PROJECT SPOTLIGHTS 

Deep Sea Multipurpose Port

Port of Ehoala, Madagascar

portehoala_1The Port of Ehoala was developed as a new deep sea multipurpose port and economic trade zone for Madagascar. The project represents a $260 million dollars investment in both international port infrastructure as well as public services.

The project was launched based on the exploration conducted by the British-Australian multinational mining corporation, Rio Tinto / QQM. The exploration showed a large-scale ilmenite deposit with an export potential of approximately 1 million tons per year over a 40 to 60-year period. The project offered incredible potential for a positive development of the socioeconomic infrastructure in Madagascar as well as a chance to alleviate poverty in the South East of the country.

Project financing was the primary problem that the development team was facing. The state did not have the financial capacity to finance a project of this size or to guarantee repayment of loans for an investment of over $260 million dollars. The project was also not financially viable for private sector investors, at least under traditional project financing models.

Although initial financing could not be found, both the state government and Rio Tinto / QMM agreed on the potential of the project and the goal of maximizing the benefit for the local population and the economic development of Madagascar. In an effort to make the project feasible, two series of in-depth studies were commissioned during the pre-feasibility and feasibility phases, prior to any investment:

  • An EISE based on international best practices and taking into account local ecosystem and socioeconomic situation
  • An analysis of all the potential socioeconomic externalities of the project for the region, for Madagascar and for the international shipping, fishing and cruising sector

portehoala_2From the studies the parameters for a modern Concession & PPP project emerged: using an integrated and inclusive approach of the micro and macroeconomic potential and taking into account socio-environmental factors. The conclusions were to consider inter alia the development of a growth pole for sustainable economic development of the region.

Since the new, port-based, economic and financial model appeared both essential for the economic development of Madagascar and not sustainable only through the estimated port revenues, an element of public subsidy for the investment in the port had been considered. The state obtained a soft loan from the World Bank which had been transformed into subsidies paid directly to the builder of the port.

he development of the Ehoala port project exemplifies progress and innovation in Public-Private Partnership (PPP) development in emerging markets. According to estimates by the Economic Development Board, created by the World Bank, 57.000 jobs have been created within 3 years in the sub region as a result of the new deep sea multipurpose port. This outcome is an immediate success. In the future, roads and other infrastructures will be created to maximize externalities and the export processing zone (EPZ) will be internationally promoted. In 2014, the port has been operating for three years and its impact and relevance to the economic development of Madagascar as well as for the economic model in general remains most promising.

 

Thanks to a high quality programming and to a very large exchanges and understanding of the fundamentals of the public-private partnership between the State, the national companies and the concessionaire (private company); and lastly thanks to the support of the World Bank, the project has been synthesized in a very balanced partnership agreement which is critical in several respect for smooth day to day operation.
It regulates various issues too often forgotten or considered as secondary at the stage of negotiation or of completion of the concession agreements questions which are in reality essential for the success of the project.
Philippe Murcia, Director of the Concessionaire Company

To find out more about GcilA projects across the globe, take a look at a complete portfolio list or browse through the other projects spotlights.

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