urgent business tasks
SCM2210: Transportation Principles
Dr. Adolf K.Y. Ng
Professor, Dept. of Supply Chain Management
Asper School of Business, University of Manitoba
Policy and Management
Lecture Outline
Tradition and New Circumstances
De/Re-centralization
Public Private Partnership
Institutional Reform
Tradition and New Circumstances
What is ‘Port Policy’?
The Role of Government in Ports
Tradition and New Circumstances
Why port policy matters?
Traditionally, government policies often reflected
such a keen interest in port operation, management
and development
National
Regional/Local
(Supra-national was non-existent)
Tradition and New Circumstances
Importance of Ports:
‘Strategic asset’ of a country/region
Many ports were rooted from serving military purpose
e.g. Le Havre, Tianjin
Income Source/‘Cash-Cows’ for the city/
surrounding region
e.g. Venice, Hamburg
Tradition and New Circumstances
Importance of Ports:
Base for infiltrating into raw material sources/colonies
e.g. Hong Kong, Accra, New York
Ports were actually important components in
complementing maritime power
Tradition and New Circumstances
As a big employer, there were a lot of people working
in ports, thus often giving a strong interest group
within the society
Source of Conflict:
Tradition and New Circumstances
Characteristics of Traditional Port Policies:
Strong Public Sector Influence, in both operation
and regulatory functions
Little Consideration to Efficiency & Service Quality
> Manual Cargo Loading/Unloading
> Lack of Port Competition
> Natural Hinterland
> Non-Hub-&-Spoke: large no. of port calls
Heavy Subsidies to Ports (notably in European ports)
Tradition and New Circumstances
Changing Circumstances and Port Policy:
Containerisation
Hub-and-Spoke and Logistical Supply Chain
Intensification of Port Competition
Globalization and Regional Integration
Terrorism and Security Issues
Tradition and New Circumstances
New Demands for Ports:
Efficiency became much more important
Fewer ports being called: competition intensified
Logistical supply chain: changing relation between
port and city/surrounding region
Globalization and Regional Integration: Is national
or regional/local policies alone enough?
Tradition and New Circumstances
Traditional equipment/system became outdated
Bureaucracy and Administrative Inefficiency
Disinvestment on Port Infra/Superstructure
Many ports had become bottlenecks…
Tradition and New Circumstances
Damietta
“The White Elephant”
in Port Development
(1970s – 1980s)
Mis-investment on Port Infra/Superstructure
Tradition and New Circumstances
Can port itself ensure its own competitiveness?
The Betuwe Route &
Port of Rotterdam
Tradition and New Circumstances
Does traditional port management philosophy
violate new principles?
- EU’s principle of Free and Fair Competition
- The Issue of State Aids to Ports
Tradition and New Circumstances
EU Legislative Proposals which can affect Ports:
- Maritime Safety (ports of refuge)
- Protection of Critical Infrastructure
- Protection of Maritime Passenger Rights
- Air Quality
- Water (Marine/River) Quality
- Waste (dredging)
- Railway Liberalisation
- Review Customs Code
Tradition and New Circumstances
The consequence:
The existing operating and management system of
port is not effective enough to tackle new situation
New port policies and reforms are required…
Tradition and New Circumstances
Increasing participation from other levels of government
(national, regional/local and supra-national)
Participation of private sector in port operation and
management
Institutional Reform
Tradition and New Circumstances
De/Re-Centralization
De/Recentralization
Unlike shipping (which was mainly national) , port
policy was traditionally largely diverse of which
it was carried out by different levels of government
National Government: South Korea, China
Regional/Municipal Government: The Netherlands, US
Construction and Management of
Container Terminals in South Korea
De/Recentralization
| Until 1989 | Ministry of Maritime Affairs and Fisheries (MOMAF) |
| 1990 – 2003 | Korea Container Terminal Authority (KCTA) (Since 1997: private sector operated terminals) |
| 2004 – date | Busan Port Authority (BPA) Private sector operates terminals |
Port Policy in the United States
De/Recentralization
Traditional Decentralized System of the US
(at least before the New Deal of the 1930s)
Free Enterprises
State/Regional/Local Control
Laissez-faire
De/Recentralization
Port Preference Clause of the US Constitution
(Article 1, Section 9, Clause 6)
No tax/duties shall be laid on articles (cargoes) exported
from any state
No preference should be given by any regulation/revenue to
the ports of one state over those of another
Vessels shall not be bounded to/from one state be obliged to
enter, clear/pay duties in another
De/Recentralization
Implications:
Federal government should not carrying out policies/investments
favouring particular port(s)
The exercise of government policy affecting ports was legally
mandated to be free from competitive/discriminatory bias
Traditionally laissez-faire approach in port policies
Highly decentralized and cautious port policies
(to avoid being accused of “federal favouritism”)
De/Recentralization
Dredging of Channels:
Federal Government:
> Only finance major water channels with no clear access to
particular port(s) (technically constructed and maintained
by the US Army Corps of Engineers)
Local Government:
> Berths and immediate water channels surrounding the port
State/Regional/Local Government(s):
> Port’s land infrastructure
> Superstructure usually provided by private sectors
De/Recentralization
A National Port Plan never exists…
According to the Report Port Development in the US, written
by Schenker (Chairman of the Panel on the Future Port
Requirements of the US) in 1976, it concluded that a national
port plan was ‘politically unrealistic and economically unacceptable
in a free, competitive society functioning under the constraints
of the marketplace…’
Port affairs, including investments, financing and subsidies
were all State/Regional/Local affairs
De/Recentralization
The “Yes” Camp:
- Destructive Competition and wasting taxpayers’ money, as all ports would invest their own facilities and create excessive capacities
- Can local authorities make the right decisions on issues affecting national interests?
The “No” Camp:
- Adaptability and Innovation to new demands of shipping lines and shippers
- National authorities often don’t understand local/regional needs
With changing circumstances, should the federal government
play a more prominent role (like national port plan)?
De/Recentralization
De/Recentralization
To deal with Increased Port Security, should the Federal
Government controls who operate Ports & Terminals in the US?
De/Recentralization
Public Private Partnership (PPP)
Public Private Partnership
Private Sector Practices or Private Participation?
What type of port activities should public/private
sector be involved in?
How should public-private partnership (PPP) be arranged?
Major Container Terminal Operators in European and Mediterranean Container Ports, Early 2006 (Source: Ocean Shipping Consultants)
Public Private Partnership
| APMT | Rotterdam, Bremerhaven, Zeebrugge, Dunkirk, Aarhus, Algeciras, Gioia Tauro, Constantza, East Port Said, Tangiers |
| Eurogate | Hamburg, Bremerhaven, Gioia Tauro, La Spezia, Livorno, Ravenna, Cagliari, Lisbon, Rijeka, Ust Luga, Tangiers |
| HPH | Felixstowe, Thamesport, Rotterdam, Gdynia, Barcelona, Alexandria |
| DPW | Southampton, Tilbury, Shellhaven, Antwerp, Le Havre, Marseilles, Constantza, Yarimca |
| PSA | Antwerp, Zeebrugge, Flushing, Genoa, Venice, Mersin |
Dedicated Terminals of Major Container Carriers in European and Mediterranean Container Ports, Early 2006 (Source: Ocean Shipping Consultants)
Public Private Partnership
| Maersk (APMT) | Rotterdam, Bremerhaven, Zeebrugge, Dunkirk, Arhus, Algeciras, Gioia Tauro, Constantza, East Port Said, Tangiers |
| Evergreen | Taranto |
| COSCO | Antwerp, Naples, East Port Said |
| CMA-CGM | Antwerp, Zeebrugge, Le Havre, Marseilles, Tangiers, Marsaxlokk |
| MSC | Antwerp, Bremerhaven, Marseilles, Las Palmas, Valencia, Tangiers, Genoa, La Spezia, Naples, Venice, Ambarli |
What are the options?
What are the strategies & tools?
What are the implications?
Public Private Partnership
Major Options…
Service Port
Tool Port
Landlord Port
Fully Privatized Port
Public Private Partnership
Service Port: The Port Authority provides/manages all
services to vessels and cargoes, owns and operates every
single port asset and fulfils all regulatory functions.
Examples: Aden (Yemen),
Public Private Partnership
Tool Port: The Port Authority owns the infrastructure,
superstructure and heavy equipment, rents it to operators
and retains all regulatory functions. However, commercial
operation is given to private operators, usually through
outsourcing or management contracts.
Examples: Le Havre
Public Private Partnership
Landlord (Partially Privatized) Port: The Port Authority
owns basic infrastructure, land and access and protection
assets, and leases them out to operators, mostly on a long
term concession basis, while retaining most, if not all,
regulatory functions. Private operators are usually expected
to finance their own superstructure and heavy equipment.
Examples: Rotterdam, Antwerp, Shanghai, Shenzhen,
Public Private Partnership
Fully Privatized Port: The Public Sector does not play any
role in the operation of the port nor ownership of any port-
related assets (most notably land).
Examples: Felixstowe, Hong Kong
Public Private Partnership
Public Private Partnership
| Operating Structure | PA Owns Infrastructure | PA Owns Superstructure | PA Provides Commercial Services |
| Service | | | |
| Tool | | | |
| Landlord | | | |
| Fully Privatized | | | |
100% Public
Involvement
0% Public
Involvement
Service
Port
Tool
Port
Landlord
Port
Fully
Privatized
Port
Modernization
Commercialization
Corporatization
Partial
Privatization
Comprehensive
Privatization
Liberalization
Public Private Partnership
Modernization
Commercialization
Better working practice within bureaucratic constraints
No real changes from the original system
Commercial principles (like accountability to own decisions
and performance), more customer-oriented
Public port is NOT transformed into private company
Public Private Partnership
Liberalization/De-regulation
(Partial) elimination of government regulations
Private companies allowed to participate in some port
functions (but not all)
Corporatization
Public port given the legal status as a private company,
although public sector usually retains ownership
Most assets transferred to the private company
Public Private Partnership
Definition of Privatization: the transfer of ownership
of assets from the public to the private sector or the
application of private capital to fund investments in port
facilities, equipment and systems (UNCTD, 1998)
Public Private Partnership
Partial Privatization
Comprehensive Privatization
Superstructure and infrastructure transferred to the
private company (or invested by the company). The company
often also operates the terminal (and reliable for its own
profits/earnings)
Public sector keeps land and public functions (like quay wall)
Public sector, in many cases, also owns the terminal
The sale of entire port to a private company
If the company decides to sell the port to developer with
no interest in port development/management, it can imply
the end of the port
Public Private Partnership
Fully Public
Outsourcing and
Management Contract
Concession
Arrangement
Build, Own,
Operate (BOO)
Divestiture (by
Licensing or Sale)
Fully Private
Liberalization/
Corporatization
Partial
Privatization
Comprehensive
Privatization
The Tools for Private Participation
Modernization/
Commercialization
Public Private Partnership
Outsourcing & Management Contracts:
The government transferred some of its port
activities to private companies
Time period: 3 to 5 years (in some cases, longer)
Operator never owns the terminal (or even super-
and infrastructure)
Contract renewal usually possible, depending on
circumstances and negotiations
Public Private Partnership
Concession Arrangements:
Build, Operate, Transfer (BOT)
Build, Own, Operate, Transfer (BOOT)
Time period: 20 – 50 years
After this agreed period, operator is obliged
to return the terminal to the public sector
Public Private Partnership
Build, Own, Operate (BOO)
Full Privatization (of Terminal):
Terminal owned by the operator
No obligations to return the terminal (and its
facilities) to the public sector
Public Private Partnership
Criticisms of the Port Reform Pendulum:
Focused on enhancing port efficiency
Largely neglect the impacts of port competition
Public sector = only public duties?
How about the commercial tasks about ‘ports’
(apart from ‘terminals’)?
Public Private Partnership
Public Private Partnership
Public Private Partnership
Institutional Reform
- Port authorities share basic public functions but re-assess their traditional “authority” role in view of common challenges:
- Mediating role of port authorities between commercial interest, local stakeholders and government
- Networking capabilities of port authorities
- Port authorities as active players in the supply chain
- Institutional reform takes place in many ports – greater autonomy and more independence from (central / local) government
- Commercialization and corporatisation of port authorities
Institutional Reform
Rotterdam Municipal
Port Management
(RMPM) before 2004
Institutional Reform
Management Board
Corporate Finance
Management Board
Information & Communication Tech.
Strategy & Communication
Commercial Affairs
Infrastructure & Environment
Facilities
Rotterdam Port Authority
Port of
Rotterdam
N.V. (PoR)
after 2004
Institutional Reform
Non-Executive Board
CEO
Directorate
Commercial Affairs (CCO)
Directorate
Finance & ICT (CFO)
Internal Audit
Human Resources
Corporate Affairs
Corporate Communication
Corporate Development
Harbour Master’s Division
Directorate
Port Infrastructure & Maritime Affairs (COO)
Maasvlakte II Project
Executive Board
- The reformed institution usually has a dual responsibility:
Public Functions
(traditional and new ones like security)
Commercial Functions
(e.g. promotion, marketing, strategic planning)
Institutional Reform
THANK YOU
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