Types of Port Ownership and Administrative Regimes - Essay Example

Different types of port ownership and administrative regimes Table of Contents I. Introduction ……………………….. 3 II. Port Regimes ……………………….. 3 III. Mixed Regimes ……………………….. 7 IV. Conclusion ……………………….. 9 V. Bibliography ……………………….. 11 Introduction The ports along with the other kinds of waterways play a critical role in the transportation, trade, and employment not just within a country but in the larger and more intricate global trading structure. For example, in the United States alone, the ports and waterways account for almost all of the overseas trade by weight and about half by value (U.S. Bureau of Census 2008) Since 1997, maritime transportation of all commodities amounted to more than two billion metric tons, about half domestic and half international trade and that they were handled by about 145 ports (including inland ports) in the US. (CMAISB… 1999, p. 7) These facts underscore the importance of the port ownership in an overall national interest of a state. This paper will outline and explore the various types of port ownership and administrative regimes. Specifically, this will examine four regimes, namely; state, autonomous, private and municipal port administrations. With this objective, a better understanding of various port management structures will be achieved as both the advantages and disadvantages of the four regimes will also be outlined. Port Regimes In the paper, Modern Ports: A UK Policy, port managements were classified into three - company-owned ports, trust ports and municipal ports. (p. 26) The description follows: Company-owned: these ports are subject to the full freedoms and discipline of the commercial marketplace. They are free to seek commercial funding for investment, on commercial terms, borrowing on their assets. They are obliged to account for their performance. They are expected to generate dividends and to increase shareholder value over time. To the extent that they generate retained profits, they have wide discretion over how to invest them. (p. 27) Trust Ports: Trust ports are independent statutory bodies. They have independent boards and trustees charged with acting in the interests of al stakeholders. Any surpluses are ploughed back into improving facilities. (p. 27) Municipal ports: These are ports that are municipally owned. Local authorities operate these facilities for the benefit of the local community, town or city. The function of these ports may be commercial in nature. Company-owned ports can be considered as private ports along with the privatised ones. The main feature that distinguishes these facilities from state or municipal ports regimes is the freedom accorded in their operations. To a certain degree, autonomous ports resemble these private port administrations except that they may differ in the stakeholders involved. For example, autonomous ports may be owned by the government but that they could either be operated commercially or run privately. The port of Holyhead in Wales is an example of a company-owned or private port. It is wholly-owned by Sealink, handling about two million passengers annually with services operated from Holyhead by B&I Line to Dublin and Sealink (or Stena Link) to Dun Laoghaire. (Hooydonk 2003, p. 43) Sealink operates the port and its facilities and have often implemented policies that benefit the company’s ferry operations. The port authorities of Rotterdam, is an example of a municipal administration for which an elected government representative overseas the port administration. The city government is responsible for the port strategy including an investment programme, among other efforts. W.G. Salet, Anton Kreukels, and Andy Thornley (2003) explained this in detail: The Rotterdam port and port economy in circles of the national government made it possible to take a number of necessary measures and to safeguard the smooth functioning of this world port. The most important factor here seems to be the continuing solid association of the harbour barons and captains of the port with each other and with the strong municipal authority. (p. 195) The strong municipal government involvement in Rotterdam port administration stems from the fact that the city’s economy is closely tied to the health of the port. Unlike Amsterdam, Rotterdam is incapable of attaining sufficient economic strength and of attracting other economic activities apart from those related to the seaport during this last 10-15 years. This is expressed in the ongoing outmigration of people and businesses to other regions since 1980s due to the weakening activities in the Rotterdam port, particularly in its shipbuilding industry. (Salet, Kreukels and Thornley, p. 195) State Ports The common concession that the coastal state should be accorded exclusive authority to prescribe policy and administration of a specific port is based on the principle that the state has a clearly predominant interest in the facility. (MacDougal and Burke 1987, p. 156) State ports follow a central port administration such as those in Southern Europe and much of South America wherein the national government controls all main ports or that various layers of it act as partners in the administration of ports. This is also the case in most ports in the United States. While there is no centralized ports administration, various levels of federal, state and local administration are in place. Control and ownership is normally vested in three levels: central or national (e.g. Indonesia, the Philippines); regional (e.g., India, Malaysia, South Carolina); and municipal (e.g. China, Los Angeles, and Miami). (Hakim, Seidenstat and Bowman 1996, p. 149) Table 1 Type of Port Advantages Disadvantages State Centralized port administration Government effectively controls trade Government can seal off the possibility for flight abroad of this vital national asset by private enterprises. Profitable ports can subsidize other ports or services. Inefficient Prone to corruption and inefficiency. Not insulated from political influence and intervention Marred by too much bureaucratic wrangling. Public budget used to finance port infrastructure are becoming tighter. Municipal has more flexibility than state administration structure Protects the port against competition. Must balance various local, regional, and national relationships and the national and international port business community. Limited budget for development Still subject to political influence and intervention. Autonomous Increased commercialization Free to pursue commercial activities Port management is accountable for its decisions and performance Efficient port management Official governance of the state still remains Does not have legal corporate independence needed to ensure efficient operations Private Has full freedom in its operations Free to pursue commercial enterprise Has wide discretionary powers in investing profits Can be monopolistic. Lack of oversight and regulation that may result in poor safety and substandard facilities and services. In many cases, it is not explicitly understood which port activities are either exclusively a public or private responsibility. Given the differences between various types of ports it is not surprising that seaports as a whole fail to reveal a clearly specific demographic regime. However, by analysing the port authority’s position, a good picture of the actual responsibilities for different activities could be formed. Writing in this regard, Henrik Stevens (1999) wrote that each port authority’s position could be analysed along two dimensions: First is that one concerned with the port’s autonomy (territorial versus functional administration); second, is the dimension concerned with the way in which governments’ representatives were involved in the port administration, whether elected or appointed. (p. 340) Hence, the expectation on the port administration is, as a matter of fact, determined by the function of the port. Mixed Regimes The ports from around the world could provide useful examples in illustrating further the types of port administrations and their complexities because they are consisted of many separate and intertwined public and private activities. For instance, many ports are not as privatised as one might expect. A reason for this is that several elements from different types of port regimes may be present in port administration structure. For example, the port ownership is public and that the management responsibility is in the care of private organization. In the case of the United States, most of the port administration in the country can be almost completely owned by the public. However, the functions are not centralized because they are provided by several federal and a number of state and local authorities. In Western Europe, on the other hand, ports have to survive in a strongly competitive environment, that is why the are granted a degree of autonomy in such a way that they profit, from which they develop and maintain their facilities. One way of outlining the advantages and disadvantages of state, autonomous, private and municipal port is by categorizing them into the structure of their administration. Here, the comparison is simplified because there are only two types: the landlord port and the service port. Simon Hakim, Paul Seidenstat and Gary W. Bowman described these two in detail: In the landlord port, infrastructure is financed by the port authority, sometimes with government intervention (equity capital, investment grants, preferential loans). Parts or all of the superstructure is financed and operated by private parties, who employ dock labor, or by a franchised company under a monopoly… In the service port, total control is by the port authority, which directly employs dock labor and owns cranes and superstructure as well as infrastructure. The private sector is simply a patron and a user, usually served under statutory conditions. Management of the port authority is self-contained and less open to third parties than the management of landlord ports. (p. 122) Countries adopting the landlord port model tend to have a three-tier institutional structure: the government is responsible for sector policy and planning; autonomous port authorities manage and regulate ports; and private companies provide commercial services. (Muller-Jentsch 2002, p. 86) The Port of Kingston in Jamaica is an example of the landlord model and the combination of elements from different port regimes. Abhas Kumar Jha (2005) provides us with the details: The Port Authority of Jamaica (PAJ) is a statutory body, with a semi-autonomous board. It has been appointed by the Government to act in the interests of the port by setting port tariffs and negotiating individual tariffs with shipping lines. PAJ also owns some of superstructure assets, such as the cranes at the transshipment terminal. Concessionaires or contractors operate the assets, cargo handling, and other activities in the port. (p. 129) State and municipal ports such those found in the United States are usually landlord ports while the ones in the United Kingdom is an example of the service port and that this type is the standard arrangement in many port authorities established in the English law tradition. The private and autonomous ports are under a different category. These are mostly found in the UK and New Zealand wherein even port land can be sold to private owners. In regard to the ports in socialist countries, the structure of port administration is more oriented toward their enterprise functions than toward the performance of public duties. They were, as a consequence, more commercially oriented than some port authorities in non-socialist countries. For instance, in Yugoslavia, wrote Hakim, Seidenstat and Bowman, ports have been self-managed enterprises, performing all infrastructure and superstructure functions and financing all installations from their own resources, that is, from traffic; user intervention has been nil, and ports have competed freely with each other. (p. 123) An example of a pure state administered port is the case of those found in Algeria where ports are socialist enterprise and government owned. Conclusion A comparison of various types of ports in the context of their administration tells us that there are fundamental differences in the significance of seaports. In turn, this also affects the structure of the port administration as well the expectations of the port authority’s performance. In addition, it is hard to cite a seaport that has a single administrative regime because most of these are characterized by a combination of two or more elements from different port administration structures. There are those who manifest a clearer regime. In Europe, particularly in the UK and much of the Western region, ports are seen as combined industrial and logistical support and hence mostly commercial when it comes to its management because it has to be profitable as possible. In the US, meanwhile, the port function seems to be dependent on the state in which the seaport is situated. In Canada, port administration is the national government’s responsibility overall. In this case, interest is focused on the trade function of the port not as much as the profit of the specific facility but as part of the national port system and its governed by its overall economic strategy. This type of port administration can also be found in most countries in Southeast Asia. Luis Guasch and Pablo Spiller (1999) argued that, “ports are on the frontier of public and private interest.” (p. 240) If these interests could be balanced, then it could significantly contribute to an increase in productivity and, henceforth, its use for the government. It appears that this is an ideal requirement that must be taken into consideration, particularly today as the trend leans toward the privatization of port facilities. The world has observed a trend toward an increasing participation of the private sector in seaports. The traditional mode of port organization, with substantial public intervention, has become obsolete and unusable for adapting to the rapid changes in the industry. (Estache & de Rus 2000, p. 123) However, port reform does not necessarily require the disengagement of the public sector from port activities because such reform can also take place through improvements in the existing framework. The advantages of a private enterprise and the government involvement (as a warden of public interest), when combined, could bring about a new partnership that achieves both economic and institutional objectives. What is significant in these developments is that port administrations are increasingly becoming an amalgamation of stakeholders that a port management structure no longer follows an exclusive, single management regime. Concepts such as mixed ownership or mixed regimes have become permanent fixtures in port administration all over the word amid the backdrop of the increasing integration of the global trade. References Committee on Maritime Advanced Information System Board (CMAISB) and Commission on Engineering and Technical Systems National Research Council 1999, Applying Advanced Information Systems to Ports and Waterways, Washington D.C.: National Academy Press. Estache, A and de Rus, G 2000, Privatization and Regulation of Transport Infrastructure: Guidelines for Policymakers and Regulators, World Bank Publications. Guasch, L and Spiller, P 1999, Managing the Regulatory Process. World Bank Publications. Hakim, S, Seidenstat, P and Bowman, G 1996, Privatizing Transportation Systems. Greenwood Publishing Group. Jha, A 2005, Institutions, Performance, and the Financing of Infrastructure Services in the Caribbean, World Bank Publications. McDougal, M and Burke, W 1987, The Public Order of the Oceans. Martinus Nijhoff Publishers. Muller-Jentsch, D 2002, Transport Policies for the Euro-Mediterranean Free-trade Area: An Agenda for Multimodal Transport Reform in the Southern Mediterranean. World Bank Publications. Salet, W.G. Kreukels, A and Thornley, A 2003, Metropolitan Governance and Spatial Planning: Comparative Case Studies of European City-regions. Taylor and Francis. Stevens, H 1999, The Institutional Position of Seaports: An International Comparison. Springer. US Bureau of Census 2008, Transportation: Water Transportation. US Census Bureau. Available from: [13 November 2008]. van Hooydonk, E 2003, European Seaports Law: The Regime of Ports and Port Services under European Law and the Ports Package. Maklu. Read More