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From barriers to trade to super
efficiency in 60 years
•   Ports fifty years ago were serious barriers to trade: inefficient, expensive, over
    manned and restrictive labour practices.

•   These problems gave incentives for radical changes - first mechanisation, and
    secondly port reforms, esp abolition of government monopolies and introduction of

•   Today general cargo is handled 20 times as fast, and at one third of the cost, of fifty
    years ago.

•   But in some countries misguided attempts at regulation have held the ports back.

• This talk will trace the steps via which the  port efficiency was transformed; and
    which reforms have worked best, and which less so.

•   In particular, it compares experience and policy in the UK with that abroad, where the
    ports are often more efficient
         IN THE UK
• 1947: Two years after WWII ended the UK government
  passed a law that ruined the UK’s ports for the next 42
• It introduced the National Dock Labour Board, which
  guaranteed dock workers minimum payments for a
  guaranteed number of working hours, even if they were
  not required; and it later gave the dockers jobs for life.
• There were good reasons for introducing it. It replaced
  the humiliating “On the Waterfront” / “You, you and you
  today” practices of the 1930s.
• But this version of monopoly labour turned out to be
  even more corrosive than monopoly in industry.
          IN THE UK
• After 1947 there were 20 years of over manning, strict demarcation
  rules, and strikes. Cost were rising fast, and productivity was low.
• Ports handled 1000 tonnes per metre of quay per year, only 5% of
  today’s throughputs. Ocean going ships spent 60% of their time in
  port and only 40% at sea
• 1966. An American trucker, Malcolm Maclean, experimented by
  detaching and loading the whole unit containing the cargo from the
  truck. And so containerisation was born.
• With containerisation , the jobs guaranteed by the NDLB were no
  longer needed. At this point, the UK had 65,000 registered dock
  workers but now needed only a small faction of this number.
• At the same time, the Government had taken over control of UK
  port investments over £0.5 million, via the National Ports Council,
  established in 1964, and lasted until 1980.
            IN THE UK
•   1966-1971. Over the five years the over manning and restrictive work
    practices brought the UK’s ports top two ports – London and Liverpool –
    into bankruptcy under the National Ports Council.
•   But there was another reason for the fall of the great British ports. The
    small port of Felixstowe built container terminals; and took a large part of
    London’s and Liverpool’s general cargo traffic.
•   1971-1989. The private port of Felixstowe enjoyed most of the container
    traffic and the other ports, mostly run by Port Trusts, languished under the
    burden of the NDLB’s jobs for life.
•    It was not until 1989 that the much needed reform was passed: Mrs
    Thatcher abolished the NDLB. By 1990 the number of dock workers had
    fallen from 65,000 in the sixties to under 10,000- despite traffic having
•   And two years later the top ports were instructed to privatise themselves.
•   We will return to this. But first let’s look at ports outside the UK, where most
    of our work had been over the years
•   Ports abroad had similar problems , although usually
    not as bad as the UK’s under the NDLB, Only a few
    other countries, including Pakistan, had such schemes.
    But many of them did have militant labour unions.
•   They, like the UK ports in the 1960s, were often highly
    inefficient, expensive, and plagued with over manning
    and restrictive labour practices. They:
    1. Made large losses
    2. Were a mess, littered with rubbish, rusty steel and mud; and
       they spawned shanty towns outside in developing countries
    3. Were barriers of trade in many countries – although in those
       days import substitution dominated economic policies
•   Most of the work abroad was in developing countries,
    and much was funded by World Bank and Asian
    Development Bank
•   It was straightforward work, of two main types:

    1. Building new modern port facilities that were sorely needed to
       support economic growth, applying the cost benefit principles
       of Little and Mirlees, and with lots of queuing theory and

    2. Making recommendations for operational improvements. It was
        standard practice to investigate how ports could get more out
        of the existing terminals before recommending new investment.
• The first was a great success, as the
  infrastructure was necessary.
• But the operational efficiency
  recommendations were often a waste of
• And then the good port construction
  projects ran out. They had all been built.
• At that low point, came the reforms that
  made the ports interesting again.
• There were three breakthroughs in the 1980s.

• 1 In the world of aid agencies, the World Bank and others switched
  to structural adjustment loans rather than loans for projects.

    The conditionality imposed on ports focused on:
         -abolition of government monopolies and
         -introduction of competition where possible
         -privatisation, usually in the form of granting concessions to run
         -deregulation of entry, investment and tariffs;
    There was now a general consensus on the desirability of the
    withdrawal of port authorities to a landlord role, with all operations
    carried out by private companies in a competitive environment.
2. The second big change was the rise of the
   International Terminal Operators (ITOs), who
   have taken over port operations in many
   countries throughout the world over the last 20

3. Thirdly, shipping lines started running
   terminals, usually very efficiently

4. Fourthly, the switch to export led growth meant
   that inefficient ports had to change.
•   The reforms were a great success. For example when India’s top port,
    Nhava Sheva, granted its first private concession it achieved productivity
    levels three times as high as at the state-run operations; and tariffs have
    often fallen sharply at the private ports.

•   And if we compare the long term productivity changes over the period
    1960-2000, they might be roughly as follows:
                                   1960s (a)         1995 (b)
    General cargo,000 tonnes
    handled per metre of quay      1000              20,000,

    % of ocean going ship time
    in port                          60%               25%

(a) in conventional general cargo vessels
(b) in the container vessels that now handle the general cargo
•   The UK’s reforms were rather different from those abroad.
•   The main difference was that they obliged the main ports to privatise
    themselves in an unusual way - lock stock and barrel in 1983 and 1991.
    The UK is the only major country to have privatised this way.
•   Almost all other countries – Germany, France, Japan, Italy, Spain, even the
    US, the standard bearer for free enterprise – have retained their public
    harbour authorities.
•   They did, however, increasingly adopt the Landlord model:, with all
    terminals run by the private sector.
•   The UK reforms seemed dogma driven, and had the unfortunate
    consequence that, to some extent, the new private companies often
    focused on property sales and financial dealing.
•   But the privatised UK ports performed reasonably well - at least for a time
•   The great advantage of the UK is that are enough ports around the coast to
    ensure INTER-port competition, which should be as effective as the INTRA-
    port competition
• Secondly, the UK ports became a victim of “regulatory creep” - by
  which the scope of government regulation is allowed to extend
  beyond its original purpose.
• In theory, UK port policy is to “leave the industry to market forces”.
  This policy was laid down by the conservative government in the
  1980s, and confirmed in 2000, and again in 2010
• But they have not been allowed to do so. In practice, the ability of
  the ports which have attracted traffic to build new berths has steadily
  come under the control of regulatory processes which have little to
  do with ports.
• The government has allowed these obstacles to “just grow”. In
  practice, port investment has been highly regulated, not by
  transport specialists but by planning inspectors.
• They are dominated by the Royal Society for Protection of Birds,
  and grouped together at one stage into Portswatch - whose other
  members are the Whale and Dolphin Conservation Society, the
  Campaign to Protect Rural England, the Marine Conservation
  Society, the Wildfowl and Wetlands Trusts, the Wildlife Trusts,
  Transport 2000, the Marine Conservation Society and Friends of the
• They pointed to the dangers of the shoreline of the UK being paved
  with concrete (in fact the total length of Britain’s deep sea container
  terminals is less than five miles, mostly in Felixstowe) and the effect
  on wildlife.
• Their manifesto referred to the “profound effects of ports on local
  communities who must live next door to the 24 hours a day, seven
  days a week port operations”.
• The objections of the environmentalists have obliged the port
  developers to go to planning inquiries. Once there, the obstacles to
  responding to market growth multiply.
• The remit of the inquiries goes much further than just weighing the
  relative merits of economic gains from the port expansion against
  environmental losses. The key stumbling block is that the planning
  inspectors now also have to decide whether there is “a need” for the
  port expansion.
• These planning enquires have effectively immobilised large parts of
  the ports industry.
• Dibden Bay, which was the largest new container terminal planned
  for many years, had been in the planning pipeline for 7 years before
  being turned down for environmental reasons.
• Its traffic growth was the highest of the main container terminals; but
  further expansion was ruled out.
• At one stage Hutchison - the world’s largest container terminals
  operator with worldwide interests, including ownership of Felixstowe
  and Thamesport - stated publicly that of the 16 countries in which it
  operates, the UK is the most difficult in terms of planning.
           REFORMS IN THE UK
•   Most of the obstacles and delays stem from environmental objections. And
    while environmental concerns are now rightly given great weight throughout
    the world, there is a common view that the UK’s environmental regulation is
    stricter than in other countries.
•   Many of the environmental rules originate in Brussels. But UK’s
    interpretation was said to be “gold plated” versions of the Brussels originals.
•   For example, Hutchison, the world’s largest container terminal operator,
    stated to the press that “the EU rules on Special Areas of Conservation
    (SACs) are applied more strictly in the UK than on the continent”.
•   In brief, the freedom of the ports to expand when necessary to handle the
    cargo they have attracted had been gradually eroded. The mantle of port
    regulator had been passed via regulatory creep to the planning
    inspectorate. It presided over planning inquiries in which environmental
    interests have made clear gains over economic interests. Their limited
    experience of ports combined with their focus on land use planning meant
    that the ports industry was effectively controlled via the procedures for land
    use decisions.
           REFORMS IN THE UK
The results of this regulatory apparatus are that:

•   There has been a deficit of capacity in some years.
•   The lack of surplus UK capacity has limited competition, and container
    handling speeds have fallen badly. A major shipping line’s statistics showed
    the following average handling speeds in 2008 for ships on the Far East
•          (Moves per crane hour)
•   Belgium        33
•   Germany        28-30
•   Rotterdam      25
•   Southampton 22
•   Felixstowe     19
•   Le Havre       19
•   The transhipment business that used to account for 25% of UK container
    traffic has been lost to European ports,
Aware that the planning procedures were
 out of control, the government set up an
 Infrastructure Planning Commission in
 2009 and issued a National Policy
 Statement for ports to speed up decision

But if a new Conservative government is
 elected his year it will scrap it.
Ports have made great progress worldwide in the last 30 years,
But government involvement has often been counterproductive, especially in
   the UK, where:
• The introduction of the NDLB in 1947 undermined UK ports for the next 42
• The government’s National Ports Council took control of national port
   planning and investment between 1964 and 1980 but saw the country’s top
   two ports going bankrupt on their watch.
• The privatisations of the ports wholesale via the acts of 1983 and 1991
   resulted in less competition between terminals than abroad, where the
   public landlord port authority usually presides over several competing
   terminals. The UK container port business has remained a duopoly.
• The undermining of the supposedly market driven UK ports industry by
   regulatory creep in the period 2010 has resulted in no container terminals
   being built for a decade.
• The results have included (i) a deficit of capacity in some years, (ii)
   productivity well below NW European levels (iii) and loss of the
   transhipment business that used to account for 25% of UK container traffic.

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