Case Studies

The Pacific Private Sector Development Initiative has been working with the Ports Authority of Tonga since 2018 to improve port operations and increase private sector participation, culminating in a public– private partnership that is making the port’s cargo handling more transparent and efficient.

The Pacific Private Sector Development Initiative (PSDI) began working with the Ports Authority of Tonga (PAT) in 2018, beginning with a performance improvement strategy—the Port Strategic Review—that focused on identifying opportunities to mobilize private sector capital and expertise. Tonga’s Cabinet endorsed the review in November 2018, which paved the way for the development of a public– private partnership (PPP) working group and the initial preparation of a cargo handling concession in 2019.

The cargo handling concession aimed to contract a sole provider to integrate all cargo handling services at the Queen Salote International Wharf (QSIW) in Nuku’alofa, Tonga. The QSIW is Tonga’s largest port and handles nearly all of the physical freight that enters and leaves the country.

The QSIW’s cargo handling services had been provided in a segmented manner and through short-term contracts, disincentivizing investment in equipment and training and reducing the negotiating power of the stevedores with the shipping lines. The concession was designed to improve port operating efficiency, professionalize the Tonga stevedoring services sector, and reduce fiscal risks for the PAT. PSDI supported the development and tendering process for the concession from 2019 to 2022, including a year-long pause in the process at the request of Tonga’s Cabinet. During this time, PSDI provided ongoing support to the PAT and a Cabinet-appointed working group to implement a competitive tender process.

On 3 August 2022, the PAT signed a 10-year stevedoring concession PPP contract with a Tonga-owned and operated firm, Royco Port Services Limited (RPSL). RPSL purchased the PAT’s cargo handling equipment, engaged its staff, and assumed stevedoring services at the QSIW on 11 November 2022. Because of ongoing litigation, the contract covers only the cargo handling services previously provided by the PAT, rather than all of the cargo handling functions at the port.

The PPP is already bringing benefits to the PAT and the port operations. There is already evidence of significant benefits, including Increased transparency on the productivity of port operations, and increased efficiencies as a result of RPSL investment in procedures and training, such as truck turnaround time, which has fallen from an average of 1 hour–2 hours to under 30 minutes. Additionally, the PAT reports that having the PPP in place has significantly freed up its own internal functioning by reducing the burden of operating the port cargo handling operations on its staff.

“I remember how PSDI tried to convince us at first to pass on that risk from us to the private sector. But back then, we did not fully understand the idea and we were reluctant, but now we can really see the benefits... I have started to preach outsourcing [to other Pacific port authorities],” said Alo Maileseni, Ports Authority of Tonga Chief Executive Officer.

PSDI continues to support the PAT in the implementation of this PPP. In fiscal year 2023, this included supporting the PAT to finalize a contract management manual, define the reporting obligations for RPSL, develop a set of monitoring and reporting templates, and prepare new port tariff guidelines.

The successful delivery of this PPP highlights the PSDI program’s core strengths. PSDI’s ability to pause the PPP process when requested by the Tonga Cabinet, and resume quickly when the appetite to continue returned—even in the midst of the coronavirus disease (COVID-19) travel restrictions—was enabled by the program’s flexible model, its pool of experienced specialists, its long-standing engagement in the region, and its lasting and trusted relationships with its Pacific counterparts.