Port privatization,efficiency and competitiveness: Some empirical evidence from container ports (terminals)

Few studies have investigated the quantitative relationship between port ownership structure and port efficiency with mixed results. This study applies a stochastic frontier model proposed by Battese and Coelli [Battese, G.E., Coelli, T.J., 1995. A model for technique inefficiency effects in a stochastic frontier production function for panel data. Empirical Economics 20, 325–332], which incorporates the inefficiency effect, to show whether port privatization is a necessary strategy for ports to gain a competitive advantage. While this stochastic frontier model has been used to a wide number of industries where the technical inefficiency effect is required, this method has rarely been employed to port industry. This study also investigates the determinants of port competitiveness. Both the principal component analysis (PCA) and the linear regression model are used to examine the effects of identified key factors on port competitiveness. Based on a sample of selected container terminals around the world, the results of this study have shown that private sector participation in the port industry to some extent can improve port operation efficiency, which will in turn increase port competitiveness. Another important determinant of port competitiveness is the adaptability to the customers’ demand. All these results provide some policy implications and guidance for port authorities and port operators in formulating effective strategies to improve their competitiveness vis-à-vis rivals.     

A decision support system for port selection

Abstract

A number of studies have been carried out on the factors determining port choice, derived from the perspectives of shippers, carriers or both. Recently, some studies using multi-criteria analysis, more specifically Saaty's analytical hierarchy process (AHP), have been undertaken to address port competitiveness and port selection by shipping lines. Based on a review of the literature on port selection, this article proposes a decision support system (DSS) for port selection using AHP methodology. The proposed DSS is web-based and thus it can be accessed by more decision makers and data collection can be carried out faster. Moreover, AHP addresses the issue of how to structure a complex decision problem, identify its criteria, measure the interaction among them and finally synthesise all the information to arrive at priorities, which depict preferences. AHP is able to assist port managers in obtaining a detailed understanding of the criteria and address the port selection problem utilising multi-criteria analysis. This article presents the architecture and the port selection procedure of the web-based DSS, and then illustrates three different cases. It shows how technology advancement can bring positive effects of strategic planning to shipping firms.     

Classifying Ports for Efficiency Benchmarking: A Review and a Frontier-based Clustering Approach

Abstract

Port efficiency and port clustering are two aspects that have received different degrees of attention in the existing literature. While the actual estimation of port efficiency has been extensively studied, the existing literature has paid little attention to developing robust methodologies for port classification. In this paper, we review the literature on classification methods for port efficiency, and present an approach that combines stochastic frontier analysis, clustering and self-organized maps (SOM). Cluster methodologies that build on the estimated cost function parameters could group ports into performance metrics’ categories. This helps when setting improvement targets for ports as a function of their specific cluster. The methodology is applied to a database of Spanish port authorities. The dendrogram features three clusters and five outlier Spanish Port Authorities. SOM are employed to track the temporal evolution of Spanish Port Authorities that are of special interest for some reasons (i.e. outliers). Results show that use of a combination of cost frontier and cluster methods to define robust port typology and SOMs, jointly or in isolation, offers useful information to the decision-makers.     

Competitiveness prioritisation of container ports in Asia under the background of China’s Belt and Road initiative

ABSTRACT

The understanding of the competitiveness of different ports under the background of China’s “Belt and Road Initiative” (BRI) is critical for drafting appropriate plans and taking suitable actions to select the best port in the logistics supply chains. A novel Multi-Attribute Decision Analysis (MADA) was proposed for the evaluation of port competitiveness. In the developed MADA method, the interval Analytic Hierarchy Process and the projection method was combined for the evaluation of port competitiveness. Three container ports in Asia including Shanghai, Hong Kong, and Singapore were studied under the background of China’s BRI. The results demonstrate that the port of Singapore is the most competitive at the initial stage of China’s BRI, followed by Hong Kong and Shanghai in the descending order. The results were validated by sum weighted method and Technique for Order Preference by Similarity to an Ideal Solution method, and sensitivity analysis was also carried out. The competitiveness of the three ports in the next ten years were also studied with the consideration of the influences of China’s BRI, and the results reveal that Shanghai port can even exceed Hong Kong port and Singapore port if it can effectively take the advantage s of China’s BRI.     

Port Administrative Structure Change Worldwide: Its Implication for Restructuring Port Authorities in Taiwan

Abstract

This paper aims to review the evolution of the port authority’s role and recent changes in port administrative structure worldwide, and to discuss its implication for restructuring Taiwanese port authorities. It is found that the port authority is expected to play a proactive role in strategically managing overall port operations, and aggressively market its ports to port customers with a view to increasing cargo throughput and economic growth in its region. The change in the port authority’s role has driven a change in port administrative management structure worldwide. The proposed restructuring of port authorities in Taiwan is accompanied by some potential pitfalls. These include that the legislative framework of the programme is driven by political rather than professional concerns, and the port authority’s dual role as a regulator and as an operator at ports is against the principles of ‘separation of port administration (regulatory functions) and business management’ recently adopted worldwide. These pitfalls can impede the achievement of the objectives, including directing port authorities towards becoming independent commercially oriented entities. Therefore, this paper recommends that port corporatization approach will be a good alternative for restructuring Taiwanese port authorities.     

Corporatisation and Performance: A Literature Review and an Analysis of the Performance Effects of the Corporatisation of Port of Rotterdam Authority

Abstract

The ongoing process of port reform has led to an increasing number of publicly owned but corporatised port authorities (PAs). The performance effects of corporatisation have been analysed, for example, for the airports industry, often showing positive effects. This paper reviews the literature on port reform and the relationship between port governance structures and performance. It also presents a first case study on the effects of corporatisation of PAs, namely for the Port of Rotterdam Authority, a publicly owned but corporatised port development company. In 2004, this organisation was transformed from a municipal department to an independently operating company. The performance indicators to evaluate the effect of this corporatisation include market share, turnover, operating costs, profits, and investments. These indicators are evaluated for two periods, one prior to the corporatisation (1997–2003) and the other afterwards (2005–11). The comparison of these two periods shows that corporatisation has led to significant improvements of all performance indicators. The findings derived from this case study are relevant for the ongoing discussion on port governance models.     

The effect of institutional factors on public–private partnership success in ports

Port public–private partnerships (PPPs) are considered to be an important emerging mechanism for port development and improvement in port performance especially for developing countries. This paper empirically investigates the effect of institutional factors in the success of port’s PPPs; the latter defined as the attractiveness of the PPP project for private bidders and the market competitiveness of the facility. The empirical investigation of a large sample of ports finds that ‘regulatory quality’, ‘market openness’, ‘ease to start a business’ and ‘enforcing contracts’ are important institutional determinants of port PPP success and may ultimately contribute to port development and economic growth. The results are consistent with and add to the theoretical literature whereas practical implications for port authorities, managers and investors are discussed.     

The Greening of Ports: A Comparison of Port Management Tools Used by Leading Ports in Asia and Europe

Abstract

From the policy and management perspective, this study aims to investigate the port management tools that port/public authorities have at their disposal and then to analyse to what extent the tools are used to enforce or encourage green port development at functional activities of port operations and development. We conduct an exploratory and comparative review based on two axes: on the one hand, the range of tools available to port authorities (pricing, monitoring and measuring, market access control and environmental standard regulation) and on the other hand, the functional activities in ports (shipping traffic, cargo handling and storage operations, intermodal connection, industrial activities, and port expansion). The situations in the leading ports in Asia and Europe, namely Singapore, Shanghai, Antwerp and Rotterdam are studied and compared, whereby the policies' effectiveness is discussed accordingly. Findings show that the ports are particularly mature in exercising environmental standard regulations which reveals that the enforcement approach is more prevalent. The most focused functional activity is shipping traffic which reflects that the ports are driven by the International Maritime Organisation. The respective port authorities in Antwerp and Rotterdam have a higher level of influence on devising green port policy in comparison to the two Asian ports.     

A review of port devolution and governance models with compound eyes approach

Port devolution and port governance are focal issues in port studies. This paper argues that the previous typology of port devolution and port governance, including port function matrix models, might have to be modified, in particular for Asian port cases, because they have not considered socio, economic, and political systems and historical aspects behind the port devolution continuum. This paper uses the “compound eyes” approach comprising of many similar, closely-packed facets called ommatidia, with a multiple angle view, to revisit and review previous port devolution and governance models. The paper aims to identify the limitations and rectify fallacies in previous port studies by conducting a critical review and taking a couple of Asian container port cases as examples. This paper contributes to the literature of port devolution and governance, illuminating crucial gaps that the previous studies have not addressed.     

Strategic beliefs of port authorities

Over the last decade, insights from the strategic management discipline have increasingly been applied to ports. A review of literature shows that in the analysis of port authority strategy, mainly outside-in approaches are applied. This paper adds to the emerging understanding of the port authority’s strategy by applying a cognitive perspective. Specifically, the strategic cognition of firms’ executives is one of the explanatory variables behind firms’ strategic decisions. Furthermore, cognitions are influenced by the organisational contexts in which port authority executives have worked. As a result, managerial “mental maps’ may vary across industry contexts and over time. This research investigates the strategic cognition of a global set of port authority executives through a survey-based instrument. The results show that, to a large extent, PAs resemble “regular” for-profit companies, but that they possess some specific beliefs that distinguish them from “regular” companies.     

An assessment of the performance of the European long intermodal freight trains (LIFTS)

Intermodal rail/road freight transport has always been considered as a competitive alternative to its road freight counterpart in the European medium- to long-distance corridors (markets). Such consideration has been based on the increasing competitiveness of some innovative rail services and the existing and prospective performance of both modes in terms of the full social – internal or operational and external – costs. The most recent innovation of rail technologies and related services launched by some European railway companies, still at the conceptual level, is the Long Intermodal Freight Train (LIFT). This is supposed to be a block train operating in long-distance corridors (markets) with a substantial and regular freight demand.This paper develops analytical models for assessing the performance of the LIFTs, the already-operating Conventional Intermodal Freight Trains (CIFTs), and their road counterpart as well. The performance consists of the full – internal (private) and external – costs of the door-to-door delivery of loading units – containers, swap-bodies, and semi-trailers. The internal costs embrace the operational costs of the transport (rail and road) and intermodal terminal operators. The external costs include the costs of the impacts of door-to-door delivery of loading units on society and the environment. These negative externalities include noise, air pollution, traffic accidents, and congestion.The models are applied to a simplified version of intermodal and road transport system using inputs from the European freight transport sector. The aims are to compare the full costs of particular modalities in order to investigate the potential of the LIFTs as compared with the CIFTs in improving the internal efficiency of the rail freight sector and its competitiveness with respect to its road counterpart. In addition, the paper attempts to assess some effects on the potential modal shift of EU (European Union) transport policies on internalizing transport externalities.     

An Application of the Hierarchical Fuzzy Process to Container Port Competition: Policy and Strategic Implications

This paper aims to empirically identify the competitiveness of container ports in Asia by examining factors influencing the perceived competitive edge of each port using the Hierarchical Fuzzy Process, a method embracing human knowledge and/or judgement into a mathematical framework. This analysis is unique in that the ‘human-perceived’ competitiveness on Asian container ports is examined under the quantifiable framework. The findings reveal that Singapore is the most competitive port among the sampled ports. Moreover, the methodology employed here shows the potential to be applicable to other transport and logistics related service industries.     

Cluster analysis of the competitiveness of container ports in Brazil

The container cargo proportion of total maritime transport increased from 3% in 1980 to 16% in 2011. The largest Brazilian port, the port of Santos, is the 42nd largest container port in the world. However, Santos’ performance indicators are much lower than those of the world’s largest ports, so comparisons with them are difficult. This article focuses on the Brazilian container terminals that handled containers in 2009 and compares port competitiveness. This study classified seventeen Brazilian container terminals into three distinct groups based on the following competitiveness criteria: number of containers handled, berth length, number of berths, terminal tariffs (in US$), berth depth, rate of medium consignment (in containers/ship), medium board (containers/hour), average waiting time for mooring (in hours/ship), and average waiting time for load or unload cargo (in hours/ship). This classification used a hierarchical cluster analysis. The classification shows that the terminal of Tecon in the port of Santos has the best performance of all, while small terminals (<150,000 container units) are the worst performing terminals in Brazil.     

Evaluating the competitiveness of container ports in Korea and China

Changes in world trade and the shipping environment have created ever-increasing competition between ports in North-east Asia, especially Korea and China. Following intensive state investment in port developments through large-scale projects, Chinese ports now threaten to oust Busan in Korea as the regional hub. To identify and evaluate the competitiveness of major ports in the region, this paper identifies the components influencing their competitiveness and presents a structure for evaluating them. Based on the literature related to port selection and competition, a regional survey of shipping companies and owners employed factor analysis to reveal that port service, hinterland condition, availability, convenience, logistics cost, regional centre and connectivity are the determining factors in these regions.     

The impact of competition on container port (in)efficiency

There are many studies on container port efficiency and that seek to understand what factors, such as technical and scale efficiency, private versus public terminal management or macro-economic factors, play on the efficiency score of a given port. There are fewer studies that focus on the role played by the inter-port competitive environment. This role remains difficult to assess. In fact, on the one hand, a port subject to high inter-port competition may record higher efficiency scores due to the pressure from the competitive environment. On the other hand, a port subject to high competition may be forced to over-invest and could therefore records a lower efficiency score. This article investigates this issue and examines how the degree of competition measured at different levels (local, regional and global level) impacts the efficiency score of a given container port. To do so, we implement a truncated regression with a parametric bootstrapping model. The model applied to information gathered for 200 container ports in 2007 and 2010 leads to the following conclusions: port efficiency decreases with competition intensity when measured in a range of 400–800 km (regional level); and the effect from competition is not significant when competition is measured at a local (less than 300 km) or at a global (more than 800 km) level. Estimates also show a tendency for ports who invested from 2007 to 2010 to experience a general decrease in efficiency scores, an element which could be explained by the time lag between the investment and the subsequent potential increase in container throughput.     

Characteristics of European inland ports: A statistical analysis of inland waterway port development in Dutch municipalities

Most scientific attention in port studies centers on deep-sea ports, in particular container ports. In our paper, in contrast, we focus our attention on the characteristics of inland waterway ports in a European context. This is an overlooked part in the scientific literature on inland port development, which is up to now mainly concerned with US-based understandings of inland ports. We try to broaden the application of the inland port concept by explaining the development of inland ports in terms of inland waterway bounded cargo throughput. Based on a large-scale quantitative dataset of inland port development in Dutch municipalities we perform various statistical analyses to arrive at a more detailed understanding of the question: What are the characteristics of European inland waterway ports and what transport and economic factors influence cargo throughput on the municipal level? The results in particular highlight the importance of the presence of a container terminal, the diversity in types of goods which are being handled by the inland port and the accessibility of the inland port relative to the regional motorway network as important factors in explaining the size and growth of inland ports. Interestingly, the popular claim in policy of ‘investments in inland port development leading to employment growth’ cannot be confirmed.     

Quasi-landlord port financing in China: Features,practice and a contract theory analysis

Since the 1970s and 80s, landlord port has been the dominant port financing model in western large and medium-sized container ports. In China, many prospective port projects have also explored a landlord port financing model. However, some evidence suggests that landlord port financing in China is a variant of the international mainstream landlord port financing model. Based on an explanation of their unique features and practices, this paper analyzes the Chinese quasi-landlord port financing model from a contract theory perspective, in which it can be viewed as a double-level principal–agent relationship and two-layer profit distribution contract with three participants: the state-owned assets administration department, the port investment company and the operators. Furthermore, the results show that in the Chinese quasi-landlord port financing model, whether in the case of both joint venture and port land lease (fixed rent), or in the case of both joint venture and port land transfer, the optimal incentive scheme is the same as in the international landlord port financing model with profit sharing rent or mixed rent.     

Health externalities of ship air pollution at port – Piraeus port case study

This paper is employing the well-known methodology of impact pathway approach to assess the external costs in human health from ship air pollution at port areas. The passenger port of Piraeus, Greece is the scenery of the study. Piraeus port is in the vicinity of the greater Athens metropolitan area where almost half of the country’s population lives. Hence, this port is the central hub of the Greek coastal passenger ship system which connects the islands of the Aegean Sea with land and is characterized by heavy ship traffic. The case study presented in this paper assesses the annual external cost in human health from air emissions produced by all passenger ships and cruise ships calling the port of Piraeus. Health cost from ships at port has been estimated at both local (Athens metropolitan area) and regional level (entire territory of Greece). Results show that higher costs occur at the local level. The dominant pollutants creating this cost are particulate matter (PM_2.5, and PM₁₀). Overall, the results indicate that the health impact of Piraeus’s passenger port emissions is not negligible; however the cost of PM₁₀ is considerably lower than the corresponded cost deriving from the land based industries of the Athens regional area for which comparison has been available.     

Modal shift from road haulage to short sea shipping: a systematic literature review and research directions

ABSTRACT

Modal shift from road haulage to short sea shipping (SSS) has been advocated by authorities and researchers for more than two decades. This paper provides a review of literature on modal shift and pinpoints paths for future research on topics in six categories: (1) factors influencing SSS competitiveness, (2) the policy-oriented perspective, (3) environmental legislation, (4) SSS performance, (5) port characteristics, and (6) the multi-agent perspective. In particular, we propose first, in evaluating the performance of SSS versus road haulage in different trade corridors, three performance-related dimensions – the economic dimension (e.g. external costs), the environmental dimension, and the dimension of service quality – should be considered. Second, researchers should use rich, real-world, numerical data and operational research techniques to identify the relative importance of individual drivers and barriers for a modal shift from road haulage to SSS. Third proposed direction is related to assessing which groups of actors certain policies should target. In doing so, researchers should extend their policy-related focus beyond the European Union, which has long encompassed the major geopolitical scope of research on the modal shift. Fourth, to moderate the adverse impact of environmental legislation on SSS, strategic solutions need to be identified. Fifth, we also suggest that the influence of contingencies, particularly port strikes and cyberattacks, on SSS operations and approaches for managing them should be investigated. Sixth, the economic and financial advantages of coordination and alliance for each transport chain agent need to be evaluated.