Case Study

Problems with Ports

1. What are the main differences in the barriers and risks faced by
foreign firms in the Japanese port system compared to Kenya's
Mombasa?

The Japanese System:

The Japanese system has a near-monopoly power of the Japan Harbor

Transportation Association (JHTAI. At its height the JHTA was a cartel of
2,000 member organizations encompassing the waterfront services
(stevedoring, cargo handling, and transfer documentation) across 130
ports in Japan.

The JHTA was (and continues to bet responsible for two kinds of anti-
competitive practices.

First, the system of prior consultations between shipping companies and

the labor unions of cargo-handling companies takes place via JHTA.
Foreign firms cannot select which firm handles their cargo on the basis of
quality or cost; JHTA chooses for them. It also controls schedule changes,
changes in berths and route calls, centrally regulating and slowing down
the entire process. There is no formal documentation, application, or
appeals procedure; the system operates through informal lobbying.

Second, licensing requirements for technical operators and stevedoring

firms act as barriers to foreign firms (and to non-cartel Japanese firms)
entering the market. Foreign firms cannot perform stevedoring or port
services for themselves, or appoint third parties without the consent of
JHTA.
The Kenyan System:

Different problems concern port users including, according to one study,

security and theft; bureaucratic forwarding and clearing procedures (cost
increases due to procedural delays); customs and excise harassment
(leading to corruption, otherwise further delays); obsolete, poorly
maintained port handling and lifting equipment (leading to further delays);
high tariffs for poor service; and just plain corruption, in that order.

2. Why is it difficult for foreign firms to challenge these unfair

practices in either Kenya or Japan?

Because of the power of cartels and the difficulties unwinding the complex
relationships between the government and the private sector.

3. How could a manager looking to use these ports minimize the risk
and uncertainty created by local ways of doing things?

The uncertainty for foreign managers unfamiliar with these local rules
of the game is increased by the constant change in key officials and
their political affiliations. Moreover, bribing the wrong person not only is
a waste of money, but also can create big problems for anyone caught
"
playing the game" during sporadic government crack-downs.

I think the manager should hire one of the local people who knows
about these matters and have experience in ports business in that
country.