a yachtsman decides to take a long break on an island during the hurricane season, he shall have visa issues. All in all, the three month expiration period on the tourist visa might be too short for the yachting tourist as it is bound by other factors that could lengthen its stay on an island. Moreover, it should be government policy to invite such tourists to come to the island, not to deter them. In practical sense, if a tourist can prove he is on the island in relation to a specific yacht, he may be provided with an extended visa.



Working permit Curaçao is proud to be a yachting destination where yachts can come for repair services. However, yacht owners sometimes demand that their own personnel carry out the repair services. Reasons for this is that the repair works sometimes involves highly specialist skills in relation to very expensive parts of the luxurious vessels such as wood-works, fibreglass maintenance, sail repair or the repairs to sensitive equipment on board, including the engine, the radar, and the sonar. These maintenance experts do not obtain a working permit in Curaçao easily which forces them to enter the country on a tourist visa. It should be government policy to stimulate Curaçao as a yacht repair destination and hence it should reconsider its regulations concerning working permits for the yachting sector. Pollution A great concern on the island is the pollution of water and lands. The waters in St. Annabay, the entrance to Het Waaigat and Schottegat, is polluted through oil spills. Berthing luxurious yachts along the quay in the St. Annabay is therefore not recommended. Besides the Schottegat area, Spanish Water also faces pollution issues. Due to the random anchorage of yachts, the lack of facilities and the lack of control/surveillance, waste ends up in the waters. The inner waters of Curaçao are one of its natural highlights and are therefore of great importance for the sustainable development of the islands tourist economy. Lack of promotion for Curaçao as yachting destination During the workshop held at the 5th of July 2012, it was concluded that the marketing of the island is currently lacking: yachting tourist do know the ABC islands, but have no idea to which extent the islands are “in the market” and subsequently, these yachtsmen have no idea what the island has to offer. Although the presence of the ABC islands is well known, the islands are not yet associated with yachting. As with many products and services, marketing is a vital part of successfully developing business. During the workshop, it was agreed on the fact that there is a strong need for promotion of the Curaçao Yachting Sector, possibly in combination with the neighbouring yachting destinations such as Aruba, Bonaire and maybe even Venezuela.

3.4.3 Curaçao Yachting Association

The above mentioned challenges need to be addressed by the public authorities. However, at the moment, there is no strong voice demanding such. There once was the Curaçao Yachting Association but it has ceased to exist. In “Koers voor onze Maritieme Toekomst” the necessity for a promoting body of the yachting sector on the island is stressed. An association in which all private sector stakeholders of the yachting sector are represented can collectively form the counterpart for government pursuing the further development of the yachting industry on the island. The association can form an opinion on and advise in the master planning, tariff regulation, custom regulations, safety inspections, environmental inspections and anchorage problems. Another important objective of this Association is the promotion of Curaçao as yachting destination. Promotion The formation of the Curaçao Yachting Association is key to the future development of the yachting sector. The CPA can be an initiator for this association by bringing all the relevant stakeholders together. After that, the CPA is one of the main strategic partners of the association but is not necessarily part of it.



3.5 Conclusions


Policy of the government of Curaçao should focus on the development of the yachting sector as it benefits the national economy. In doing so, the government should appoint an authority that would concern itself with marina development in the role of a landlord. In this chapter, it has been argued that the CPA is best positioned to fulfil this responsibility as in the new ‘Beheersovereenkomst’ CPA is awarded with the management rights of all the waters, inner waters and upland areas. The government, as majority shareholder of CPA should steer the organization toward a focus on the yachting sector. The CPA needs to become a professional counterpart for yachting matters and should internalize relevant yachting and marina expertise in its landlord organization. In other matters than the development of Waaigat marina, the government should be a facilitator in stimulating the yachting sector. It can reconsider rules and regulations that affect the customers and stakeholders in the yachting sector with respect to customs, immigration, safety inspection and working permits. Public authorities should also increase efforts to deter illegal anchoring and pollution, currently common problems. The CPA should be the initiator / facilitator in the development of the yachting sector. As the CPA currently has no experience with the yachting sector whatsoever, it is of utmost importance that such expertise is acquired. Together with other public authorities and consultations with the private sector, it needs to design a yachting infrastructure development plan. In such, the development of the marina in Het Waaigat and the installation of anchorage facilities should be prioritized. The master plan must also carefully consider the potential markets which Curaçao can and cannot attract as outlined in the first part of this chapter. As a landlord, the CPA should invest in necessary (basic/general) infrastructure and should tender the rights of exploitation of marinas to the private sector. For that, the CPA shall receive concessionary payments through which the CPA secures its return on investment. An international marina operator may be considered to act as a catalyst to attract existing yachting tourist to the island. The CPA needs to assume to role of initiator for the Curaçao Yachting Association by bringing all relevant stakeholders together. The association in turn can form a united voice towards public authorities and push for alterations in rules and regulations.




In relation to the above, a first action list can be presented which forms the basis of the implementation plans (report phase 3).

1. Government of Curaçao, as majority shareholder, should steer the CPA towards the yachting sector; 2. The CPA should acquire marina expertise in house for the development of this new sector in her

organization; 3. CPA should design a yachting infrastructure development plan together with the private and public

stakeholders, in which the development of Het Waaigat and the installations of anchorage facilities are prioritized;

4. Given its public objectives and the catalyst function for the development of the yachting sector, the government and the CPA should actively participate in the development of Het Waaigat marina and waterfront area;

5. CPA should engage in efforts to initiate a Curaçao Yachting Association in which only private stakeholder are represented;

6. The public authorities should create an easier registration process for visiting yacht tourists; 7. The public authorities should increase efforts to deter illegal anchoring and water pollution; 8. The government should stimulate the development of the yachting sector by reassessing rules and

regulations concerning the sector and altering when deemed appropriate.







4 Ferries



4.1 Introduction

4.1.1 Background

Ferries are used to transport passengers, vehicles and cargo; separately or combined. The majority of ferries operate on regular, frequent return services. Some ferries are part of a public transport system, allowing direct transit between points or connections within a city or country or over much larger distances, especially when they carry vehicles. Curaçao currently lacks any ferry connection. The small passenger ferries operating in the St. Anna Bay when the pontoon bridge is open are not taken into account here. In the past, various initiatives have been undertaken to setup a regular ferry service to and from the island. The latest attempt dates back to 2011, when Albamar Shipping Company (Ferrymar) moved the HSS Discovery (acquired from Stena Line in 2009) from La Guaira, Venezuela to Willemstad for maintenance. The vessel was originally intended for a scheduled service between La Guaira and Isla Margarita, but never commenced the service due to license issues and a problem with the loading doors. It remained at La Guaira for nearly 2 years before being moved to Curaçao for repairs. In 2010 the media mentioned that Albamar intended to deploy the HSS Discovery (1,500 passengers, 375 cars, 800 lane meters) on a new route between Willemstad and Coro, Venezuela and subsequently sell it to interested investors. To date, the service as not been established and following alleged fuel smuggling by the owners, the vessel has since been laid-up at Caracasbay and its owners being prosecuted.

The HSS Discovery in better days between Hoek van Holland and Harwich

Besides failed attempts, many ferry-related ideas are regularly discussed on the island. Such ideas relate to tourism, trade and commuting and involve nearby destinations such as Aruba, Bonaire and Venezuela and destinations further away, including Panama and Jamaica. This policy analysis focuses on the possibilities of establishing such ferry links. It aims to provide a policy framework by which governmental organizations can assess current and future ferry initiatives and their role in such initiatives.




Following this concise introduction the ferry business is shortly described, covering primary aspects of the ferry industry and an overview of the ferry business in the Caribbean. The relevant ferry markets for Curaçao are subsequently analyzed. Based on the conclusions of the market analysis, the role of the government is further elaborated and policy recommendations are made.

A small RoPax ferry in Croatia connecting the island of Krk with the mainland



4.2 Ferry Business

In this section, a few aspects of the ferry market are concisely described. Understanding of these aspects aids in the discussions on the viability of ferry-business to/from the island. Passengers and/or Cargo Ferries are typically used to transport passengers or cargo; separately or combined. The majority of the cargo is transported by truck (accompanied by the tractor or unaccompanied, trailer-only) and sometimes also as general cargo. Short distances Ferries are typically used on short distance, traversing sea straits and connecting islands to the mainland. Sometimes the journey is made overnight, limiting lost-time for drivers and passenger who need cabins to sleep. Ferries are less practical for longer journeys: passengers would prefer other means (flying) and cargo can then usually be transported more efficiently using regular container lines (preventing trucks, trailers and drivers to spend a long in-productive period on board of a vessel). Accompanied/unaccompanied Trailers can be ferried accompanied by their tractor (and driver) or unaccompanied. Depending on the countries involved, this can have legal implications: sometimes tractors are not allowed to drive on the roads of the overseas market and in some countries it is not allowed to connect trailers to other tractors standing-by at overseas destinations.

RoRo activities in Scandinavia



Customs/immigration procedures With passengers, drivers and trucks waiting for the ferry (and vice versa), the focus on efficient customs and immigration procedures is much stronger than with trades involving cargo only. In case of inefficiencies, the economic losses with ferries are typically much higher than with cargo-only trade (general cargo or containerized). Services Successful ferry connections sail on regular schedules providing structured departures and arrivals throughout the year. Weather-sensitive Since passengers and drivers are travelling by ferry and since stowage of cars, trucks and cargo is much more difficult on ferries that on regular cargo ships, ferry trade is much more susceptible to harsh weather conditions. Port Facilities Structured ferry-connections require facilities for passengers (arrivals/departures/immigration/shops/parking) and for cargo (customs and other procedures). Most notably for ferry terminals is the vast area they occupy for truck parking: sufficient space is needed for marshalling trucks waiting to board the ferry.

The Duke Point Ferry Terminal in Nanaimo, Vancouver-area, Canada



Limited ferry business in the Caribbean The picture below shows the existing ferry connections in the Caribbean. The picture makes clear that ferries are only deployed on relatively short distances and that no ferries traverse the entire Caribbean Sea. The ferry connection indicated at Curaçao is in fact the small passenger ferry crossing the St. Annabay when the pontoon bridge is open. Concluded is also that the island cannot connect to existing ferry lines in the vicinity of the island: the ferry-link closest to Curaçao is the link connecting Isla Margarita to the Venezuelan mainland, which has in fact recently been nationalized and services have allegedly temporarily been suspended.

Regular ferry connections in the Caribbean



4.3 Ferry Markets

As described earlier, ferries are versatile vessels which can be used for many type of trades/connections. In the case of Curaçao, 4 specific types of markets are further assessed:

1) Import cargo: Imports of cargo to the island 2) Export cargo: Export of cargo from the island 3) Touristic Passengers: people travelling between islands and to/from the mainland for pleasure 4) Commuting Passengers: people travelling between islands and to/from the mainland for business 5) Economic Passengers: people travelling to the mainland to purchase personal goods at lower costs

4.3.1 Import Cargo

Without any ferry connection, Curaçao is currently served by container and general cargo lines calling the terminal at the Schottegatbay. These vessels bring in all products the economy needs from overseas destinations, typically the US (37%) and Europe (19%), followed by regional origins such as Venezuela (5%), Puerto Rico (5%), Panama (4%) and Colombia (3%) [Central Bureau of Statistics of Curaçao, 2010]. Since ferry services are typically established on short to medium distances, the ferry concept for import products relates more to the continental destinations such as Venezuela and Colombia to than destinations overseas such as Panama and Puerto Rico (and US/Europe). Together, Venezuela and Colombia only account for 8% of the import trade of the island and this trade is currently imported as general cargo or containerized. The position of Venezuela is currently clouded by uncertainty, but it is expected that the political situation has an ongoing negative impact on the import trade from Venezuela. Establishing ferry connections to these destinations is not expected to render significant growth in trade through Colombian or Venezuelan ports: both countries are predominantly import countries themselves and trade would probably only limit to agricultural products and construction materials for which demand on the island is limited (considering the size of the economy). One cause for significant growth of import cargo from Venezuelan and Colombian ports would be a ferry connection circumventing existing market imperfections within the existing general cargo and container markets: In the case the port operator in Curaçao and/or the shipping lines calling the island take advantage of market imperfections (such as due to a monopoly) and ferry connections from Colombia or Venezuela are viable ways for transporter/importer to circumvent such market imperfections (by ‘transshipping’ containers/cargo from US/Europe/Far East through a Venezuelan or Colombian port via ferry to Curaçao), then it is more cost efficient to use this scheme compared to the existing scheme where imported containers are transshipped in, for example, Kingston and shipped by container vessel to the terminal in Curaçao.



There are two reasons why this circumvention-scheme should not be adopted by the government as a reason to actively focus on establishing ferry connections in the region:

1) CPS currently holds the exclusive rights for commercial cargo handling on the island. This includes cargo handling of ferries. So in case the operator (CPS) takes advantage of any market imperfections, these imperfections are not expected to be circumvented through schemes in which the same operator is involved.

2) Circumvention of market imperfections should not be the aim of a government policy. Policy should aim at solving/lifting such imperfections. In the case of CPS potentially taking advantage of market imperfections as a monopolist, the concession agreement between CPA and CPS should be used to lift such imperfections (e.g. by introducing competition, or securing service level and competitive prices).

Small RoPax ferry in Washington, US

4.3.2 Export Cargo

Similar to many other Caribbean islands, Curaçao is an import market. Since the island lacks significant natural resources and a competitive edge in relation to manufacturing, only few products are exported. Most notable export products are petroleum products from the Isla refinery to the world market; crude oil from the Bullenbay facility to the world market (which is actually transshipment); dry bulk from the mine near Fuikbay to regional destinations; scrap metal from Schottegatbay to the Far East and few consumer products originating from the Economic Zones. The consumer products are considered the only trade which can practically be transported by ferry, but for now it is rationally assumed that ferry connections shall not greatly enhance the island’s export market: demand from neighbouring islands is typically low and the price for the products is relatively high for continental destinations in the vicinity (e.g. Venezuela and Colombia). In the future, this situation might change: in case the island is capable of successfully developing a container transshipment hub, the export position of the island may enhance and also re-export/transshipment to the ferry may be considered. The geographical market still however remains limited: only Aruba, Bonaire and selected destinations in Venezuela and Colombia might be of interest then.



4.3.3 Tourists

Currently two types of tourists visit the island: cruise tourists and hotel tourists. In the case the marina business materializes, a third type is expected as well: yachting tourists. Since both the cruise tourists and the yachting tourists are already bound to their ‘own’ vessels, they are not expected to be interested in a ferry-link from the island to other destinations. The hotel tourists, usually spending 1 or sometimes 2 weeks on the island, may be interested in such link. Such tourists are however expected to have very strict requirements:

1) Day-trips: Since their hotel on Curaçao is usually booked and pre-paid for their entire stay (1 or 2 weeks), the average tourist would only use the ferry to make day-trips to destinations outside the island. An overnight stay elsewhere would mean they have to spend additional budget on a hotel and practically pay double for that night. To prevent this, they need to be able to make a round trip, departing somewhere not too early in the morning and returning the same day before nightfall. This means limited time at the destination, probably reducing the overall appeal of such scheme.

2) Reliability of Service: Ferry connections are susceptible to harsh weather and in the case storms and high waves causes delays or even cancellation of service, tourists can get stranded on their destination, forcing them (to try) to find a hotel for the evening.

3) Comfort: Tourists only use ferry links if the journey is comfortable enough. The sea in the straits can however be relatively rough and therefore much less comfortable compared to the eastern part of the Caribbean basin.

4) Distinctiveness of destinations: For many tourists, especially those spending only a week on the island, the island itself has sufficient to offer, further reducing the overall appeal for daytrips elsewhere. The same probably accounts for tourist on the other destinations (especially Aruba)

5) Transit times: Tourists are not interested in spending many hours on board a ferry to reach their destination and returning on the same day. A maximum of around 2.5 hours for a single journey would be considered practical (bearable). This means that the ferries need to be very fast to traverse the straits between destinations and as a consequence on very specific (expensive) ferries should be used. For comparison: an airline connection takes around 15 minutes.

6) Cars: Making a day trip to another island means that the tourists intend to enjoy the destination only shortly. To remain mobile and to be able to capture some interesting sights during their short stay, the tourists want to bring their (pre-paid rental) cars on the ferry. If this is not possible, these tourists need to spend much on taxis or an additional rental car (while leaving their paid car on Curaçao)

7) Price: The service needs to be competitive to airline fees and appealing enough to draw large scores of tourists. For comparison: an airline roundtrip costs around 150 USD.

8) Safety of destinations: Appeal for certain destinations shall swiftly disappear if it is not safe and robberies are common. Continental destinations such as Columbia and especially Venezuela may have such risks.



Taking into account the above, the regular tourist on a week-long holiday is expected to be very conservative towards such services, resulting in low demand. Only the more adventurous hotel tourist may be interested in ferry services from the island and in the case the yachting sector materializes, a connection by yacht may be more appealing for such tourists. Concluding from the tourists sector, it seems there is currently only very low appeal for a regular ferry connecting Curaçao with surrounding destinations. For the cruise and the yachting tourist, this is evident and for the hotel tourist, a ferry scheme is not expected to meet the strict requirements during their holidays. To make a ferry scheme work, a new type of tourist needs to be attracted to the island: tourists that want to visit multiple destinations during their holidays and that purchase or engineer holiday packages which include hotels in these destinations and the connecting transport by ferry or airplane. This type of tourism is not yet seen in this part of the world and it is expected to require significant marketing and alignment. The Ministry of Economic Development (Ministerie van Economische Ontwikkeling, MEO) is doing research to the viability of such scheme: the “1-ticket-multiple-destinations” project, which has followed from an MoU which has been signed between the ABC islands, Colombia, Grenada and Trinidad & Tobago in 2011 (Venezuela signed, but opted out). The MoU has a term of 12 months and MEO is currently appointing consultants to further research the potential of the scheme.

The cruise ferry connecting Rotterdam (Netherlands) and Hull (UK)



4.3.4 Commuters

Commuting is highly time-sensitive, so only very short distances are considered relevant in this assessment. Since the nation of Curaçao consists of one island, there is no need for citizens to use a ferry service to visit the capital for regular administrative affairs, as is the case in other island nations such as Trinidad & Tobago, Greece or Indonesia. Commuters tend to use airplanes for longer distances. In the case of Curaçao, this means that only Aruba, Bonaire and very few Venezuelan destinations can be considered relevant. Currently, there is barely any commuting between these islands and those individuals who are involved in business travel take the airplane, which connects these destinations on a regular and reliable basis. Only very large ferries would be considered as they can provide the speed and comfort to compete with regular airplane connections. With only few commuters under consideration, it is however not expected that these services can be rationally offered at competitive prices.

The high-speed ferry connecting the islands of Trinidad and Tobago

4.3.5 Economic Passengers

Many inhabitants are interested in regular travel to Venezuela or Colombia to purchase consumer goods at lower prices. This includes petrol and other fuels, but also items such as furniture, spare parts, liquor, tobacco and food. From an economic and ethical point of view, a government should not facilitate such activities as they would undermine entrepreneurship and employment on the island and they directly reduce state income from taxes and excise. In line with this, the government should not pursue opening of ferry routes aimed at these types of economic passengers. Another issue with such connections is the increased risk of large scale transport of contraband to the island, including drugs. In the case ferry lines are indeed initiated the Government should ensure that these negative effects are prevented and mitigated.



4.4 Conclusions

4.4.1 Potential of a Ferry Link to Curaçao

In the past, many attempts have been made to establish a viable and sustainable ferry-link from the island to overseas destinations, but so far they have failed. Looking at the regional ferry market, it is concluded that the potential for structural ferry business can be considered limited. From cargo perspective, Curaçao currently lacks the export volumes for a viable ferry trade within the region and this is only expected to change in the case the island successfully develops a transshipment hub. Import trade by ferry is also not expected to materialize on a significant scale as imports are predominantly sourced from distances outside viable ferry-reach (US/Europe/Far East) and it is not expected that this shall change dramatically over time. From passenger perspective, relevance is also very limited: cruise and yachting tourists shall not use the ferry and even the existing hotel tourists are expected to remain reluctant to use a regular ferry service to nearby destinations. Only a completely new type of tourist might be interested in visiting multiple destinations in the region during their holidays. Regular commuters are also not expected to use the ferry: they prefer the airplane. Only significant interest is expected from people visiting the mainland for cheap fuel, consumer products and contraband and this is not in the interest of the national economy. The sustained presence of the impressive HSS Discovery at Caracasbay may have fuelled the discussions of a ferry link connecting the island to overseas destinations. But considering the size of the vessel (large) and the expected trade on the route between Willemstad and Coro (modest), it is strongly doubted that the rumoured route was a sincere initiative and it may have paved the way for irrational claims/hope on the ferry potential of the island.

4.4.2 The Role of the Government

Following this analogy, the government should not be actively (financially) involved in developing ferry links to/from the island. The government can however take on a facilitative role in the case the private sector sincerely wants to establish a ferry link. This facilitative role relates to organizing smooth customs procedures and rules/regulations with respect to cars, trucks and unaccompanied trailers moving to and from the island. Since free trade agreements are lacking in the region, bilateral agreements are needed to tackle these regulatory matters, at both sides of the ferry link. The CPA is also involved in this facilitative role of the government: in the case of sincere interest from the private sector in the establishment of a ferry link, the CPA is expected to play a coordinating role, involving, amongst others, the Harbour Master (safety/security), the customs (immigration/clearing) and the CPS (cargo handling). The ministry of economic development (Ministerie van Economische Ontwikkeling, MEO) is analyzing the viability of attracting a new type of tourists which is potentially interested in regular ferry services calling the island: the “1-ticket-multiple-destination” project, which has followed from an MoU which has been signed



between the ABC island, Colombia, Grenada and Trinidad & Tobago in 2011 (Venezuela signed, but opted out). The MoU has a term of 12 months and MEO is currently appointing consultants to further research the potential of the scheme. It is recommended to continue with this project and to see whether there is any potential to attract this new type of tourist to the island. MEO is advised to pro-actively involve other organizations and institutions in this research: the Curaçao Tourist Board (tourist market intelligence), the CPA (port facilities) and the Harbour Master (nautical affairs). Any infrastructural investments by the government to facilitate this new type of tourist should only be made once this market has materialized to a certain extent. In the case (significant) investments by the government are needed for the project, it is advised to initiate the “1-ticket-multiple-destinations” scheme by using airlift instead of ferries. Somewhat out of scope, but in line with this analysis, the government is recommended to analyze ways to lower the costs of airline tickets to nearby destinations. USD 150 for a 15 minute flight is relatively expensive and it is expected that lower airfares on selected routes, combined with smooth airport and customs procedures are expected to have a positive effect on inter-island travel in absence of a ferry connection. The “1-ticket-multiple-destination” project may take this into account.


Curaçao as a Ferry Destination Following failed past attempts and considering the limited market for ferry-services, it is recommended that the government remains passive on this matter and only pursues active involvement once a sincere and viable initiative is launched by the private sector. In that case, the CPA should verify the viability of the initiative and take a coordinating role to facilitate successful implementation. Following coordination by the CPA, the government needs to be responsive with its own immigration and customs procedures and engage in bilateral or even multilateral schemes facilitating efficient ferry trade. To further explore ways to attract tourists interested in ferry schemes, it is recommended that the project “1-ticket-multiple-destinations” is executed under coordination of MEO. One additional topic of relevance here are the prices of airline regional airline tickets: lower costs for these short flight may have positive effects for the economies involved. No infrastructural investment should be made by the government (nor CPA), before sufficient guarantees are provided by the private sector (especially for cargo) or before the new tourist-concept has materialized (for passengers).




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Documents

CPA Report Strategic Choices - 21-12-2012