Benchmarking the Canadian Gateways and Corridors Governance by hcj

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									Transportation Summit 2011: Best Practices
Shaping Global Logistics, Vancouver, BC,
March 2-3 2011

              Benchmarking the Canadian
              Gateways and Corridors
              Governance Model
               Jean-Paul Rodrigue1 & Stephen Blank2
               1Associate Professor, Dept. of Global Studies & Geography,
               Hofstra University, New York, USA; Van Horne Researcher in
               Transportation and Logistics, University of Calgary, Canada

               2Adjunct Research Scholar, Center for Energy, Marine
               Transport and Public Policy, Columbia University; Senior
               Research Analyst, Arizona State University’s North
               American Center for Transborder Studies
Benchmarking the Canadian Gateways and
Corridors Governance Model


    • How does governance apply to
1     intermodal transportation?


    • Which governance criteria can be used
2     for benchmarking?


    • To what extent gateways and corridors
3     are an effective governance strategy?
      Intermodal Transportation: Emerging Paradoxes



Geographical and functional diffusion   Rationalisation (corridors and sites).
of containerization.
Massive investments.



New standards, practices and            Incremental changes.
technologies.                           Decreasing returns.
Increasing returns.



Consolidation (maritime, rail and       PPP. Supply chain control. Added-
trucking). Emergence of large           value-capture.
operators.
Main Causes of Public Divesture in the Transport
Sector


                             High
          Fiscal          Operating
        Problems            Costs
       (we’re broke)     (we have few
                          incentives)


          Cross-         Equalization
        subsidies         (everyone
        (profits are      must have
           spent           their fair
        elsewhere)          share)
     Governance and Supply Chains Don’t Match




  Logistics Chain 1          LC 2                 LC 3                Logistics Chain 4


Extraction      Processing          Fabrication          Assembly          Distribution          Retailing



   Transport Chain 1         TC 2                 TC 3              TC 4                  TC 5
           Governance and Intermodal Transport: Potential
           Benchmarks

Criteria         Economic Sector                  Intermodal Sector
Participation    Involvement of private capital   Access to intermodal assets (modes &
                                                  terminals) by the private sector
                                                  (national and foreign)
Transparency     Clear regulatory process         Available information about policies
                                                  and actors
Fairness         Consistent regulations           Policies in line with modal market
                                                  potential
Decency          Secure property rights           Secure ownership and operational
                                                  contracts
Accountability Measures for litigation            Intermodal operators complying to
                                                  policies
                                                  Terms for renegotiation
Efficiency       Limited compliance costs         Compliance costs below operating
                                                  revenues
 Transport Terminal Governance: Main Benefits and
 Issues

• Compliance /                                    • Monopoly /
  Accountability                                    Rent seeking



                     Public           Ownership

                                PPP


                   Operations          Private

• Performance /                                   • Profit /
  Productivity                                      Externalities
The Governance Setting of Gateways and Corridors:
Many Actors Supporting Functional Integration
 Maritime Freight Distribution        Transport Actors
                                  Maritime shipping companies
                                            (Private).
                                   Waterways and navigation
                                        channels (Public).


                                  Terminal operators (Private).
                                 Port operations (Port Authority).
                                  Land ownership (Public and
                                             Private).
          Gateways

                                 On-dock rail (Port Authority and
                                       terminal operators).
     Corridors and Hubs          Near-dock rail (Rail companies).
                                 Trucking and barging (Private).
                                  Roads and highways (Public).
                                   Rail lines (Rail companies;
  Inland Freight Distribution      ownership or right-of-way).
               Security Trumping Trade? Maritime Security
               Initiatives Implemented by The United States

Initiative                       Type              Year    Description

Automated Targeting System       Cargo screening   1999    Weighted model applied to inbound cargo manifests to assign risk
(ATS)                                                      factors.
Customs-Trade Partnership        Certification     2001    Transferring some of the Customs responsibilities to importers and
Against Terrorism (C-TPAT)                                 exporters to reinforce overall security levels. Benefits include reduced
                                                           likelihood that containers of participating firms will be examined.
Container Security Initiative    Cargo tracking    2002    Increasing security related to ocean going containers
(CSI)                            and screening             through the targeting and screening of high risk containers bound for the
                                                           US before they are loaded.
Megaports initiative             Cargo tracking    2003    Installation of radiation detection equipment in key foreign ports.
                                 and screening             Reducing the illicit trafficking of nuclear and other radiological materials.
24 hour rule                     Advance cargo     2003    Implementing the cargo-related information at least 24 hours before a
                                 information               container is loaded aboard the vessel at the last foreign port.
Standards to Secure and          Certification     2005    Implementing C-TPAT and CSI security practices with foreign trade
Facilitate Global Trade (SAFE)                             partners.
Importer Security Filling and    Advance cargo     2009    Implementing the collection of cargo-related information by requiring
Additional Carrier               information               information from both the importer (10 information elements) and the
Requirements (ISF, 10+2)                                   carrier (2 information elements) to be transmitted at least 24 hours
                                                           before the goods are loaded.
100% scanning                    Cargo screening   2012?   Non-intrusive inspection of 100% of all inbound cargo containers.
  Pressures for Governance: Vertical and Horizontal
  Integration in Port Development

             Horizontal          Vertical
             Integration       Integration
                                                             Maritime Services


                                             Inland
  Port                                        Port             Port Services

           Intermediate hub                                   Inland Services

                                    Terminal
           Port Holding                Port
                                       Rail / Barge
                                       Distribution Center



Maritime            Port Terminal         Inland Modes       Distribution
Shipping             Operations           and Terminals        Centers


                      Commodity Chain
     Governance Changes in Port Authorities: Competing
     over the Hinterland

Conventional Port Authority            Expanded Port Authority
              • Planning and
              management of port
              area.
              • Provision of
              infrastructures.

              • Planning framework.
              • Enforcement of rules
              and regulations.



             • Cargo handling.
             • Nautical services
             (pilotage, towage,
             dredging).
    Value Propositions behind the Interest of Equity
    Firms in Transport Terminals

                Sectoral and geographical asset diversification.
                Mitigate risks linked with a specific regional or
                national market.
                                Diversification
                            (Risk mitigation value)


             Asset                                      Source of income
       (Intrinsic value)                               (Operational value)
Terminals occupy premium                          Income (rent) linked with the traffic
locations (waterfront).                           volume.
Globalization made terminal assets                Constant revenue stream with
more valuable.                                    limited, or predictable, seasonality.
Traffic growth linked with valuation.             Traffic growth expectations result in
Same amount of land generates a                   income growth expectations.
higher income.
Terminals as fairly liquid assets.
                                Risk Transfer and Private Sector Involvement in
                                Public-Private Partnerships


                                                                                                 Privatization
Degree of Private Sector Risk




                                                                                       Concession

                                                                               D-B-F-M-Operate
                                 PPP Models




                                                                 Design-Build-Finance-Maintain


                                                               Build-Finance

                                               Operation & Maintenance

                                              Design - Build

                                                          Degree of Private Sector Involvement
      Privatization and Financing Models

Sale or          Divesture part of a political agenda (budget relief).
concession       Public sector is forced to sell or lease some of its infrastructures.
agreement        Infrastructure is transferred on a freehold basis.
                 Requirement; used for its initial purpose.
                 Long term lease (50 – 75 years).
                 Requirement that the concessionaire maintains, upgrade and build
                 infrastructure and equipment.
Concession for   Tap new sources of capital outside conventional public funding.
new project      Fiscal restraints.
                 Experiment with privatization.
                 Getting the latest technical and managerial expertise for the
                 infrastructure project.
Management       Ownership remains public.
contract         Management given to a private operator.
                 Through a bidding process.
                 Popular in the terminal operation business (maritime and rail).
                 Efficiency improvements.
         Typology of Global Port Operators

Stevedores                        Maritime Shipping                  Financial Holdings
                                  Companies
Horizontal integration            Vertical integration               Portfolio diversification
Port operations is the core       Maritime shipping is the main      Financial assets management is
business; Investment in           business; Investment in            the main business; Investment in
container terminals for           container terminals as a support   container terminals for valuation
expansion and diversification.    function.                          and revenue generation.
Expansion through direct          Expansion through direct           Expansion through acquisitions,
investment.                       investment or through parent       mergers and reorganization of
                                  companies.                         assets.
PSA (Public), HHLA (Public),      APM (Private), COSCO (Public),     DPW (Sovereign Wealth Fund),
Eurogate (Private), HPH           MSC (Private), APL (Private),      Ports America (AIG; Fund),
(Private), ICTSI (Private), SSA   Hanjin (Private), Evergreen        RREEF (Deutsche Bank; Fund),
(Private).                        (Private).                         Macquarie Infrastructure (Fund),
                                                                     Morgan Stanley Infrastructure
                                                                     (Fund).
Container Terminal Portfolio of the four Main Global
Terminal Operators, 2010
                    Top ten terminal operators: 65% of the world’s total
                    container handlings
The Governance of Gateways and Corridors is
Effective if it Reflects a Functional Reality
The North-American Container Port System and its
Multi-Port Gateway Regions


       4




                                  2



   1


                              3
                                      Multi-port gateway regions
                                      1. San Pedro Bay
                       6              2. Northeastern Seaboard
                                      3. Southwestern Seaboard
                                      4. Puget Sound
                                      5. Southern Florida
                                  5
                                      6. Gulf Coast
                                      7. Pacific Mexican Coast


            7
Major Rail Corridors Improved since 2000
Conclusion: Gateways and Corridors Governance in
a New Global Economic Setting

    • Growing complexity of supply chains and
      governance.
A   • The “last regulatory mile”.


    • Port authorities and terminal operators as active
      actors.
B   • Setting of functional corridors.


    • Finding value to capture and capital to finance.
    • Governance as a risk mitigation strategy.
C

								
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