Port Investment Strategies - Coursework Example

Port Investment Strategies Port Investment Strategies Decisions for port investment relate to productivity improvement tactics or capacity expansion that results in higher financial performance as well as capacity utilization. This work proposes a decision-making process that concerns port investment for future infrastructural development after taking into account the uncertainties of the trade. There is proof of the effectiveness of the proposed strategies in the improvement of warehousing facilities in multi-purpose ports (Lagoudis & Salminen 2014, p. 302). For an evaluation of the present alternatives, there is a need to base the expected net present value (ENPV) on earnings before tax, interest, amortization, and depreciation (EBITDA). Results indicate the strategies of investing in a new 4-level warehouse that has a flexible option was the best option compared with alternatives of the same scale (Heaver & Van De Voorde 2001, p. 300). Introduction A port system is an assortment of the components that link the sea to the land, which collectively work to handle the cargo that reaches via the seaside by water vessels at anchorage. There is also a consideration for the intermodal links from the offloading sites to the terminals of the goods. Such infrastructure as roads, rail, airports and other modes of transport are, therefore, part of the port systems. The hinterland has intermodal linkages as the connectors between the ports and the destinations for the goods. As such, there are varied development strategies depending on the most suitable in terms of business. There are those whose plans focus the cargo handling components, others focus on the intermodal links, yet some focus on all the sectors. The essay presents review literature on the modes of investment of two ports compared. The paper also gives the reasons for investment strategies employed as well as a recommendation for better adjustments. Review of Literature The U.S. Maritime Administration outlines eight fundamental strategies by port authorities to implement their investment strategies. In their planning and investment toolkit, the maritime administration first emphasizes on an evaluation of port conditions. The second stage involves definition of problems. The third stage of the investment strategy entails comprehensive planning. The port authority should navigate the process of planning for the investment project. It is important for the authority to engage private partners in the investment strategy. The next step is to presents needs of the authority that are actionable. The authority must access available funding from the government agencies of other administrations. The last step of the process involves actual implementation and completion of the project (U.S Department of Maritime Administration, 2015). According to the Waterfront Conference Company Ltd., 2015, having the right infrastructure is a vital aspect for consideration in port investment. Further it is essential in plans to implement port development. With the right infrastructure, identification of best implementable strategy for the port is fundamental. To have the optimum strategy for port investment, agencies should have port master plans that are important in ensuring economic on development. There is need to promote private participation in port infrastructure development. in many countries including the UK, the private sector contributes to port development in diverse ways. Port System of Australia Key Agencies engaged in Port Several agencies are engaged in the management of ports in Australia. One such agency is State Department of Transport, which is responsible for all modes of transport within the country such as road, ports, air and others. There is also the Australian Transport Council, the Department of Transport, Infrastructure, and Regional Development among others. Each of the departments has a specific duty assigned that leads to the overall development of the port systems (Auckland Regional Holdings 2010, p. 64). Port Ownership in the Country There are three levels of government in Australia-state: commonwealth and local. The commonwealth level of government has a number of functions that involve the ports such as environment, completion policy, security, and control of the borders. The commonwealth government also undertakes to finance and owns particular infrastructure assets that include some roads and railway lines. Ownership of port corporations is under the State Government that also regulates the adjacent land uses except for Southern Australia, which the government privatized in 2001. There are also plans of further privatizing the Port of Brisbane. The ports of Australia are proprietors to terminal operators as well as the managers of port infrastructure. A small number of specialist organizations operate the terminal businesses and only lease berth space to others with the permission of the port authorities. As such, there is coordination among the concerned parties, which ensures the proper running of the port activities (Talley 2012, p. 100). The Port of Melbourne, Victoria Australia Key Agencies The Department of Transport, which works in collaboration with VicRoads and other transport agencies is responsible for all the forms of transport in the region. It gains its powers from Transportation Act of 1983. As such, there is a discovery that the government is the sole player of the running of the port in the region. All the investment plans and their execution lie in the hands of the government. There is a need therefore, for discussing the role of the Australian government in the running of the port of Melbourne (Kolar & Puckett 2011, p. 100). The government forms a ten-year investment plan for the port, which is cyclical. The formulated strategies ensure that the port remains competitive, efficient, and adaptive to emerging needs both domestic and foreign as well as sustainable to the demands (Auckland Regional Holdings 2010, p. 64). Identifiable Challenges There are several challenges associated with government involvement in the running of the port of Melbourne. Identifying such problems gives the rationale for the investment plans of the government, which will ensure that there is improved efficiency in the operations at the port. The first problem is coping with the rate of growth while at the same time, maintaining the incentives for maintaining the efficiency of the port. Another challenge is an increase in the levels of congestion of the roads and other networks of transport that link the port. The third problem is preparing a way of attracting larger ships at the port, which would improve the rating of the port internationally. The fourth challenge an integration of the ports of Melbourne and Hastings, which will see the port increasing the number of its operations. Such a move is also a target for making the port of Melbourne one of the largest in the world. Investment Strategies for the Port of Melbourne The main consideration for the port’s investments is an integration of the ports of Melbourne and Hasting. There is a need that the government achieves such a move because of the associated benefits. Should the government succeed in such a move, the Victoria region will have one of the most attractive port facilities in the country. However, achieving such requires that the concerned parties identify and address the constraints to the development of infrastructure capacity so that there can be a realization of full utilization of resources at the port (Shneerson 2015, p. 5). If the port advances in the manner proposed, there is also a requisition that the government addresses a shortage of the number of drivers. Therefore, a consideration will first take the process of merging the two ports. The government, therefore, will have a responsibility of improving the intermodal transport networks, the port facilities, and all the affected networks of the port (Meersman 2014, p. 56). Most specifically, there is a need that the government of Australia improves the port-handling facilities for cargo and ships because upgrading will only mean a rise in the levels of activities. Such may include the warehouses and associated storages, the berths, offloading equipment among others. Recommended Measures The government should consider a progressive process of running the strategies of investment (Burns 2015, p. 300). Such a move will ensure that there is a smooth transition, which ensures that the port does not halt its functionalities. It means that the developers of the upgrading process should consider alternatives for the running of the two ports in the process of their merging. It therefore means that such moves should be in line with the long-term project implementation procedures as it is the nature of the country. The Port System in the UK Key Agencies Involved There are a number of responsible parties for the management of ports in the UK. Considerably, there is not a common agency considering that there are different countries in the region. One such department is the department of transport, which has a wide range of responsibilities most of which spun across the entire transport sector. There is also the infrastructure planning commission, which decides on the allocation of significant infrastructural projects in the region. There are others, which have specific jurisdiction of specific countries such as the Scottish Executive, The Welsh Assembly, and the North Ireland Executive. Port Ownership Structure Unlike in Australia, most ports in the UK fall under private ownership. In fact, 15 of the biggest 20 ports in the UK in terms of tonnage are private entities. Such a number accounts for approximately 2/3 of the port traffic of the UK. The privatized ports do not have any government investments that imply they entirely depend on private funding. The Port of London Identified Challenges There are number of identifiable challenging factors in the functionalities of the port of London, which form the basis of investment strategies for the involved parties. The first one is maintaining a well-integrated system of handling freight in the port (Haibo & Jian 2010, p.6). Such would take the investors a move to develop a sustainable freight transport system. Another challenge is growth in the number of trailers on the roads because of the increase in the demand of cargo from the Port of London (Guasch & Spiller 1999, p. 99). As such, the problems overlap that of increased demands for the port services, which the developers have to meet via a development of better facilities for cargo handling. There is a need that the port installs facilities that will meet the timetables of the largest ships and avoid congestion. Investment Strategies The Port of London risks loss of its substantial prominence to other ports across Europe considerably because of high competition in the region. Such problems arise from the failure at times to meet the capacity demands, which slows down the rates of operation of the port. As such, investors work hard to ensure that regulation mechanisms at the port add value to the port rather than being an unnecessary cost (Weber & Alfen 2010, p. 93). The best move for the region is therefore not just improving the handling facilities, but training the staff involved in the process. There is also a plan that will ensure that the port sticks to the agreed standards of good practice involved in managing the port while considering environmental management (Wareham 2010, p. 56). The rationale for such strategies is ensuring three critical aspects of the running of the port. One of them is the promotion of competiveness of the UK across the entire Europe as in concerns maritime business (Mansouri & Mostashari 2010, p. 1130). The next is the maintenance of nationally acceptable standards of safety as a way of sticking to the third reason, which is environmental safety. As such, the two ports have a similar strategy in terms of what they target to achieve at the end of the process. However, the port of Melbourne targets an expansion of the port and its hinterland, while port of London considers improving its facilities to improve its levels of competition (Van den Berg & Langen 2011, p. 10). Conclusion This work has analyzed the investment strategies for both the port of Melbourne and the port of London. There is the realization that while in Australia most of the ports fall under government ownership, those of the UK are private entities. There is a variation in the rationale for strategies for each port, with the port of Melbourne targeting an improved capacity while that of London aiming improved efficiency. The rationale for the identified problems is to derive investment strategies, which differentiate the two ports as it concerns their development plans. Bibliography Auckland Regional Holdings 2010, International Ports and Freight Policies, Strategies and Action Plans, Retrieved March 6, 2015 from http://www.poal.co.nz/news_media/publications/International%20Ports%20and%20Freight%20Policies%20Strategies%20and%20Action%20Plans.pdf Burns, M 2015, In Port management and operations (First ed., Vol. 1, p. 406), New York: CRC Press. Dekker, S., & Verhaeghe, R. J 2008, Development of a strategy for port expansion: an optimal control approach, Maritime Economics & Logistics, 10, 3, pp.258-274. Guasch, J. L., & Spiller, P. T 1999, Managing The Regulatory Process: Design, Concepts, Issues And The Latin America And Caribbean Story, Washington, D.C: World Bank. Haibo, K., & Jian, W 2010, Research on Single Port Investment Decision-making Optimization Model Based on Real Options, Perspective, 4, 9. Heaver, T., Meersman, H., & Van De Voorde, E 2001, Co-Operation And Competition In International Container Transport: Strategies For Ports, Maritime Policy & Management, 28, 3, pp. 293-305. Kolář, P., & Puckett, S. M 2011, Role of port authorities in Australia, Canada, and the European Union, retrieved from http://www.atrf11.unisa.edu.au/Assets/Papers/ATRF11_0076_final.pdf Lagoudis, I. N., Rice Jr, J. B., & Salminen, J. B 2014, Port Investment Strategies under Uncertainty: The Case of a Southeast Asian Multipurpose Port, The Asian Journal of Shipping and Logistics, 30, 3, pp. 299-319. Mansouri, M., Nilchiani, R., & Mostashari, A 2010, A Policy Making Framework For Resilient Port Infrastructure Systems, Marine Policy, 34, 6, pp.1125-1134. Meersman, H 2014, Port Infrastructure Finance (First ed., Vol. 1, p. 264), New York: CRC Press. Pinder, D 2004, Shipping and Ports in the Twenty-First Century Globalization, Technological Change and the Environment, London, Routledge. Ports and Terminals 2015, Global Investment in Ports and Terminals, Retrieved March 6, 2015 from https://www.hfw.com/downloads/HFW%20Ports%20and%20Terminals%20Report%20[A4]%20February%202013.pdf Shneerson., D 2015, Investing In Port Systems, Retrieved March 6, 2015 from http://www.bath.ac.uk/e-journals/jtep/pdf/Volume_XV_No_3_201-216.pdf Talley, W. K 2012, The Blackwell Companion To Maritime Economics, Chichester, West Sussex: Wiley-Blackwell. The Waterfront Conference Company Ltd., 2015, Port Strategy: Maximising Your Port’s Potential Through Infrastructure Solutions, retrieved March 10, 2015 from http://www.waterfrontconferencecompany.com/conferences/ports/events/port-infrastructure U.S Department of Maritime Administration, 2015, Port Planning and Investment Toolkit, Retrieved March 10, 2015 from http://www.marad.dot.gov/ports_landing_page/StrongPorts/Port_Planning_Investment_Toolkit/port_planning_investment_toolkit.htm US Department of Transportation 2015, Port Investment and Finance Port Finance Reports, Retrieved March 6, 2015 from http://www.marad.dot.gov/ports_landing_page/infra_dev_congestion_mitigation/port_finance/Port_Fin_Home.htm Van Den Berg, R., & De Langen, P. W 2011, Hinterland Strategies of Port Authorities: A Case Study Of The Port Of Barcelona, Research In Transportation Economics, 33, 1, pp. 6-14. Wareham, P 2010, Competition Law and Shipping: The EMLO Guide to EU Competition Law In The Shipping And Port Industries, London: Cameron May. Wareham, P 2010, Competition Law and Shipping: The EMLO Guide to EU Competition Law In The Shipping And Port Industries, London: Cameron May. Weber, B., & Alfen, H. W 2010, Infrastructure as an asset class: Investment Strategies, Project Finance, and PPP, John Wiley & Sons. Read More