Economic policies and seaports: Strategies for port authorities

This paper discusses the strategies which might be adopted by port authorities, given that modern port technologies have considerably limited the scope for competition. It therefore analyses the several forms of competition relevant to ports, any or all of which may apply in any given instance.

It describes the 'minimalist strategy, which consists of recognizing that public sector bodies have many faults, may make many mistakes and that well-intentioned attempts to rectify faults in the private sector may make matters worse. Second, it describes the 'pragmatic' strategy, which involves establishing committees to examine problems and to recommend actions, if they can reach a consensus. Third, it describes the 'public sector' strategy, which involves the port authority taking over all port functions. Finally, it describes the 'competitive' strategy, which involves a careful reproduction of the circumstances of competition, even though there may be room for only one efficiently-sized operator at a time. Franchising, or short-term leasing on any of a variety of competitive bases, so as to produce serial competition is described. Each of these strategies is presented as having its own advantages and disadvantages, and each may be suitable to particular circumstances.     

Shipper's councils: role and responsibility—a western view

This paper first presents arguments for having public sector port authorities. They can deal, flexibly and permanently, with property rights within their own areas. They can plan and regulate port areas comprehensively. They can provide ‘public goods’. They can deal, in various ways, with externalities. They can promote efficiency, whether their own (if they operate as a comprehensive port) or that of the private sector (if they are largely landlords). For example, if their policy is to rely on the private sector to produce efficiency through competition then they can see to it that there actually is competition and not any kind of cartel or monopoly. Examples are cited where this last function has not been performed. The exception for single-user ports is noted.

Against them are the general disadvantages of public authorities (or bureaucracies)—though examples are cited where port authorities had very small staffs. The common instances of ‘market failure’ may thus be contrasted with those of ‘government failure’. Finally, a pragmatic approach is advocated, tailored to the needs and resources of the country in question. The increasing effect of the economies of scale in port technology, and its limitation on competition, is, however, noted and to be discussed in the next paper.     

The implications of increased competition among ports for port policy and management

The increased competition faced by ports is more focused than previously on the performance of logistics systems of which the individual terminals in ports are critical hubs. The changes in competitive conditions raise issues about appropriate public port policies and strategies of port managements. This paper argucs that the port industry should (and is) moving in the direction of more harmonized policies based on economic principles. Port policies based on cost recovery from users of port facilities and services need to be adopted as the international standard. The competitive environment favours considerable local autonomy. Port management, in addition to possible direct responsibility for terminal management, needs to focus on activities with economies of scale or scope. Such activities, which span the requirements of terminals and may even warrant inter-port cooperation, enhance the services available for many port users.     

Port privatization under Cournot vs. Bertrand competition: a third-market approach

By incorporating port competition into a third-market model consisting of two exporting firms and one importing country, we demonstrate the endogenous choice of port structures (i.e. privatization or public ownership) under either Bertrand or Cournot competition. In contrast to previous studies on port competition, we analyze the port strategy in view of all trading countries (i.e. importing country and exporting countries). We find that regardless of transport cost, the port ownership strategy alters according to exporting firm’s competition mode. Under Bertrand competition, the choice of port ownership structure depends on the degree of imperfect substitutability. However, under Cournot competition, all trading countries choose same ownership structures of each port. By comparing equilibrium of each competition mode, we show that welfare of exporting country under Cournot competition is higher than under Bertrand competition if goods are sufficiently substitutes. In contrast, importing country prefers Bertrand competition to Cournot competition when the competitive pressure is sufficiently high.     

Evaluating determinants of attractiveness and their cause-effect relationships for container ports in Taiwan: users’ perspectives

The attractiveness of ports is usually a pre-requisite and necessary condition for ports to achieve competitiveness, as well as the springboard to explore the competitive advantages of ports. To determine whether a port is competitive, it is necessary to explore whether it boasts certain factors that make the port attractive to users. The main purpose of this article is to apply the Analytic Hierarchy Process (AHP) method and the Decision Making Trial and Evaluation Laboratory (DEMATEL) technique to evaluate key determinants of attractiveness and their cause/effect relationships for container ports in Taiwan. The empirical results showed that: (1) Top six determinates of attractiveness for container ports are ‘ample cargo sources,’ ‘favorable port charges,’ ‘dense ship network and routes,’ ‘low transshipment costs,’ ‘efficient wharf operations,’ and ‘adequate wharfs and back-line land,’ respectively. (2) Among the above six determinants of attractiveness, ‘ample cargo sources’ is the cause determinant. Three determinants of port attractiveness, ‘favorable port charges,’ ‘dense ship network and routes,’ ‘low transshipment costs,’ which are the effect determinants. They are affected by the determinants of attractiveness of ‘ample cargo sources’. In addition, this study discusses the above findings and expects to provide the study results to Taiwan’s port authorities for reference.     

Economic policies and seaports: Are port authorities necessary?

This paper first presents arguments for having public sector port authorities. They can deal, flexibly and permanently, with property rights within their own areas. They can plan and regulate port areas comprehensively. They can provide 'public goods'. They can deal, in various ways, with externalities. They can promote efficiency, whether their own (if they operate as a comprehensive port) or that of the private sector (if they are largely landlords). For example, if their policy is to rely on the private sector to produce efficiency through competition then they can see to it that there actually is competition and not any kind of cartel or monopoly. Examples are cited where this last function has not been performed. The exception for single-user ports is noted.

Against them are the general disadvantages of public authorities (or bureaucracies)—though examples are cited where port authorities had very small staffs. The common instances of 'market failure' may thus be contrasted with those of 'government failure'. Finally, a pragmatic approach is advocated, tailored to the needs and resources of the country in question. The increasing effect of the economies of scale in port technology, and its limitation on competition, is, however, noted and to be discussed in the next paper.     

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The ever-changing environment in which ports operate has put strong pressure on the traditional role of public port authorities. Market developments have created the need for ports to be part of wider logistics networks and to provide value-added services. Powerful private players who are organised on a global scale, such as carriers, terminal operators and logistics service providers, struggle to gain control over port-oriented logistics networks whereas port authorities very often seem to remain local spectators with limited influence on these market-driven processes. Port authorities are on the other hand, the focal point of criticism from societal interests such as local government, NGOs and citizens for negative externalities related to port development and port operations even if these do not always fall within their direct responsibility. In 1990, Richard Goss questioned, albeit rather rhetorically, the need to have public sector port authorities. Since then scholars have demonstrated a true renaissance or renewed interest in the role of port authorities, recommending repositioning and development of new strategies. Parallel to the concept of the ‘renaissance man’, which is defined as a person who is well educated and excels in a wide variety of subjects or fields, a kind of ‘renaissance port authority’ is emerging from literature which may take on a variety of facilitating and even entrepreneurial tasks. The purpose of this article is to develop a conceptual framework for the various options at hand, based on an extensive literature review of port authority functions. The framework also identifies the principal governance-related factors that may in practice enable or prevent port authorities, particularly in Europe, from assuming the renaissance ambitions advocated by scholars. The hypotheses developed in this article form the basis of a wider empirical research agenda into reform of port governance in Europe and elsewhere in the world.     

Development of port service network in OBOR via capacity sharing: an idea from Zhejiang province in China

The ‘Silk Road Economic Belt and the 21st-Century Maritime Silk Road’ (One Belt One Road, OBOR) strategy initiated by the Chinese government has a significant impact on the business and logistics modes which involves Asia, Europe, Africa, and their adjacent seas. Many countries and ports are developing new strategies that are suitable for this economic environment. Compared with many ports in the world, the ports in Zhejiang province of China have a novel property. In addition to Ningbo-Zhoushan port, there are several other sea ports and river ports in that province. In this paper, we propose a concept of port service network that consists of a huge hub and multiple ports. Ports of small and medium sizes can share their capacities of different types of port service with the hub when the service capacities are integrated into the network. We develop a mixed integer nonlinear programming model to determine the optimal decisions in such a network with constraints on the budget to conduct integration. An optimization algorithm incorporated with a genetic algorithm is developed to solve large size problems. We provide managerial insights on the policies of government, including expanding port capacity, reducing fixed integration cost, and providing better financial condition.     

港口企业竞争策略分析

针对我国港口间争夺腹地、争夺货源的竞争日益激烈的新形势,提出了港口企业应采取的竞争策略。     

浅谈新时期港口竞争形势及港口企业的发展对策

从港口竞争的区域和竞争的内容及形式上分析了港口竞争的变化,阐述了由此带来的港口企业发展战略的变化。并从加强与邻港合作、提高中转货物比例、发展物流产业和建立全球网络等4方面论述了上海港发展战略的现状及方向。     

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The large variety of factors that influence port performance complicates the determination of port efficiency. This paper presents a new approach to the measurement of efficiency. Data envelopment analysis (DEA), as a it is called, has particular applicability in the service sector. Applying mathematical programming techniques. DEA enables relative efficiency ratings ti be derived within a set of analysed units. Thus it does not require the developmentof ‘standards’ against which efficiency is measured, although such standards can be incorporated in the DEA analysis. The efficiency of units is compared with an ‘efficiency envelope’ that contains the most efficient units in the group. The DEA approach will be demonstrated by a hypothetical numerical example where the performance of 20 ports are compared. The DEA efficiency ratings can be useful tool for port managers and for researchers, providing a deeper insight into port performance. Weaknesses can be detected, leadungs the way to potential improvements.     

Port competition in Latin America and the Caribbean: the role of concessions and competition policy

Appropriate port regulation and competitive forces tend to be related to higher levels of operational and economic performance of ports. From a policy-making perspective, pursuing efficiency and securing competition in ports to reach a level playing field is a two-step process requiring (1) ex-ante regulations to set the rules that maximize the competition for the market, especially when the policy objective is to attract private operations to ports on competitive concession processes and (2) ex-post competition policy to monitor and preserve competition in the market. This paper studies port regulation in Latin America and the Caribbean (LAC) from a competition perspective, analyzing both ex-ante and ex-post policies implemented in the region. The analysis reveals that the competitive environment in LAC is low, giving room for possible anticompetitive practices in the LAC port sector. Since the end of the 1990s, approximately 80% of container terminals in the region were granted to only five companies. Chile and Mexico have been found to be the best practices in the region, with better conditions assuring robust competition in the market. The main policy implication from this analysis is the need for a stronger involvement of antitrust agencies throughout the port concession processes.     

Port strategic planning: Canadian port reform

Recent port reform established major commercial ports as Canadian Port Authorities (CPAs) as federal non-profit, business corporations. Canadian port reform was aimed at allowing CPAs to compete effectively. Canada's major ports operate in an increasingly competitive business environment. To gain advantage over their competition, Canadian ports must develop business strategies dealing with their organizational cultures, institutional structures, operations, and facility provision. Developing appropriate strategies involves creating a strategic plan that considers external and internal port environments. This paper outlines the evolution of strategic planning and its applicability to Canadian ports. The initial literature review is followed by a brief review of Canadian port reform and an analysis of external and internal port environments. This analysis determines the resources available to exploit external opportunities and defend against threats, and considers the internal strengths and weaknesses of Canadian ports. A list of strategic issues facing Canadian ports and how the Canada Marine Act affected them is derived from the analysis.     

Port reform in Australia: issues in the ownership debate

Australia port reform initiatives have taken on a variety of forms — from out-right sale and transfer of ownership, to the sale of particular assets of infrastructure or services, or to long-term lease arrangements; or in some cases state governments, unable to relinquish control, have opted for corporatization or commercialization strategies. Reform is driven by the belief that ownership impacts on efficiency and efficiency is perceived to suffer if governments either retain ownership or direct control. As a result a major aim of reform is to either remove or distance governments from day to day port operations. The sale of ports removes government control outright and privatized ports are subject to identical regulatory constraints as any company in the private sector. But corporatization strategies are such that government ownership is retained and ports have been transformed into statutory state owned corporations. Effectiveness of this strategy requires legislation to be such that port corporations are free to operate like their private sector counterparts. To date this has not occurred and some serious impediments are emerging which are embedded in legislation and which, rather than reduce, have indeed, increased government control.     

Port strategic planning: Canadian port reform

Recent port reform established major commercial ports as Canadian Port Authorities (CPAs) as federal non-profit, business corporations. Canadian port reform was aimed at allowing CPAs to compete effectively. Canada's major ports operate in an increasingly competitive business environment. To gain advantage over their competition, Canadian ports must develop business strategies dealing with their organizational cultures, institutional structures, operations, and facility provision. Developing appropriate strategies involves creating a strategic plan that considers external and internal port environments. This paper outlines the evolution of strategic planning and its applicability to Canadian ports. The initial literature review is followed by a brief review of Canadian port reform and an analysis of external and internal port environments. This analysis determines the resources available to exploit external opportunities and defend against threats, and considers the internal strengths and weaknesses of Canadian ports. A list of strategic issues facing Canadian ports and how the Canada Marine Act affected them is derived from the analysis.     

Influence of local government on port investment: implications of China’s decentralized port governance system

ABSTRACT

The pursuit of better performance by the local government can influence the investment decision-making related to port expansion. This paper compares the ceilings at which the port enterprise and the local government would stop making investments. To achieve this, the benefits to the port enterprise and the local government are measured over a given time period. An empirical study investigating how a port would respond if a rival port uses a type of capacity investment strategy is conducted for two major ports in Liaoning. The time at which the local government and the port enterprise would stop making investments and the final equilibrium are developed using the data from 2010. From the empirical results, it was found that investment in port capacity contributes greatly to the local government’s performance. Meanwhile, different investment ceilings are discovered for the port enterprise and the local government. This research is meaningful for discussing the institutional relationship between the local government and the port enterprise in China’s current decentralized port governance system.

This paper is a revised and expanded version of a paper entitled ‘Port expansion mechanism in the context of political achievement of local government: a special phenomenon in China’ presented at International Association of Maritime Economists 2012 Taipei Conference during 5th September –8th September.     

Legal and practical consequences of not complying with ISM code

Almost a decade since port corporatization was introduced in Australia it is becoming clear that initial objectives are not being realized. This paper explores some of the legal and legislative causes, the effect on port operation and investigates what necessary conditions are required to deliver an effective corporatized port business. The paper argues that effective corporatization is a product of effective legislation—one which, while emulating private sector business practices—can deliver a business model that is innovative, entrepreneurial, commercially oriented and free from self-serving political constraints.

The legislation and corporatized artifacts in Australian mainland ports have failed, in general, to deliver this. Arguably, the legislation has, in fact, created a model with inherent flaws and serious contradictions. The legislation enacted is such that while it has set in place a model that articulates commercial objectives, the model created is in fact one in which political objectives may override commercial ones; where strategy may be determined by a bureaucratic elite without the requisite skills and insights, and the resultant strategy appears ad hoc; and a corporate culture that frequently has failed to transcend that of the statutory authority and public utility model. This paper will test these assertions against the developments in the port of Melbourne.     

Effective corporatization of ports is a function of effective legislation: legal issues in the existing paradigm

Almost a decade since port corporatization was introduced in Australia it is becoming clear that initial objectives are not being realized. This paper explores some of the legal and legislative causes, the effect on port operation and investigates what necessary conditions are required to deliver an effective corporatized port business. The paper argues that effective corporatization is a product of effective legislation—one which, while emulating private sector business practices—can deliver a business model that is innovative, entrepreneurial, commercially oriented and free from self-serving political constraints.

The legislation and corporatized artifacts in Australian mainland ports have failed, in general, to deliver this. Arguably, the legislation has, in fact, created a model with inherent flaws and serious contradictions. The legislation enacted is such that while it has set in place a model that articulates commercial objectives, the model created is in fact one in which political objectives may override commercial ones; where strategy may be determined by a bureaucratic elite without the requisite skills and insights, and the resultant strategy appears ad hoc; and a corporate culture that frequently has failed to transcend that of the statutory authority and public utility model. This paper will test these assertions against the developments in the port of Melbourne.