Privatization of ports
Governments in many countries traditionally regarded ports as national strategic assets which should remain under public control. However, faced with the high cost of port modernization programmes, Governments began to seek alternative forms of finance other than through State budgets.
Port privatization thus began in many countries during the 1980s and 1990s, with the introduction of private participation in services and the granting of concessions to private terminal operators. Today, the majority of the top 100 container ports have some form of private participation.
Partnerships
The plethora of port concessions worldwide has created many individual terminal operating companies. Over time, these companies have seen the benefit of joining together through common management or ownership companies.
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Partnerships which have occurred through a spate of mergers and acquisitions have transformed some terminal operators into transnational corporations, with some controlling more than 60 terminals and others present in more than 27 countries.
| At the other end of the scale are individual port operators who, having matured in their own markets, have sought out new opportunities abroad. (For example, the Irish Port of Dublin is partnering with Sabang Port in Indonesia.) Although the global terminal operators have a presence in many ports in many countries, the ownership is rarely whole; more commonly, there is a local partner with a significant share. For example, an analysis of Cosco Pacific shows that, of its interests in 23 terminals, on average it has a 28 per cent stake in each.
Opportunities
- The globalization of port logistics has brought with it many opportunities and benefits to developing countries, such as:
- The sharing of knowledge and expertise in the areas of:
- Management and operational techniques;
- Infrastructure planning; and
- International finance;
- The adoption of tried and tested computer software systems;
- Fine-tuned port equipment tested in other locations; and
- Backward linkages into host economies that stimulate local imports and exports volumes.
- Ports are increasingly attracting the interest of investors. For developing countries the main issue is no longer how to finance new infrastructure projects but which partner to choose.
- Well-run and efficient ports can attract trans-shipment traffic which is not reliant per se upon domestic demand or supply.
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Challenges The challenges facing developing countries in the port sector are essentially about whether to remain a government-owned and controlled company or to allow private participation, perhaps through a global partner. While global terminal operators are few, there are hundreds of established single-port operators who could also assist developing countries.
In the new era of globalization of port logistics, port owners and terminal operators may find it harder to compete for new business and invest in port infrastructure, because of close proximity to ports belonging to a global player. Ports now have to be more globally orientated than previously. Competition used to seen as a local issue over hinterland ports; nowadays, ports such as Colombo in Sri Lanka have found that they are competing with the port of Salalah in Oman, and Port Klang and Port of Tanjung Pelepas in Malaysia, for trans-shipment traffic.
The risky side to trans-shipment traffic is that it is fickle; transhipment can move rapidly from port to port, making it difficult for ports to plan future investments when traffic and thus revenue is not certain. Care should thus be taken that the fortunes of ports do not become reliant upon their trans-shipment customers.
An important challenge for any Government privatizing its ports is that it must replace its previous role as a self-regulated provider of services with that of a new role as an independent regulator of activities delivered by private operators. Care must be taken not to create shadow management of former activities or to over-regulate. |
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