Privatization trends at the world's top-100 container ports

Over recent years, the role of the private sector in seaports has been greatly expanded. Yet, in practice, the extent of privatization in ports can vary significantly, in part due to the different methods employed to bring about private sector participation. This paper identifies and analyses, through a survey of ports, recent trends in regard to privatization at the world's top-100 container ports. The survey has benefitted from, and seeks to extend, a previous survey undertaken by the International Association of Ports and Harbours (IAPH). Findings suggest that, although the influence of private sector actors in ports is growing, the role of public sector agencies also remains significant.     

Private sector responses to port privatization in India

Indian ports offer good opportunities for investors prepared to take a long-term view, and some successful small-scale private contracts are already in place. But strategic direction from the centre is required to accelerate and broaden the privatization process, and ensure that private interest in the ports sector is maintained.     

The legal framework

The major and minor ports in India operate within different legal frameworks. Both allow privatization, but impose different conditions. Administrative culture has acted as a constraint on privatization in the major ports; private development at the minor ports has been very responsive to the amount of assistance offered by individual States.     

Strategies of developing part administration in Ireland

This paper reivews a programme recently undertaken by the Irish Government aimed at reforming the administration of Irish ports. Arising from that programme, and as a result of legislative changes, eight key ports were vested as commerical harbour companies (prior to this they were administered by large Boards and were very restricted in their ability to perform commercially). The context for the paper is the global trend towards port reformation, and the paper draws particuarly on the effects of the privatization of UK ports. The paper starts with a review of the role of parts, both generally and within the context of Ireland's growing, geographically peripheral, economy. Observations of the UK ports privatization process are next considered. The history, development and recent performance of Irish ports, together with port investment strategies, are critiqued and the background to the recent programme of administrative reform undertaken by the Irish Government concerning the ports is reviewed. Various observations from a number of sources (including 12 interviews by the authors with key actors in the sector) on the reform process are discussed. It is concluded that there is no uniformity of opinion as to the suitability of the chosen model for Irish ports administration and that it is too soon to judge whether it has been a success (the eight ports were commercialized in March 1997). The paper concludes that, given the critical role of ports within the Irish economy, the situation should be periodically reviewed to ascertain the current applicability of the extant port administration model.     

Strategies of developing part administration in Ireland

This paper reivews a programme recently undertaken by the Irish Government aimed at reforming the administration of Irish ports. Arising from that programme, and as a result of legislative changes, eight key ports were vested as commerical harbour companies (prior to this they were administered by large Boards and were very restricted in their ability to perform commercially). The context for the paper is the global trend towards port reformation, and the paper draws particuarly on the effects of the privatization of UK ports. The paper starts with a review of the role of parts, both generally and within the context of Ireland's growing, geographically peripheral, economy. Observations of the UK ports privatization process are next considered. The history, development and recent performance of Irish ports, together with port investment strategies, are critiqued and the background to the recent programme of administrative reform undertaken by the Irish Government concerning the ports is reviewed. Various observations from a number of sources (including 12 interviews by the authors with key actors in the sector) on the reform process are discussed. It is concluded that there is no uniformity of opinion as to the suitability of the chosen model for Irish ports administration and that it is too soon to judge whether it has been a success (the eight ports were commercialized in March 1997). The paper concludes that, given the critical role of ports within the Irish economy, the situation should be periodically reviewed to ascertain the current applicability of the extant port administration model.     

Rethinking maritime privatization in Africa

While recognizing the need for increased participation of the private sector in the maritime industry of developing countries, there is a need to go beyond the call for privatization in terms of mere change of ownership from state to private sector as the only solution to the inefficiency of the maritime industry in developing countries. This limited understanding of the maritime problems of these countries abounds in the literature on maritime privatization. This study departs from this approach and focuses on the political economy of the maritime industry, and suggests that maritime privatization will not necessarily result in increased efficiency of the divested maritime enterprises. Rather, it argues that maritime problems in these countries have less to do with ownership than with the structural constraints in world shipping together with internal management and local ~olitics. The maritime industrv in West and Central Africa is used as a case studv. and recommendations such as selective privatization, 'programme contract', and most importantly, corporatization, are suggested as alternative strategies that could enhance maritime privatization and the development of the maritime industry in developing countries.     

Institutional structure of Canadian ports

Canada's federal government is responsible for ports. Despite this, an integrated national ports system has not been established. The Canadian system includes: the Canada Ports Corporation; Harbour Commissions; and Transport Canada's Public Harbours. These are historic divisions. Following a failed 1970s attempt to place all ports within Transport Canada, in 1983 parliament opted for a Crown corporation model in establishing the Canada Ports Corporation for Canada's major ports. This paper addresses the question of whether, in today's increasingly competitive environment, a more integrated and businesslike national system of ports is required. Alternative systems range from centralization to regionalization and enhanced 'commercialization' of local ports to privatization. A suggested alternative for Canada includes incorporating all commercial ports within the Canada Ports Corporation, using a regional system for planning, and augmenting local autonomy of financially self-sufficient ports by making them crown corporations. Eventual privatization of the expanded Canada Port Corporation is also considered.     

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.     

An assessment of port reform in Argentina: outcomes and challenges ahead

During the 1990s Argentina engaged in a process of restructuring and deregulation of its ports. The main objective of the reform was to increase efficiency and service quality and to reduce the size and role of the public sector in ports. Overall, it was expected to allow the transport sector to adjust its capacity to demand changes and to facilitate international trade while contributing to the reduction of the fiscal burden of this sector. This paper shows that the reform caused significant efficiency gains, allowing a 50% drop in container terminal handling price within five years in the most important ports. The paper also identifies outstanding issues that could impact the long-run sustainability of the gains achieved. Among these issues, emphasis is given to recent horizontal and vertical mergers in the Port of Buenos Aires and their consequences in terms of actual competition and access regulation.     

An assessment of port reform in Argentina: outcomes and challenges ahead

During the 1990s Argentina engaged in a process of restructuring and deregulation of its ports. The main objective of the reform was to increase efficiency and service quality and to reduce the size and role of the public sector in ports. Overall, it was expected to allow the transport sector to adjust its capacity to demand changes and to facilitate international trade while contributing to the reduction of the fiscal burden of this sector. This paper shows that the reform caused significant efficiency gains, allowing a 50% drop in container terminal handling price within five years in the most important ports. The paper also identifies outstanding issues that could impact the long-run sustainability of the gains achieved. Among these issues, emphasis is given to recent horizontal and vertical mergers in the Port of Buenos Aires and their consequences in terms of actual competition and access regulation.     

The privatization of Polish ports—the present situation and outlook for the future

The Polish economy is going through fundamental changes from a central planning to a market economy. The main aim of this transition is the privatization process which has to change the structure of Polish economy. Privatization has to establish more favourable ways of utilizing the productive capacity of state enterprises and create better conditions to compete on the market. The Privatization process for Polish state enterprises was defined in the Act on the Privatization of State Enterprises of 13 July 1990. According to this Act state enterprises can be privatized in capital or liquidation methods. The capital method has been applied to the privatization of Polish ports. In 1991 the major Polish ports were transformed into a State Treasury shareholder company. The holding company was used in the first stage of privatization. Gdynia was the first port which started this process building the real model of holding. Another important element connected with the structural transformation of Polish ports is the separation of operational and management roles. According to the Act on Ports, the Port Authority is also responsible for the development of the commercial, industrial and distribution services. This Act will also enable Poland to adapt economic and legal regulations which are similar to those in the European Union ports.     

The privatization of Polish ports—the present situation and outlook for the future

The Polish economy is going through fundamental changes from a central planning to a market economy. The main aim of this transition is the privatization process which has to change the structure of Polish economy. Privatization has to establish more favourable ways of utilizing the productive capacity of state enterprises and create better conditions to compete on the market. The Privatization process for Polish state enterprises was defined in the Act on the Privatization of State Enterprises of 13 July 1990. According to this Act state enterprises can be privatized in capital or liquidation methods. The capital method has been applied to the privatization of Polish ports. In 1991 the major Polish ports were transformed into a State Treasury shareholder company. The holding company was used in the first stage of privatization. Gdynia was the first port which started this process building the real model of holding. Another important element connected with the structural transformation of Polish ports is the separation of operational and management roles. According to the Act on Ports, the Port Authority is also responsible for the development of the commercial, industrial and distribution services. This Act will also enable Poland to adapt economic and legal regulations which are similar to those in the European Union ports.     

The Indian dry ports sector, pricing policies and opportunities for public-private partnerships

At the time of writing (2010), the world is witnessing the aftermath of the most severe financial sector meltdown in modern economic history caused by the real estate bubble in the United States. Its consequences on the real economy, especially in Europe, are yet to be fathomed, and this of course includes the longer-term impacts on international ocean transportation, ports and the distribution of global production.The economic recession has left the international shipping and port sectors with substantial overcapacity. This has resulted in drastic cost cutting measures on the one hand, and voluntary, often consensual, and coordinated reduction of supply on the other. These measures, together with a noticeable recovery in demand, are gradually leading again to improvement in prices charged by carriers and other transport service providers.In view of the country’s expanse; size of population; and regional inequalities, India’s dry ports (inland cargo consolidation and distribution centres) are seen by the government as a pivot of export-led growth and economic development (Haralambides & Gujar, 2011). Moreover, public and private sectors alike see the coordinated development of dry ports as the only way forward in terms of easing pressures at congested coastal ports, thus improving supply chain efficiency. In spite of this, dry port development and operations are still dominated by the public sector, under prices, capacity, land acquisition policies and other conditions that make private sector participation risky and comparatively unattractive. In order to rationalize dry port capacity and prices, this paper argues in favour of greater devolution through competition-enhancing Public-Private Partnerships (PPPs). The paper puts forward recommendations for the necessary legal, regulatory and general economic policy interventions based on international best practice, while keeping Indian specificities in the right perspective.     

Sustainability and national policy in UK port development

Given the private sector character of the UK port system it might well be thought that, so far as port development is concerned, the market ruled. There are of course permissions to be obtained, including planning consent under the Town and Country Planning Acts; but this process has not so far been considered to interfere with market function. Ports are already well used to the process of obtaining approval, to negotiations with objectors and environmental interests, and to mitigating the effects of development when defining projects and seeking approval.

However, as ports policy is being brought into line with transport policy generally, and in particular with Government policy for sustainable development, ports are being faced with a more challenging regulatory framework. The search for sustainable transport is leading Government towards a broader based approach to the approval of development applications in which market need and commercial viability are simply two of a number of considerations which ports must take into account in designing projects which also meet environmental concerns.

There has been a long standing requirement for developers of major projects to carry out Environmental Impact Assessments. In addition Government policy is set out in a number of publications, applying sustainability and the associated “New Approach to Transport Assessment” (NATA) to the ports sector. In a separate and broader initiative it has also considered a radical reform of the planning system and the establishment of national priorities for infrastructure combined with a simplification of the Public Inquiry process. In the event it has been decided not to establish national priorities in the ports sector, although the aim of simplification of the Inquiry process remains.

The aim of this paper is to explore the emerging theoretical and practical issues arising within the development approval process. These are of most concern in the development of major projects for cargoes which have broad hinterlands, and where there are competing locations for new facilities. The most important example of this is in the deep sea container sector where there is a demand for new capacity and a choice of widely spaced locations in the south east of the UK. Some comment will be made on this sector and on the issues arising at the Public Inquiries for the proposed container port developments at Dibden Bay (Southampton) and the London Gateway at Shellhaven on the north bank of the Thames.     

Sustainability and national policy in UK port development

Given the private sector character of the UK port system it might well be thought that, so far as port development is concerned, the market ruled. There are of course permissions to be obtained, including planning consent under the Town and Country Planning Acts; but this process has not so far been considered to interfere with market function. Ports are already well used to the process of obtaining approval, to negotiations with objectors and environmental interests, and to mitigating the effects of development when defining projects and seeking approval.

However, as ports policy is being brought into line with transport policy generally, and in particular with Government policy for sustainable development, ports are being faced with a more challenging regulatory framework. The search for sustainable transport is leading Government towards a broader based approach to the approval of development applications in which market need and commercial viability are simply two of a number of considerations which ports must take into account in designing projects which also meet environmental concerns.

There has been a long standing requirement for developers of major projects to carry out Environmental Impact Assessments. In addition Government policy is set out in a number of publications, applying sustainability and the associated “New Approach to Transport Assessment” (NATA) to the ports sector. In a separate and broader initiative it has also considered a radical reform of the planning system and the establishment of national priorities for infrastructure combined with a simplification of the Public Inquiry process. In the event it has been decided not to establish national priorities in the ports sector, although the aim of simplification of the Inquiry process remains.

The aim of this paper is to explore the emerging theoretical and practical issues arising within the development approval process. These are of most concern in the development of major projects for cargoes which have broad hinterlands, and where there are competing locations for new facilities. The most important example of this is in the deep sea container sector where there is a demand for new capacity and a choice of widely spaced locations in the south east of the UK. Some comment will be made on this sector and on the issues arising at the Public Inquiries for the proposed container port developments at Dibden Bay (Southampton) and the London Gateway at Shellhaven on the north bank of the Thames.     

Marketing management at the world's major ports

Recent technological developments in maritime transport, particularly in container shipping and larger vessels, are having major repercussions at ports the world over. The latest wave of innovations has increased the level of competition in maritime transport, in particular in port activities. Shippers have many more alternatives available, something that tends to increase the hinterland of each port, precisely by reducing captive hinterlands. Ports are now generally moving towards formulas in which private initiative has a bigger role to play. Increases in competition combined with growth in private initiatives highlight the usefulness of marketing tools in two ways. Externally, because they help to achieve throughputs from remote points of origin and destination, and internally, by aiding the proper coordination of business and organizational activity at a commercial port. The present paper is a transversal study of the current situation of marketing and quality tools at major ports, including the opinions of a range of port commercial and marketing managers. We have also tried to describe the differentiated groups to be found at ports, as a useful methodology for identifying the nearest competition or ports with similar characteristics.     

Marketing management at the world's major ports

Recent technological developments in maritime transport, particularly in container shipping and larger vessels, are having major repercussions at ports the world over. The latest wave of innovations has increased the level of competition in maritime transport, in particular in port activities. Shippers have many more alternatives available, something that tends to increase the hinterland of each port, precisely by reducing captive hinterlands. Ports are now generally moving towards formulas in which private initiative has a bigger role to play. Increases in competition combined with growth in private initiatives highlight the usefulness of marketing tools in two ways. Externally, because they help to achieve throughputs from remote points of origin and destination, and internally, by aiding the proper coordination of business and organizational activity at a commercial port. The present paper is a transversal study of the current situation of marketing and quality tools at major ports, including the opinions of a range of port commercial and marketing managers. We have also tried to describe the differentiated groups to be found at ports, as a useful methodology for identifying the nearest competition or ports with similar characteristics.     

(Law for the Promotion of Competition and Consumer Protection) was passed in early 1995. The impact this law will eventually have, however, is uncertain because rules for its implementation have not yet been established.

Governments in their port reform efforts have experimented with liberalization and commercialization to improve port operations. Because of their failure to meet expectations or because of changing competitive environments, these options have generally been discarded in favour of privatization. In mature large-volume port systems, privatization was a relatively obvious solution, because interport or interterminal competition would be achieved to the extent that the monopolistic tendencies characteristic of their predecessor organizations would cease to exist. In countries with a limited number of ports having relatively small cargo volumes, however, the case is quite different. These countries would have to pursue strategies that would still induce competition in spite of their limited cargo volumes if they hoped to achieve the same privatization benefits and market disciplines enjoyed in other countries. This article examines the port reform approaches used in three distinct competitive settings;the experiences in these countries offer some guidance on how to assure that ports will feel competitive pressures even under conditions of limited cargo volumes.     

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.     

Container terminals in South Korea: problems and panaceas

Korea has achieved remarkable economic growth over the last three decades. This has largely been due to the adoption of export-oriented economic policies. This economic development has resulted in a rapid increase in export and import cargos. Since the foreign trade of Korea is carried predominantly by sea transport (approximately 99.8% in terms of volume), ports play a crucial role in this process. Although recent port developments are aimed at keeping pace with ever-growing seaborne cargoes, problems persist, especially insufficient port capacity and inefficient management and operations. As a consequence, the ports of Korea suffer from serious port congestion. This problem is particularly acute in Pusan, the fifth largest container port in the world. In the past, all ports in Korea were controlled and administered by the Korea Maritime and Port Administration which was a public port authority. In August 1996, the Korean government established a new government organization, the Ministry of Maritime Affairs and Fisheries (MMAF), with a remit to control and manage its seaports and other related activities and to improve management efficiency in the maritime area. As a way of solving problems related to port congestion and other sources of inefficiency, the new MMAF has launched several new port development schemes. In this context, this paper will discuss (1) the extent of congestion in Korean ports, especially Pusan, the major seaport of the country; and (2) governmental and commercial reaction to solving the problems, including measures such as new port development schemes aimed at attracting private and foreign finance. From this analysis, a strategy for port development in developing countries may be inferred.