Port Policy: Key Design Issues & Impact

Transcription

1 Port Policy: Key Design Issues & Impact Aden Wong Senior Consultant Ports & Terminals

2 About Drewry Drewry is a leading international provider of research and consulting services to the maritime and shipping industry with unrivalled experience and expertise across all market sectors from containers and ports to tankers and dry bulk. From our origins in 1970 London to a 21st century maritime and shipping consultancy, Drewry has established itself as one of the most widely used and respected sources of impartial market insight and industry analysis. This indepth understanding and objectivity provides our clients with the actionable advice and recommendations they need to achieve their ambitions and stay ahead of the market. We provide our services through four business units: Drewry Maritime Advisors supporting the needs of the industry; Drewry Supply Chain Advisors providing seafreight procurement support to retailers and manufacturers; Drewry Maritime Research publishing market-leading research on every key maritime sector; and Drewry Maritime Equity Research delivering an Investment Research Service on listed companies operating in the industry. SPEAKER S CONTACT DETAILS Aden Wong Senior Consultant T: M: E: aden@drewry.co.uk 2

3 Part I Port Policy Framework 3

4 Significance & Objectives of Port Policy Port Policy plays a critical role in supporting the wider Maritime Policy and its linkages to other key national policies on policies, transport and security. What is Port Policy? Port Policy is a set of actions that is designed, undertaken and enforced by the Ministry of Transport (MOT) and its port authorities on the country s port sector. It encompasses all aspects of the port sector from institutional structure to issues on labor, environment and competition is critical to enabling the strategic goals of the MOT. Port Policy must be viewed in the context of a larger environment. It is a subset of the country s Maritime Policy, which in turn is interdependent with other key national policies on industry, transport and security. Why is it Important? To solve policy problems in the port sector (ie. Reduce negative externalities or increase positive externalities) where the private sector is not incentivized or in a position to provide solutions. To attract the desired level of foreign investments to advance the port sector and its interdependent industries. To ensure sufficient port capacity in the long run to serve the needs of the local population and industries. A Policy is only as good as its implementation But the benefits it bring can only be extended as far as its design 4

5 Thinking Model The Maritime Policy plays a key role in enabling other strategic national objectives. As such, a Whole-of-Government thinking approach must be adopted when performing policy design. NURTURE Maritime Policy ENABLE Local Maritime Community Port Operators Shipping Companies Logistics Providers Shipping Agents Freight Forwarders Ship Chandlers Maritime Law Firms Maritime Insurance Firms Ship Brokers Ship Charterers Maritime Researchers Marine Equipment & Supplies Providers Marine Contractors Shipbuilders Dredging Companies Pilots & Towage Service Providers International Policy Port Policy Port Development Port Regulation Customs Efficiency & Transparency SUPPORT Quality of Hinterland Connections Strategic National Objectives Development of Industrial Zones & Manufacturing Clusters Establishment of New Trade Agreements Connectivity to International Markets and Sources of Supply Creation of New Urban Areas Incubation of Local Maritime Players Growth in Related Industries: Offshore & Marine Oil & Gas Petrochemicals Availability of Skilled Labor 5

6 Port Policy Framework The Port Policy Framework consists of 2 dimensions development and regulation and 8 policy areas that collectively shapes the advancement of the port sector. To ensure adequate port capacity in both the near and long terms, and the appropriate model to finance such development in a sustainable manner. The institutional structure is the most vital Port Policy area. it addresses fundamental questions on ownership and roles, and determines the degree of foreign investments. PORT DEVELOPMENT The institutional structure is usually designed in consideration of other policy areas such as competition, capacity planning & financing, productivity and tariffs. To regulate the tariff levels to ensure the financial viability of port investments while protecting the interests of the local trade and maritime communities. 6 Institutional Structure Legal Framework Asset Ownership Division of Roles Capacity Planning & Financing Tariff Management Competition Management Port Policy Productivity Management To manage the degree of competition in respective port zones and ensure fairness in treatment among concession holders. Labor Readiness Management Environmental Impact Management Security & Risk Management To ensure the availability and quality of port labor through labor pool growth and training. Collaboration with Manpower and Education ministries required. To ensure that EIAs are carefully enforced, ports are designed with Green objectives in mind and port emissions regulated. PORT REGULATION To ensure that proper security and risk mitigation measures are in place for ports and key approaches. Collaboration with Port Operators and Defence agencies (Immigration, Customs, Navy) required. To ensure that ports are managed efficiency so as to make the best use of limited waterfront land (maximize value added per hectare) and to entrench connectivity.

7 Part II Key Policy Design & Implementation Issues 7

8 Problems & Root Causes Policy Solutions are only effective when they address the root causes of problems. Good policy making increases investor confidence and reduces inefficiencies in capacity development. Sample Problem Root Cause Analysis Excess Capacity Poor Demand Market Share Loss To Competition Poor Port Utilization Poor Location Excessive Development Global/Regional Downturn Industry Underperformance Poor Productivity Incompatible Infrastructure Poor Hinterland Connectivity Poor Selection Methodology Land Rights Issue Poor Planning Parameters Poor Strategy Insufficient Budget Skilled Labor Gap Lack Automation Labor Issues Poor Processes Congested Roads Inefficient Intermodal Unreliable Service Provision Protection of Other Interests Poor Interagency Communication Protection Of Other Interests Incompatible Education System Lack of Incentives Low Wages Monopolistic Power Budget Limitations Lacks Regulation Broad Approach: Thinking Points Step #1: Dig deeper into any port sector problem an uncover the possible list of root causes. Step #2: Prioritize root causes and overlay with authorities span of control Step #3: Segment, test, refine and roll out. Impact: Addressing the right root causes is the cornerstone to good policy making. This increases investor confidence and ensures continuous improvement in the port sector. Root cause analysis also encourages cross-department solution derivation within the government, hence reducing inefficiencies in over/under provision of capacity. 8

9 Funding & Sustainability Sustainability and efficiency are keys in the provision of key port infrastructure and services. Authorities need to keep these in mind when designing development and operating models. Split in Responsibilities? Thinking Points Fundamental Questions: i. Is the infrastructure/service critical? Common Goods & Services Provision Sustainability? Generate Returns Ministry of Transport / Port Authorities ii. iii. iv. Can market forces lead to efficient provision? How can the government finance the provision in a fair and sustainable manner? How can the government manage the provision efficiently? Port Infrastructure Development Non-Port Infrastructure Development Fund / Incentivize Private Sector Other Government Departments / SOEs Impact: The port sector s indirect economic impact on sectors like mining, manufacturing and construction cannot be understated. Inadequate port infrastructure, poor logistics networks and port labor issues can each bottleneck industrial growth in the hinterland. Sustainability is key in the provision of key port infrastructure and services, along with efficiency considerations. 9

10 Fairness Fairness takes the forms of equality among players and getting users to pay for what they use. Fairness in port policy making ensures sustainable solutions and attracts investments. Competition Landscape User Based Financing SOE Operators Supply Knowledge workers Port Operators & Port Service Providers Supply Skill-Based workers Access to Opportunities Selection Process Concession Terms Tariff & Cost Items Regulations Pay Skill Development Levy Ministry of Transport Co-create Programs & Subsidize Fees Foreign Operators Local Operators Universities & Colleges Private Sector Training Provider Thinking Point: Fairness in policy making ensures sustainability by letting market forces work to produce efficient and good solutions. Impact: The port sector becomes more attractive to foreign/local investors, hence accelerating the pace of development required to establish a reliable gateway for hinterland consumers and industries. 10

11 Capacity Development When developing new port capacity, port authorities need to achieve clarity in the planning parameters of system, pace, size and model to avoid inefficient use of resources. Thinking Points Pace Development to Manage Utilization. Manage Utilization to Increase Port Attractiveness. Private Sector pursues profits. Government enables and regulates. Pace Model System Size Create Supply when there is Demand. A Node must have Spokes. Not all Ports are Hubs. Avoid Vanity Projects. Move away from Max-Sizing and towards Right-Sizing. Common Mistakes and Impact: Port is developed without corresponding growth in the hinterland. Underutilization leads to large opportunity costs. Port is developed without proper road and rail connectivity. Underutilization leads to large opportunity costs. Hinterland congestion kills port attractiveness. The port is developed too quickly. Sharp fall in utilization leads to destructive competition. Port development is delayed. Congestion builds and port loses reputation and connections. Port is built to handling largest vessels, but continues to handle small feeders. Excessive provision leads to wastage. Port Authorities demand concession terms that eliminates profitability, while maximizing control. Private sector interest in port declines, leading to delay in development. 11

12 Part 3. Final Remarks 12

13 Final Remarks Good port policy design and implementation is key to fulfilling the true potential of emerging economies port sectors and their interdependent industries. The port sector is a complex sector given its interdependence with other key industries and areas of national importance The port policy/strategy formulation process must include: i. A broader and more extensive scan on the macro environment ii. iii. iv. A deeper root cause analysis on key policy issues More inclusive policy solutions that are premised on collaboration across agencies A policy/strategy implementation plan with good accountability and sufficient political support and leadership Throughout the process, clarity is key. Port Authorities must possess: A clear and fixed mission (No moving targets) A clear view on its financial and economic objectives (Cover long term cost / maximize profits / maximize economic activities) A clear set of roles and responsibilities An efficient, right sized port gateway will promote growth in other industries such as manufacturing, and hence plays a key role in helping emerging economies reach their potential. To achieve this end, good port policy design and implementation is most critical. 13

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