“A PROJECT ON PORT INDUSTRY”
Submitted by ANGANA CHATTERGE REKHA KANJANI RIDDHI SHAH SWATI SHAH
Roll Roll ROll ROLL
No. 12 No. 63 No. 90 NO.92
S.K.PATEL INSTITUTE OF MANAGEMENT & COMPUTER STUDIES GHANDHINAGAR
Year: NOV 2006
Sr. NO 1 TOPIC Chapter 1: Brief Introduction of Port industry 2 Chapter 2: Post Reforms, Privatization, New Roles in Port industry 3 Chapter 3: Challenges & emerging issues concerning Port Industry 4 5 Chapter 4: Chapter 5: Where the major players can improve. (Recommendations) PAGE NOS.
Chapter 1: Brief Introduction of Port industry
Ports connect us to the world. Goods we touch every day travel to and from one of hundreds of deep draft ports that accommodate ocean-going vessels. They are located in coastal areas, as well as on the Great Lakes and on inland river systems. Ports are busy, dynamic transportation hubs that are constantly adapting to meet the demands of global trade. Ports are the nexus of business transactions for imported and exported goods. We depend on ports to increase international trade, to strengthen local and national economies, to provide higher paying jobs, and to increase our standards of living. Trade creates new opportunities for citizens in every country. By virtue of their location, ports also serve as environmental stewards of our coastlines. Ports spend millions of dollars each year to minimize the impacts of port operations and development of their surrounding communities and natural resources. Ports play another critical role in our communities as well. They serve as local economic engines, generating jobs and opportunities that allow businesses to flourish.
GUJARAT TOWARDS A WORLD CLASS INFRASTRUCTURE:
the country’s principal maritime state. It is the ideal location for a direct berthing port facility. structure and pattern of development. It is endowed with the longest coastline of 1600 kms. Africa and Europe. India too has consciously built a port linked infrastructure over the last several decades thanks to successive proactive governments and sharp business acumen of entrepreneurs.the only one of the country. Kandla is one of them. Maritime transport and maritime industry is and has always been a vital part of India. It has strategically located 41 large and small ports. The country’s first pvt sector ports pipavav and Mundra are already in operations. These ports handle a lot of port
. Pipavav is the country’s first port in the pvt sector to be operated by APm terminals. India has six major ports on the west coast. capable of handling more than 100 million tones of bulk. It is also near maritime outlet to Middle East. it has emerged as one of the leading industrial countries. liquid or containerized cargo. It influences the pace. Of which one is a major port. And more than 150 ports. From being a largely agrarian economy. This port is heading towards major expansion. India is a natural gateway. Each of its port location has a lot of opportunities to offer.India is a land of enormous opportunities and it is the second fastest growing major economy of the world. Earlier this state was famous in the western world as the mistress of the sea. Its long coastline gives it a natural and favorable advantage to play host to foreign trade considering its location and connectivity. Situated on the western coast of India is Gujarat. Maritime transport is a critical infrastructure for the social and economic development of a country. Dahej offers fascilities of a chemical port terminal. Mundra is the largest pvt port in India. Peninsular India is blessed with a total 5700 kms of coastline. 11 are intermediate and there are 29 minor ports.
39% of the total national cargo. Several states have made significant progress by setting up maritime boards and establishing guidelines for developing pvt ports. of pvt.. At present pvt jetties are operational at 8 locations while 3 more are under construction. power generation and infrastructure development. Of these. dredgers and floating crafts. The state govts have been developing policy frameworks.e. This policy integrates the development of ports with industrial development. Under the port policy ten new ports at new green field locations are proposed to be developed. which handle 75% of the country’s pvt port cargo. It also includes promoting coastal shipping for passengers and cargo traffic
. The BOOT law has been framed to invite pvt sector participation through international competitive biding. ports in the country. More than 90% of the country’s foreign trade by vol. Gujarat’s planning includes ports laid development strategy. The BOOT policy for the ports as been announced. encouraging ship building. The ports target a gross capacity of 100 million tones.traffic in the country and also millions of tones of cargo. And 70% by value are handled by the Indian ports. By 2015 it is estimated that Gujarat’s ports will handle 400 million tones i. providing port facilities to promote export oriented and port based industries. ship repairing and manufacturing facilities for cranes. Specific projects for pvtn. Gujarat also has the maximum nos. It maximizes flexibility with tariff freedom. have been identified. cornering 25% of the cargo and handling 80% of the port traffic in the country. Gujarat is the first state to announce a separate port policy. at present the Gujarat ports handle a major chunk of the cargo throught the country. vis container terminals. The port policy includes developing and upgrading port facilities. outer harbors. captives jetties etc..
between various locations within and outside the state. India is among top 20 maritime nations in the world and its greatest strength as a maritime nation is its ship breaking facilities and very high quality maritime man power. SEZ s are the future growth engines. In addition. Being only minutes away from each other. some of these SEZs can virtually said to be extensions of the ports. Gujarat’s along is one of the largest ship breaking yards in the world. Good quality ports lead to the development of infrastructure of which SEZ’s are important and integral part. With the advent of SEZs and SEZs policy . Attracting pvt sector investments in minor and intermediate ports as also at the new port locations is incorporated in the policy. Ports and SEZs go hand in hand. These SEZs are associated with near by ports. This holds true the other way around also. Shipping is a very important sector for the growth of any economy. Considerable pvt investment has started flowing in to the Indian port sector. India is the perfect destination for ports and with the large no of ports that Gujarat has. SEZs functions well only with proper ports and hinterland connectivity. In close proximity to SEZs and ports is shipping. it is expected that ports would form an integral part and also be an avenue for sizeable development of this sector. A major ship building yard is to be developed at Hazira. the policy aims at decongesting the over burden on the existing ports through efficient fascilities and services to support domestic and international trade. it offers the perfect platform for SEZs . for here SEZs can import and export products on a large scale.
. And this sector offers opportunities not only for the direct investments but also in ancillary activities.
Steering amidst profitable waters for the shipping industry sky is the limit. It was a booming market that prompted Indian ship owners to go on acquisition spree. The past year and a half for the Indian companies can be characterized as a big ticket purchases.
India has around 12 major ports and 185 minor ports with a coastline of 7517
. ports.Indian shipping is on a new wave. The shipping sector is witnessing tremendous upsurge with a high requirement for additional capacities. With companies looking to outsource their services. in today’s time and ages that either one ships up or ships out. This players need to interface with each other and comply with the requirements. the country had progressed fast and even now is well on its way to further development. Those groups dealing with logistics provide a range of logistic solutions while on the other hand shipping agents and vessel operators are always in need for various operational services. and SEZs for the success of these three sectors good logistical support is very necessary. The entire pattern of cargo traffic has changed. the market for logistic service providers is expanding. With the country’s vibrant port laid economy and a rich maritime history. And this will be a welcome move whose time has come. Logistics plays a vital role and encompasses all the three sectors – shipping. The government too has modified various regulations which have provided a further impetus to the industry. it is indeed true. New trends have begun to show up in the pattern of movement cargo. On these building blocks. The Gulf of Khambat provides navigational safety and logistical advantage.
India has the largest merchant shipping fleet among the developing countries and is ranked 17th in the world. and Tuticorin on the east coast and Cochin. Visakhapatnam.Km. The twelve major ports are Kolkata (including Dock Complex at Haldia). P&O Ports (Jawaharlal Nehru Port Trust. Jawaharlal Nehru at Nhava. The sector in India handles 95 per cent (in terms of volume) and 70 per cent (in terms of value) of India's external merchandise trade. Ennore.80 million tonnes during 2005-06 for the period upto February 2006. Mumbai). Chennai. new Mangalore. The twelve major ports handled a record traffic of 383. Dubai Ports International (Cochin and Vishakapattinam). Mormugao. Mumbai and Chennai).
Major ports :
All the major ports primarily offer a combination of dedicated bulk terminals. and PSA Singapore (Tuticorin). Paradip. Significant investments have been made on a Build Operate Transfer Mode (BOT) mode by foreign players such as Maersk (Jawaharlal Nehru Port Trust. The major ports
. Mumbai and Kandla at the west cost. some specialized container terminals and several cargo berths.
The other prominent container operations are based in Chennai.5 MT as against the 2005-06 target of 397.17 per cent of the total major port traffic at 423. JNPT is the leader JNPT is the leader in this segment. Kolkata port posted the highest growth of around 75 percentin cargo traffic. and Mumbai. The six-year CAGR for container traffic has been 13. Cochin.
Performance of Major Ports :
The twelve major ports handled a record traffic of 383. Chennai. 1963. The other major ports were developed later with the newest facility being Ennore port. Unlike the others.75 million tonnes during 2005-06 for the period upto February 2006.57 percent to the total cargo in 2005-06. controlling 55-60 percent of container traffic in the country. Kandla.65 percent. The cargohandling target for all the major ports except Kolkata revised upwards vis. It is the only major port to be corporatized and run by a limited company. Iron ore was the next largest commodity in the cargo mix. Over the last six years. When the act was passed.are regulated under the major Ports Trust Act. It contributed 33. POL has been the dominant commodity carried through major ports. Kolkata and Chennai occupy the second and third slots respectively.56 percent. In 2005-06. Ennore is not governed by a trust and is therefore outside the purview of the major ports trust act.avis their actual performance in 2005-06. Container cargo is also growing at an impressive CAGR. In 2005-06. Tuticorin and Cochin.
. it controlled 13. Visakhapatnam has maintained the number one slot in terms of processing cargo traffic. For 2006-07.41 million tonnes. container traffic grew at 12. Kolkata. Vishkhapatnam. there were only six major ports viz.9 percent over the previous year. contributing 18. the shipping ministry has set the cargo-handling target for all major ports at 465. between 2001-02 and 2005-06. Notably.5 MT.
94 9.91 44.80 465.Dec) 33.59 51.69 17.80 52.19 32.17 2.81 14.75 34.72 17.20 40.01 14.20 43.80 35.95 18.43 2.62 14. 41 Cargo Handling Target for 2006-07 61.25 45.02 47.98 14.80 53.56
Cargo Handled at Major Ports:
(Percentage to total) Commodity POL Iron Ore Fertilizer and raw Material Coal Containerized Cargo Others Total 2005 (April – Dec) 32.Port wise details are given below: Cargo Traffic at Major Ports (Million Tonnes) Cargo Port Visakhapatnam Kolkata Chennai Kandla Mumbai JNPT New Mangalore Paradip Mormugao Tuticorn Cochin Ennore Total Traffic (2004-05) 50.20 37.11 31.00 43.17 100 2004 (April. 81 33.20 50.14 13.69 Cargo Traffic (2005-06) 55.20 15.48 383.25 14.67 9.30 18.16 423.55 35.02 18.45 33.80 49.89 30.10 30.10 46.80 16.10 9.66 15.19 37.88 100
These are comparatively newer ports with
.Major Ports :
About 48 non-major ports are active and operational. Orissa (1). Andhra Pradesh (2). Tamil Nadu (9). These are in Gujarat (21). and Goa (1).Non. A few of the non. The non. They carried cargo traffic of 145. Maharashtra (8). passenger ferrying. The rest are selectively operational and cater to local cargo requirements.36 MT in 2005-06. Karnataka (3).major ports have been developed as relatively large ports (Mundra and Pipavav) through private sector participation and attract a fair amount of Cargo.major ports handle around 26 percent of India's total port traffic. a growth of 5.71 percent over the previous year. and fishing operations.
and thus score high on efficiency parameters.
Hub ports and logistics centres :
Hub ports Increasing competition among hub ports has been growing as previously less developed ports in countries undergoing national economic growth have been developing port infrastructures to compete with the existing hub ports. better-trained workforces.modern facilities and smaller. shipping alliances and major shipping lines have been taking advantage of their growing power in negotiating concessions for dedicated terminals and/or in deciding ports of
. As competition among ports has been increased.
Ports and container terminal operators are under strong pressure from their clients. productivity. Ports are losing thier bargaining power and have been forced to provide deep water. which means they are forced to take part in the competition among ports by actively enhancing productivity and investing a great amount of money in order to stay in the game. all of which are frequently demanded by shipping lines with bargaining power created by great amounts of container volume. accommodation of super large ships and many other quality services. When a port fails to meet the shipping line’s demand. quick turnaround times. infrastructures including rails and roads. and concessions to global operators allow for a straightforward definition of the conditions for success as hub port: • location (proximity to major world routes) • quick turnaround time • quality services with efficiencies and productivity • reasonable costs • ability to accommodate super larger ships – deep water. advanced equipment • excellent networks covering neighbouring feeder ports
. quality services. consolidated port operations. efficiencies.call. The demands of shipping lines (customers of ports) exercising their growing bargaining power for lower port tariffs. super larger ships. it may lose its major clients. and industry trends towards containerization.
• existence of logistic cluster supporting value-added logistics activities • no red tapes and no burdensome paper works • advanced information technology • intermodal infrastructures. air and road distribution networks • local markets producing freight volume.access to rail. Unlike
. It has been recognized as an inevitable technologically driven process that has dramatically increasing commercial and political relations between people in different countries.
Globalization has been the most influential phenomenon among the major trends in the world economy over the last two decades.
and semi-finished products can be brought together at a single or. parts. to significantly reduce overall costs without any local interference to product quality.
. In terms of the global supply chain. Business structures must be made after considering both intercontinental and regional or local aspects. cultural differences in the marketplace or the importance of response time demand global companies to customize or localize their products in accordance with local consumers tastes. industrial production has become increasingly international over the last 20 years increasing competition among businesses the world over. be considered. At the same time. a few locations. low transportation cost and the revolution of information and communication technology make it possible for companies to source raw materials and product components all over the world. centralization of business structure for economies of scale is a useful strategy in enhancing global competitiveness. too. Decentralization of business structure or postponement of final assembly must. during which production remained national. This globalization has created a real-time global marketplace and a business focus and concentration on maximizing comparative advantage when sourcing and supplying product. therefore.most of the 20 th century. Many factors such as standardization in production components. global companies have been forced to work simultaneously within two different systems while enhancing efficiency and effectiveness — centralized and decentralized maritime activities — even as international supply chains have become complex and logistics models continuously evolve. Thus. Raw materials.
and some other companies have achieved success in penetration of specific markets by thorough localization strategies such as quick response times or different design and functions.Many companies have experienced significant cost savings through integrating existing logistics places into a few integrated logistics centres. ports have a great chance to play an important role as the centre of global logistics activities. In this way. However. ports dreaming to become a hub have been struggling to meet and provide the global standard in terms of hardware and software by investing for world class infrastructures and by experimenting with several policies. most ports have been actively trying to attract regional distribution centres of
. In addition. competition among ports towards global logistics centres or global load centres is getting severer. successful logistics zones are able to secure freight volume which may be generated by established logistics companies. One of the major trends in port industry is to develop logistics related zones such as free trade zones or international logistics zones to accommodate valueadded logistics activities and to attract global logistics companies. Many ports have been trying to develop their ports towards hub ports to take advantage of these benefits through developing the necessary infrastructures and marketing a variety of advantages and incentives. Considering this growing competition among global logistics centres. because business structures of supply chain networks are decided wholly by a company s specific strategy. Thus. The advantage of special logistics-oriented zones (whether or not they are designated as free trade zones providing tax related incentives) is that they attract foreign investment and create new employment. and to develop their ports as hub ports.
With the commissioning of the LNG terminal in April 2005. In this regard. the first phase of the port became operational. which may guarantee a reliable business environment and quality administrative support.multinational logistics and manufacturing companies. Privatization.
Chapter 2: Post Reforms. ports and governments are placing great emphasis on establishing strong support from governments. The port is conceived as a solid cargo port. New Roles in Port industry
New Ports with Private Participation :
• Hazira port (Gujarat): LNG shell undertook the project to develop a Greenfield port-cum LNG terminal at Hazira. to handle bulk or
• Dighi Port (Maharashtra): the concession agreement for the development of Dighi port was signed between the Maharashtra maritime board and Mumbai based Balaji Infrastructure projects limited in July 2003. one dedicated coal berth and one container berth will be built. Dighi port will be developed in two phases. The port is to be
. The port is to be developed in phases into an all weather port. • Krishnapatnam Port (Andhra Pradesh): In 1997. Construction work of the project work is expected to be completed by 2008. • Positra port (Gujarat): the Gujarat Maritime Board has set up a joint venture company. • Dholera Port (Gujarat): a joint venture between the JK group (51 percent) and the Adani group (49 percent) is developing a Greenfield port at Dholera. Land has been acquired for the project and the project is awaiting environment clearance. IL&FS will be the strategic partner with a fifteen percent equity stake. The port is expected to be fully operational by 2007-08. The first phase is estimated to cost Rs. the state government signed a concession agreement with Krishnapatnam Port Company Limited (KPCL) of the Natco group to privatize the port. The all -weather direct berthing port will have eight dry cargo jetties and a container depot.52 billion and expected to be fully operational by 2008. to develop the port at Positra. Gujarat Positra Port Infrastructure Limited.solid cargo and container cargo. In the first phase. 3. two multi purpose berths. promoted by the Sea King Group.
18 billion project is proposed to be implemented in modules. • Dhamra Port (Orissa): the Rs. The project is to be completed within a year of commencement of work. The Rs. the contract for development of Gopulpur port was awarded to Orissa Stevedores Limited phases. The project will be jointly floated by Dubai Ports International (DPI) and a Hyderabad based entrepreneur. 13.commissioned by January 2008.6 billion. The project will be implemented in two phases.based universal lubricants. • Vizhinjam (Kerala): Vizhinjam will be developed as a Greenfield deepwater international container transshipment terminal (ICTT) hub. 20 billion Dhamra port project has been undertaken by a 50:50 JV between Tata steel and L&T. iron ore and other dry bulk cargo. 3. Gangavaram Port Limited (GPL) is the SPV formed for developing the port. The port is expected to be operational by the end of 2007. • Azhikkal Port (Kerala): Azhikkal port will be developed as a multipurpose cargo port capable of handling general cargo and containers by Sharjah.11 billion contract by GPL to execute the first phase of the project. which is expected to cost Rs. • Gopalpur Port (Orissa): In February 2006. L&T was awarded Rs 4. envisages the construction of six or seven berths. In December 2005. The first module. it will be
. • Gangavaram Port (Andhra Pradesh): the Gangavaram deepwater port will have six berths and will handle import and export of coal.
and a multi-purpose berth with a potential capacity of 0.5 million TEUs.
Development of container ports : There are close to 600 container ports across the world with an estimated combined handling capacity of 380 million TEU. The project will initially consist of two berths a container terminal. account for nearly two thirds of global capacity (Drewry. Phase-I will cover two berths.implemented in two phases. By 2010 Shanghai container throughput is expected to have surpassed Hong Kong. Capital expenditure on the construction of two berths is estimated at $235 million. 2001). The first berth is expected to be operational by 2007 and the second after 2009. The port is expected to be operational by December 2008. comprising a 350-meter quay line. The largest ports. limestone. One for handling coking coal. P&O signed a 50 year concession agreement with BPL to develop. and iron ore and one for handling steel and clean cargo. but by 2020 Shanghai is expected to be
. • Kulpi Port (West Bengal) : in August 2004. operate and maintain Kulpi port. currently the world’s largest port. those that can handle in excess of 1 million TEU per annum.
Vertical integration is a viable alternative for key clients. Shanghai and Shenzhen are expected by 2020 to be moving 56.7 million TEU (Fairplay. Free Trade Zone and Port Hinterland Development: Ports can be broadly classified into three types of ownership.5 metres. Shipping lines accounted for 25 per cent of the container terminal market in 2002. In terms of ports and terminals.2 million and 57.overtaken by Shenzhen to become the world’s largest container port. the ability for
. Several large shipping lines such as Maersk Sealand and China Ocean Shipping Company (COSCO) have integrated vertically and developed into formidable container terminal operators. 2003).3 per cent (Ports and Harbours. In 2002 the global container terminal operators controlled close to 55 per cent of total capacity. As a result. 2005). most of the leading container ports currently accommodating the largest ships in service are designed to berth ships of up to 300-400 metres in overall length and have approach channels and berths dredged to 15-15. investment in handling equipment. However. With the introduction of 8. This option is only economic for shipping lines with sufficient volumes (in a region) and strong balance sheets. sufficient to accept ships up to 14. In 2004 Shanghai moved 14.5 metres draught (Matthews. extra feedering costs and landside congestion and distribution. carriers focus on certain areas and rarely operate a global network of either dedicated (for their own business) or public terminals. the other private sector operators 22 per cent and the public sector operators 24 per cent. From 2003 Shanghai container throughput increased by 53.000+ TEU vessels there will be a need for dredging. 2005).9 million TEU respectively.6 million TEU and Shenzhen 13.5 per cent yet wharf length increased by only 14.
allowing for 22 rows of boxes on deck (Matthews 2003).000 TEU (Malacca-max). but assumes a 361 metres length and much wider beam of 57 metres. Economic forces appear to be favouring the emergence of super-hubs and a changing pattern of port calls (Trace.000 TEU vessels is not the limit.3 per cent per year from 2002 to 2008 to a total of 442 million handlings. It has been suggested that ports must have throughput of 5 million TEU and logistics facilities to support the efficient flow of cargo (Lloyd’s List.shipping lines to operate their own terminals acts as a regulator on container terminal operators and keeps a check on pricing. Drewry (2001) has forecast that investments in new berths and quays will increase throughput capacity to 442 million TEUs by 2008 or growth of around 4 per cent per year.
. However. online).500 TEU capacity. it may take a long time before this type of vessel is built. cranes and container yards.5 metres loaded draught. which will be calling at fewer and fewer hub ports (informare. capacity utilization should increase from around 72 per cent in 2002 to around 88 per cent by 2008. shipping companies can reduce costs.3 per cent per year. 8. By limiting port calls to regional hub ports. 2002). There are predictions of building new containerships as big as 18. which maintains the 14. There are plans to design an ultra large containership (ULCS) of 12. Drewry (2001) expects that if current port utilization levels of 73 per cent in 2002 were to be maintained then an additional US$ 14 billion would be needed to be invested in quays. Drewry (2001) forecasts container throughput to grow at 8. This includes growth in transhipments estimated at 9. At that pace of expansion. 1997).
new roles: In most economies in this 21st century. public/private partnerships to finance port investments and manage port facilities have been commonplace for many years. In the following year the remaining 51 per cent was also sold. The first port privatization occurred in the United Kingdom in 1983 when the government sold a 49 per cent stake in Associated British Ports. privatization. Between 1990 and 1998 some 112 port projects with private participation reached financial closure in 28 developing countries with investment totaling more than US$ 9 billion
most port management or port authorities 6 in the world are categorized into landlord port with a few exceptions as a result of recent privatization process or participation of private sector in the port sector 6 Ports usually have a governing body referred to as the Port Authority. for security’ (World Bank. Port Management or Port Administration. increasing financial viability and improving productivity and efficiency in the port industry.(Sommer. The United Kingdom alone has raised some US$ 121 billion through its privatization programme whilst globally the figure stands at well over US$ 1 trillion (Baird & Valentine. 2006). in certain circumstances. which is largely responsible for the tasks of construction. 1999). with the objective of reducing demands on the public sector budget. administration and sometimes the operation of port facilities and. The term ‘Port Authority’ has been defined in various ways.
Except for small ports with small portion of commercial activities.
. According to the World Bank (2001). ‘Port Authority’ is used widely to indicate any of these three terms. Many governments have accelerated deregulation of economic activities and decentralization of decision making. 2001). Municipal. public or private body. there are four types of port management models which are:
• • • • •
service port tool port Free Trade Zone and Port Hinterland Development landlord port private service port. In 1977 a Commission of the European Union defined a Port Authority as a ‘State.
Firstly. most of which will have been established by
.For privatization basically there are three distinct and essential elements of a port which should be carefully considered:
• • •
port regulator port landowner port operator. regulatory activities within a port will generally be related to duties and responsibilities such as enforcing regulations and providing pilotage services and vessel traffic management.
(Baird. The second element is port land. (Lethbridge and Ra’anan. locks. breakwaters. 1991) The role of a national port authority should be reduced to a few major tasks and the staff kept to a minimum. turning basins. piers and wharves
providing or arranging road access to the port complex. when considering port reform there are three institutional issues which must be examined:
the role of the national port authority the role of the local port authority
• the role of the private sector. and market and promote the entire port and its facilities to users. which may include a range of value-added activities and free trade zone related activities within the port estate. berths. According to another study. Appropriate tasks are:
to coordinate port investments so as to avoid wasting scarce resources to ensure that sufficient capacity exists to meet the country’s trade needs
• to guarantee an adequate quality of service
. This function traditionally is conducted by a government body. plan for future expansion. A port authority may also be expected to monitor the performance of the port. coordinate policy making with local and national government bodies. Most private participation takes place in this element.statute. The key tasks a port landowner will need to undertake include:
managing and developing the port estate conceiving and implementing port policies and development strategies
• supervising major civil engineering works • providing and maintaining channels. 1999)
The third element is operations.
Essential elements are the freedom to recruit staff at competitive salaries and the existence of responsible financial management and accounting practices. certain aspects of port maintenance and electronic data processing systems. traffic control. hazardous vessels. mooring boats.
Since most ports are monopolies. the port will retain only certain key activities – a good example is the role of the harbour master and his office (responsible for the safety of navigation. the first major step in reform is to establish the port as if it were a commercial enterprise. The role of the private sector may be for stevedoring. The second step is to divide port functions into a number of areas – safety. another example is the responsibility for
. port operations and pricing – and to retain in the public sector only those areas necessary to ensure the safe functioning of the port. and other important tasks). with growing participation by private sector companies.•
to exert some control over pricing of port services (to ensure government receives a return on its investments and port profit levels are not excessive)
to act as the body representing the ports industry in discussions with government. investment and maintenance of major infrastructure. pilot boats). Eventually. superstructure investment and maintenance. security and environment.
At the local port authority level. port users and the public. the provision of floating craft (tugs. work boats. and for container and bulk terminal management and operation. simply transferring their activities to private enterprise without carefully designed and appropriate regulations could easily be against public interest.
Free trade zone related matters are controlled by the Administration of Dalian FTZ. one thing must be carefully considered. In port reform. and Incheon Port Authority will be established in 2005.maintaining dredged depths and channels (not doing the actual dredging. which is a stated-owned enterprise with the function of the former port authority. at Dalian Port. which is to introduce a competition system within a port in order to maintain the competitive position
. especially the introduction of a container terminal privatization system. The management of ports by the central government was transferred to the responsibility of municipal government.
In the case of the Republic of Korea. China began reform of their port management system in 2001. For example. Busan Port Authority as a state-owned enterprise was established in January 2004. port operation related matters are under the authority of the Dalian Port Corporation Limited. The government function was assigned to municipal governments while the enterprise function was granted to stateowned enterprise from early 2003. but managing the task and its implementation). They separated government function (or regulation) and enterprise management (or operation). and government related regulation matters are controlled by the Port Bureau of Dalian Municipal Government. These reforms in the Republic of Korea and China are aimed mainly at improvement of efficiency and productivity through overcoming the limits of the former port authority which was the government or state.
Ports must look outside their immediate jurisdiction as a focus of their future development. customer’s needs and to cope with rapidly the changing maritime environment. However. the existing labour union system. and some monopolistic terminal operators introduced terminal congestion charges. This may mean the loss of competitiveness of national export and import production. To increase terminal productivity modern quayside handling equipment has to be introduced. Such strategies fall within a perspective of port regionalization where a port seeks a closer integration with the supply chains of its hinterland. During the economic boom of 2003 and 2004 many ports suffered from terminal congestion due to the rapid increase in the number of containers. Many countries have faced or continue to face such unions which act as barriers to productivity improvement. Major factors to be considered in port management roles are as follows:
increase of private sector participation in the port development and operation
. which is usually monopolistic in terms of the supply of labour.and national strategic role of the port. Governments must pay careful attention to the need for port management organizations to change in order to meet national objectives and economic strategies. often refuses to accept reductions in the labour force and ignores the need to upgrade skills.
. private operators and users interrelated in port activities
strong leadership and initiatives to meet its long and short term strategies by persuading and negotiating national and local level of stakeholders
needs of industry cluster approach to ports as a whole including shipping industry and logistics industry
needs of promotion of port competitiveness and marketing strategy as a whole. expanding to the outside of its boundary as the importance of intermodalism grows
growing competition toward hub port and logistics centre and user’s demand for competitive services
• needs of coordination and cooperation among a variety of government organizations (such as customs.•
often conflicts between port sector and city sector port sector role moving beyond the physical port boundary. labour and security related public offices).
This means that ports have had to face many challenges due to unpredictable environmental changes and trends in the shipping. port and logistics industries.
.Chapter 3: Challenges & emerging issues concerning Port Industry
Challenges and emerging issues in port development:
A port is essentially a point where goods are transferred from one mode of transport to another. In an era of economic globalization ports are evolving rapidly from being traditional land/sea interfaces to providers of complete logistics networks.
such as: • globalization of manufacturing and outsourcing • global trends of logistics network restructuring and reposition of regional and/or local distribution centre • rapid growth in volume of world seaborne freight. especially container • emerging hub and spoke system in global shipping service • increase of transhipment cargo and competition among ports and terminal operators • introduction of the super mega size containership • increasing competition towards hub ports • emerging global terminal operators and their growing market share • one stop shopping concept and intermodal transport linking strategically between ocean. road and inland waterway • increasing role of ports in global supply chain management and logistics network structures
.railway.Most ports in the world have paid (or should pay) attention to these challenges and emerging issues.
private and public partnership.
. many ports have been carrying out port reforms such as port governancere structuring and deregulations.
To cope with these challenges and emerging issues ports across the world have been trying to develop their physical infrastructures. especially container terminals and related facilities. In addition. and to expand their port hinterland through introducing free trade zones with a hope of developing hub ports and international logistics centres.• increase of productivity and efficiency in ports
high cost and constraints for developing port facilities.