Devolution, Port Governance and Port Performance - Case Study Example

Name: Institution: Tutor: Course: Date: Sydney Port Introduction Sydney ports is located in New south Wales (NSE),Australia at latitude 33° 51' S and longitude 151° 15' E (Sydney 2010). The Act 1995 of ports cooperation and waterways management saw the establishment of Sydney port in the year 1995 though the Act changed to what is commonly known as the ports and maritime administration Act 1995. Objective and the core goal of its foundation were to offer profitable services and to develop competition in providing services to the shipping and cargo industries in Sydney Harbor and Port Botany (Sydney 2010). Sydney port is the second largest in terms of the ports facilities in reference to container volumes and one of the largest general ports in Australia. According to Tull and Reveley (135), New South Wales has a natural transport hub which is provided by the Sydney port with 85% of cargo having origin or destination within 40km of Port Botany. According to Tull and Reveley (135) port and marine services such as crisis response, safety and security, pilot age and an interface with Sydney integrated port system are provided around the clock. For success of all its operations, ports operations and procedures are developed in line with Federal and state regulations and legislation to provide positive, pro-active and safe environment for all its stakeholders (Sydney 2010). Trade consists of containerized trade bringing in imports household goods, machinery and equipment, chemicals, paper related products, food, fruits and vegetables. Containerized exports include cotton, wool, wine, wheat, animal food, aluminum, iron and steel. Sources from Sydney ports corporation bulleting trade and statistics 1st July to 31st may 2010 indicate that Sydney ports has achieved a record container throughout reaching a total of 1.784 million twenty foot equivalent units in the financial year 2008 -2009, up 0.3% compared to previous financial year despite the global financial crunch experienced (Cullinane and Brooks 324, (Sydney 2010). Machinery and transport equipment are the key commodities with the highest growth by 11.6%, textile fabric up by 47.1%, chemicals up by 14.9% and paper products up by 9.8%. Total container imports reached 866,400 TEU, up by 6.4% compared to previous year with the major importing regions being Asia and Europe making up 76% of total full container imports. Major exports include cereals cotton, metallic and non-metallic metals (Sydney 2010). Asia has led to trade in port Sydney as it contributes to 62% of imports and exports. The port handling facilities are designed in a way that they can handle heavy cargo making work easier and fast to ease congestion at the port. They are also designed in a way that the number of employees is minimized so as to cut costs (Cullinane and Brooks 324). Examples of such handling facilities in this port are the conveyor belts, cargo trolleys, hydraulic lifts, mobile car ELV baler and the cable handling equipments. Metropolitan strategy is the strategy through which the integration of inland transport mode at port Sydney was set out. Therefore a focus of New South Wales (NSW) government’s Metropolitan strategy is to integrate land use and transport planning to reduce the growing number of trips by individual’s motor vehicles and improve air quality. Adoption of the strategy as noted by Tull and Reveley, (135) aims to manage the impact of transport emissions at the local level by separating sensitive land uses from significant emission sources such as industries and arterial roads. These objectives of the metropolitan strategy cover ten regions which make up the Sydney metropolitan area (Cullinane and Brooks 324). These areas include: Sydney city sub-region, east sub-region, south sub-region, inner west sub region, north sub-region, inner north sub-region, north east sub-region, west central sub-region, North West sub-region and south west sub-region. Tull and Reveley (135) argue that Every of these sub- regional strategies contain key directions and actions which set broad planning framework for their respective areas to ensure success. For success to be achieved on the integration process, the Integrating land use and Transport policy has involved government agencies, councils and developers. This policy addresses the notion of a livable community, public safety, accessibility and effective management of land use. According to Tull and Reveley, (135) policy package consists of five documents which are: overview of integrating land use and transport, right place for business and services planning policy, improving transport choice, draft state environmental planning policy and the summary of employment and journey to work patterns in the greater metropolitan region. All these policies and plans are laid down by the ministry of planning and transport of the New South Wales (NSW) government. The Ports Ownership and Administrative Structure The Sydney port was established under the ports corporation and waterways management Act 1995, currently known as the ports and maritime administration Act 1995. Therefore most of its ownership belongs to the maritime service board although there has been soaring debates on this issue of ownership (Tull and Reveley, 135). There are many endeavors in trying to enhance the territories of the Sydney port since it recently negotiated acquire of state railway authority land to complete plan area in single ownership of Sydney ports. Most of the plan area is commercially leased (Cullinane and Brooks 324). There are several factors which influence the administration model of a port such as: 1. Social economic structure of a country 2. Historical developments example the colonial structure. 3. Location of the port .(urban areas or isolated areas) 4. type of cargo being handled such as liquid cargo and dry bulk cargo Four different models of ports have emerged over times which are the public service port, tool port, landlord port and fully privatized port. Service and tool ports take care of public interests while landlord ports secure both public and private interests (Tull and Reveley, 135). The privatization model takes care of private interests. In case of Sydney ports, it seems the landlord structure is the one in use since the port authority acts as the landlord and leases some of its ports operations to the private companies or industries (Cullinane and Brooks 324). Not to forget that these model are distinguished by characteristics such as private or public, regional and the status of dock management. Sources from alternative ports management structures and ownership models, indicate that ports have a governing body known as ports authority. Ports authorities may be established at all levels of the government and the most common being the local authority administering only one port area for instance the Sydney port. Cullinane and Brooks (324) notes that the United Nations meeting on trade and development (UNCTAD) Handbook for port planners in developing countries lists the statutory powers of a port authority on the assumption of operational decisions as follows: 1. The power to approve proposals for port investments. 2. Power to set common financial objectives for ports. 3. Power to regulate tariffs to protect public interest. 4. Authority of ensuring that standards recruitment, wage structure power to approve common labor union procedures. 5. Power to establish principles for licensing of port employees or agents. 6. Authority to gather, examine and circulate arithmetical information on port activity for general use. 7. Power to act as legal advisors. The port authority should also set objectives focusing on port finances and operations. For them to set good financial goals they should focus on full cost recovery to generate adequate return on capital. According to Cullinane and Brooks (324) the trial of recuperating fully the costs will help the port authority to: Create sufficient internal cash flow Uphold internal cost discipline Be a magnet for investors Inspire modernization in the various functional areas. Compete according to rules of the market without extensive distortions of competition. Put limits on cross subsidization which can undermine financial performance. Avoid dissipation of ports authority's asset base to satisfy third parties. Te full recovery of costs should view as a minimum objective by the ports authority and once met other objectives can be pursued. The key main operators of a port are: stevedoring firms, cargo handling companies as well as terminal operators. Port operators pursue microeconomic objectives such as profit maximization, growth and additional market share so as to achieve the benefits of a market oriented system (Cullinane and Brooks 324). There is a dock labor board which was established at port Sydney to take care of labor system at the port. It ensures that strikes are kept at minimal by paying employees competitive wages. Advantages and Disadvantages of Landlord Model As noted before, Sydney port adopts the landlord model. The following are the advantages of adopting this model: 1. Secures both private and public interest. This is an advantage since interests of both parties are taken care of. 2. Since this model is the most popular model among many ports, it becomes advantageous for the port to set benchmark standards as a measure of performance (Cullinane and Brooks 324). In this case, it well knows how to remain competitive in comparison with other ports regionally and globally. 3. The port is in a position of maintaining financial stability and achieving financial targets, since flow of income from lessees is made possible 4. The level of lease amount is related to the initial preparation and construction costs such as land reclamation therefore, cost effectiveness is achieved as the lease benefits outweigh the costs. 5. Labor stabilization is achievable as dock labor is employed by these private companies. 6. Modernization of institutions and installations is enhanced since the private sector is able take care of all this efficiently. This is because they purchase their own equipments. 7. Lease paid is usually paid to a fixed sum per square meter per year, typically indexed to some measure of inflation. Therefore, inflation is taken care of. There are also disadvantages related to adoption of this model: Sometimes public interests and private interests may conflict where each sector decides to pursue different goals which are not best for the good of all customers. This can pose a danger to a ports operation and its financial goals. It may also prove difficult in integrating the two therefore heavy costs may be incurred to run this mode. Where investment risk is high when private stakeholders are involved, this becomes perilous to the ports operations and financial stability. Work cited James Reveley and Malcolm T. Tull, Port privatization: the Asia-Pacific experience Edward Elgar Publishing, 2008, pg. 112-156 Mary R. Brooks and Kevin Cullinane, Devolution, port governance and port performance Elsevier, 2007, pg. 300-407 Sydney port http://www.sydneyports.com.au/port_operations accessed on August 12, 2010. Read More