Labor Toolkit

Alternative Port Management Structures and Ownership Models

Port Functions, Services, and Administration Models

Ports produce a combination of public and private goods. Public goods include those that are inherently nondivisible and nonconsumable, such as public safety, security, and a healthy environment on the one hand, and coastal protection works necessary to create port basins on the other hand. Private goods are both consumable and divisible and their use entails a minimum of economic externalities.

Most of the value of private goods can be captured in market transactions between private parties. However, a substantial portion of the value of public goods cannot be captured in arms-length transactions. Consequently, private firms have little incentive to produce them. Public goods create positive externalities when they are used; the social benefits they generate are greater than the price that private parties can charge for them. Thus, some form of public intervention is appropriate in their production to make certain that an adequate level of public goods is maintained.

Ports represent a mix of public and private goods. They generate direct economic benefits (private goods) through their operations, as well as additional indirect benefits (public goods) in the form of trade enhancement, second order increases in production volumes, and collateral increases in trade-related services. These “economic multiplier effects” have been used by many ports to justify direct public sector investment. It is in this dual production of both public and private goods that complexities arise, which makes defining roles for and boundaries between the public and private sectors challenging in the ports industry. This is particularly the case in the fields of marine and port safety, port security, and the protection of the marine environment. Box 3 lists a number of areas where ports generate economic multiplier effects.

Both through targeted development policies and the unplanned growth of interrelated industries, many ports have become the location for industrial clusters. Industrial clusters are geographic concentrations of private companies that may compete with one another or complement each other as customers and suppliers in specialized areas of production and distribution. Industrial clusters represent a kind of value chain, a web of interrelated activities that are mutually supportive and continuously growing. Clustering of related activities improves the competitive advantage of cluster participants by increasing their productivity, reducing transaction costs among them, driving technological innovation, and stimulating the formation of new business spin-offs.

Large ports offer particularly attractive locations for seed industries and distribution-intensive enterprises. Several notable port-centered industrial clusters have developed over the last 50 years, for instance, those in Dubai, Colon, Norfolk, Rotterdam, Yokohama, Antwerp, Hamburg, Marseilles, and Houston, to name but a few. From the 1950s, the larger European ports targeted refineries and chemical industries for colocation and codevelopment, with considerable success. Thus, for example, a large cluster of five refineries and many chemical-processing companies located in the Port of Rotterdam as a direct result of public policies developed in 1950s. A cluster of world-class, specialized marine services likewise established themselves in the Port of Rotterdam as a result of the good hinterland connections and the gas and oil finds in the North Sea. Another example of cluster development is the Port of Colombo; a fashion goods and apparel industry cluster has developed around Colombo, which focuses on reliable, short-transit container services to complete just-in-time (JIT) purchase orders. This development was business-driven and not the direct result of explicit public policy. The lesson demonstrated in Colombo is that quasi-public goods in the form of efficient industrial networks can be created and developed through private initiatives.

As a matter of strategic development policy, many ports encourage the codevelopment of various value-added services through franchising, licensing, and incentive leasing. Today, ports seek to attract enterprises that extend their logistics chains or provide them with specialized capabilities to add value to cargoes that are stored and handled in the port. General services that many ports attempt to develop include chandlering, ship repair, container maintenance, marine appraisals, insurance claims inspections, and banking. Box 4 describes the efforts of one port to expand and develop its ensemble of value-added services.

Many governments are directly or indirectly involved in port development. They often use a “growth pole” argument to justify the direct financing of basic port infrastructure. This growth pole rationale derives from the belief that investments in port assets have strong direct and indirect multiplier effects on the entire national economy and, further, that the commitment of public resources is necessary to encourage coinvestment by the commercial and industrial sectors. These sectors are thus stimulated to make investments that they would not make in the absence of public seed investment in port infrastructure. However, determining causal links between public investment and specific commercial activities and investments is difficult and at times speculative. Still, it is important that governments envision and articulate future development scenarios, maintain frequent consultation with the private sector, and implement public policies that are applied consistently and that enable the private sector to invest with confidence in projects that support the stated public policy objectives.

On the other hand, port operations are businesses in their own right and should be managed to achieve optimal utilization of capital. Investments in port assets are affected by risk, competition for land and capital, or other factors in the competitive business environment. Subsidies and government-provided incentives distort the allocation of resources for port development and may result in over- or underinvestment.

It is the delicate alignment of public and private interests that determines the structure of port management and port development policy. A full spectrum of institutional frameworks is available, differing primarily in where the boundary line is drawn between the public and private sectors. At one end of this spectrum, full public control over planning, regulation, and operations results in a “service port.” At the other end, the almost total absence of public ownership, control, or regulatory oversight results in a “fully privatized port.”

In a clear trend, the alignment of public and private interests in recent years has resulted in a diminishing role for governments in the port industry. The total absence of public involvement in the port sector, however, still remains an exception, limited primarily to specialized ports and terminals.

When governments attempt to increase national economic welfare through port development, they may choose to apply one of two distinct normative frameworks: the market surrogate framework or the public interest framework. In seeking to increase economic welfare, governments may attempt to remedy market imperfections and capture nonmarket externalities within appropriately engineered and contested transactions. Alternatively, they may pursue explicit goals developed through public consultative processes designed to determine demand for public goods.

With respect to the market surrogate framework, the primary task of government is to identify and eliminate market imperfections and anticompetitive behavior or to regulate its undesired effects. For example, competition “for the market” can replace competition “in the market,” and competition “for the market” can be engineered into contestable offers of rights in ways that assure procompetitive outcomes.

It follows that one of the objectives of public policy should be to create contestable market structures for port services and to manage competitive behavior. This might be accomplished through licensing, leasing, concessioning, or other methods designed to bring about an efficient allocation of resources. The market surrogate view is followed in most countries with market-oriented economic policies.

The need for some form of government intervention in markets for port services is related to the unique economic characteristics of seaports, some of which tend to make them natural monopolies:

This set of characteristics is the main reason for financial involvement of governments in port construction and expansion projects.

Interaction with Port Cities

Ports and the cities of which they are a part interact across many dimensions: economic, social, environmental, and cultural. Any port reform process should take into account the linkages between city objectives and the port objectives. Transport integration—the smooth transfer of cargo and equipment from land to water-borne systems—is an essential port function, but it does not take place in isolation. A seaport node within a multimodal transport system is frequently associated with the development of an urban center and generates substantial employment, industrial activity, and national and regional development.

Many big cities trace their roots to the establishment of a port. This does not mean, however, that the port will be extended at the place where it was originally founded. Antwerp and Rotterdam are examples of ports that developed relatively close to the cities’ central cores. Over time, however, they shifted operations away from city centers. The underlying reason was the increase in ship sizes (requiring deeper drafts and longer berths). Another reason contributing to the weakening of links between port and city centers is the rapid mechanization and specialization of port work and the accompanying increase in the operational scale and scope. These shifts led to increased storage space requirements and make ports very spaceintensive.

Another factor is the rapid industrialization of most developed country cities. The new industries emerging after World War II required large areas of land, preferably close to deep water, which often could not be found within the original port borders. Therefore, Maritime Industrial Development Areas (MIDAs) were located at some distance from old city centers.

Technological changes and consequential port relocation have left substantial areas available for redevelopment for other purposes. Such areas are often located near city centers because that is where the port (and city) began. Therefore, land values are potentially high, although probably depressed prior to redevelopment because of the presence of decaying port facilities.

Three approaches commonly have been used for the development of surplus port land:

Finally, the interests of ports extend beyond local traffic and transport. Hinterland connections, nationally and internationally, rely on road, rail, and waterway links. Both the port authority and the port city should use their influence to establish needed intermodal infrastructure and agreements. In addition, the port authority and the port city should collaborate to efficiently accommodate traffic flows and limit transport costs (including external costs).

Role of a Port Authority

Ports usually have a governing body referred to as the port authority, port management, or port administration. Port authority is used widely to indicate any of these three terms.

The term port authority has been defined in various ways. In 1977, a commission of the European Union (EU) defined a port authority as a “State, Municipal, public, or private body, which is largely responsible for the tasks of construction, administration and sometimes the operation of port facilities and, in certain circumstances, for security.” This definition is sufficiently broad to accommodate the various port management models existing within the EU and elsewhere.

Ports authorities may be established at all levels of government: national, regional, provincial, or local. The most common form is a local port authority, an authority administering only one port area. However, national port authorities still exist in various countries such as Tanzania, Sri Lanka, Nigeria, and Aruba.

The United Nations Conference on Trade and Development (UNCTAD) Handbook for Port Planners in Developing Countries lists the statutory powers of a national port authority as follows (on the assumption that operational decisions will be taken locally):

Increasingly, central governments implement seaport policies through the allocation of resources rather than through the exercise of wide-ranging regulatory powers.

While central governments should pursue macroeconomic objectives through an active seaport policy, port authority objectives should be more narrowly focused on port finances and operations.

It is a widely accepted opinion among port specialists that a port authority should have as a principal objective the full recovery of all port-related costs, including capital costs, plus an adequate return on capital. The full recovery of costs will help a port authority to:

Full cost recovery should be viewed as a minimum port authority objective; once this objective has been achieved, however, the port authority can pursue other-than-financial objectives considered desirable by the government or by itself.

Role of Port Operators

Just as central governments and port authorities play key roles in the port communities, so too do private port operators (such as stevedoring firms, cargo handling companies, and terminal operators). Port operators typically pursue conventional microeconomic objectives, such as profit maximization, growth, and additional market share. Only if port operators are free to pursue such objectives can the benefits of a market-oriented system be achieved.

Roles of a Transport Ministry

In a market-oriented economic system, the ministry of transport typically performs a variety of functions at a national level. With respect to coastline and port issues, the main tasks and responsibilities of the ministry can be summarized as follows:

In many countries, transport directorates are established as independent bodies within a ministry and perform an executive function. They are usually responsible for one of the modes of transport, for example, the maritime and ports directorate (maritime administration). The principal elements of a typical maritime and ports directorate are:

Port Functions

Within the port system, one or more organizations fill the following roles:

In view of the strategic significance of land, port property is rarely sold outright to private parties because of its direct and indirect effects on regional and often national economy and public welfare, its intrinsic value, and possible scarcity. Therefore, a key role for many port authorities is that of the landlord with the responsibility to manage the real estate within the port area. This management includes the economic exploitation, the long-term development, and the upkeep of basic port infrastructure, such as fairways, berths, access roads, and tunnels.

Port authorities often have broad regulatory powers relating to both shipping and port operations. The authority is responsible for applying conventions, laws, rules, and regulations. Generally, as a public organ it is responsible for observance of conventions and laws regarding public safety and security, environment, navigation, and health care. Port authorities also issue port bylaws, comprising many rules and regulations with respect to the behavior of vessels in port, use of port areas, and other issues. Often, extensive police powers are also assigned to the port authority.

The planning function of the port authority in coordination with the municipality is a complicated affair, especially for large ports located within or near a city. The port planner has to consider:

Actual port services and balancing of supply and demand occur at the levels of the port authority and individual port firms. Hence, the development of realistic investment projects for infrastructure and superstructure should be initiated at these levels. Investment plans of industrial and commercial port operators or projects for specific cargo handling, storage, and distribution should be integrated at the level of the port authority to arrive at a strategic master plan for the port. The individual master plans may then be integrated into a national seaport policy, taking into account macroeconomic considerations. Integration of individual master plans will help to avoid duplication of expensive, technologically advanced facilities when different ports in a national system strive to attract the same customers as well as ensure the selection of the appropriate locations for specific seaport facilities that will interconnect maritime and land transport systems.

To conclude, central governments should establish a national port policy that supports national economic objectives and creates a reasonable framework for port development. The development of plans for specific port projects, however, should remain in the hands of port operators.

Oversight of nautical operations should be within a port authority’s mandate and is often referred to as the harbormaster’s function. It generally comprises all legal and operational tasks related to the safety and efficiency of vessel management within the boundaries of the port area. The harbormaster’s office allocates berths and coordinates all services necessary to berth and unberth a vessel. These services include pilotage, towage, mooring and unmooring, and vessel traffic services (VTS). Often, the harbormaster is also charged with a leading role in management of shipping and port-related crises (for example, collisions, explosions, natural disasters, or discharge of pollutants). In view of its general safety aspects, the harbormaster’s function has a public character.

The cargo handling and storage function comprises all activities related to loading and discharging seagoing and inland vessels, including warehousing and intraport transport. A distinction typically is made between cargo handling on board of the vessel (stevedoring) and cargo handling on shore (landside or quay handling). Terminal operators can fulfill both roles.

There are typically two types of cargo handling and terminal operating firms. The more common structure for terminal operating firms is a company that owns and maintains all superstructures at the terminal (for example, paving, offices, sheds, warehouses, and equipment). Other firms only use the superstructure or equipment that is owned by the port. Such firms typically only employ stevedores or dock workers and have virtually no physical assets.

The port marketing and promotion function is a logical extension of the port planning function. Port marketing is aimed at promoting the advantages of the entire port complex for both the port authority to attract new clients and for the port industry to generally promote its business. This type of broad marketing is distinct from customer-oriented marketing that is aimed at attracting specific clients and cargoes for specific terminals or services.

A variety of ancillary functions such as pilotage, towage and ship chandlering, fire protection services, linesmen services, port information services, and liner and shipping agencies exist within the port community. Large port authorities usually do not provide these services, with the possible exception of pilotage and towage. In a number of smaller ports, however, these are part of the port authority operations because of the limited traffic base.

Port Administration Models

A number of factors influence the way ports are organized, structured, and managed, including:

Four main categories of ports have emerged over time, and they can be classified into four main models: the public service port, the tool port, the landlord port, and the fully privatized port or private service port.

These models are distinguished by how they differ with respect for such characteristics as:

Service and tool ports mainly focus on the realization of public interests. Landlord ports have a mixed character and aim to strike a balance between public (port authority) and private (port industry) interests. Fully privatized ports focus on private (shareholder) interests.

Service Ports

Service ports have a predominantly public character. The number of service ports is declining. Many former service ports are in transition toward a landlord port structure, such as Colombo (Sri Lanka), Nhava Sheva (India), and Dar es Salaam (Tanzania). However some ports in developing countries are still managed according to the service model. Under it, the port authority offers the complete range of services required for the functioning of the seaport system. The port owns, maintains, and operates every available asset (fixed and mobile), and cargo handling activities are executed by labor employed directly by the port authority. Service ports are usually controlled by (or even part of) the ministry of transport (or communications) and the chairman (or director general) is a civil servant appointed by, or directly reporting to, the minister concerned.

Among the main functions of a service port are cargo handling activities. In some developing country ports, the cargo handling activities are executed by a separate public entity, often referred to as the cargo handling company. Such public companies usually report to the same ministry as the port authority. To have public entities with different and sometimes conflicting interests reporting to the same ministry, and forced to cooperate in the same operational environment, constitutes a serious management challenge. For this reason, the port authorities and cargo handling companies of Mombasa, Kenya, and Tema and Takoradi, Ghana, were merged into one single entity.

Tool Ports

In the tool port model, the port authority owns, develops, and maintains the port infrastructure as well as the superstructure, including cargo handling equipment such as quay cranes and forklift trucks. Port authority staff usually operates all equipment owned by the port authority. Other cargo handling on board vessels as well as on the apron and on the quay is usually carried out by private cargo handling firms contracted by the shipping agents or other principals licensed by the port authority. The Port of Chittagong (Bangladesh) is a typical example of the tool port. The Ports Autonomes in France are also examples, in particular the container terminals, which are managed and operated along the principles of the tool port, although for more recent terminals the private terminal operators have made the investment in gantry cranes. This arrangement has generated conflicts between port authority staff and terminal operators, which has impeded operational efficiency.

The above-mentioned division of tasks within the tool port system clearly identifies the essential problem with this type of port management model: split operational responsibilities. Whereas the port authority owns and operates the cargo handling equipment, the private cargo handling firm usually signs the cargo handling contract with the shipowner or cargo owner. The cargo handling firm however, is not able to fully control the cargo handling operations itself. To prevent conflicts between cargo handling firms, some port authorities allow operators to use their own equipment (at which point it is no longer a true tool port). The tool port has a number of similarities to the service port, both in terms of its public orientation and the way the port is financed.

Under a tool port model, the port authority makes land and superstructures available to cargo handling companies. In the past, these companies tended to be small, with few capital assets. Their costs were almost entirely variable. The cost of underuse of port facilities was usually absorbed by the port authority, which minimized risk for the cargo handling companies. Often, the provision of cargo handling services was atomized, companies were small with activity fragmented over many participants. The lack of capitalization of the cargo handling companies constituted a significant obstacle to the development of strong companies that could function efficiently in the port and be able to compete internationally.

However, with the above in mind, a tool port does have its advantages, particularly when it is used as a means of transition to a landlord port. Using the tool port model as a catalyst for transition can be an attractive option in cases where the confidence of the private sector is not fully established and the investment risk is considered high. A tool port may mitigate this by reducing initial capital investment requirements. Another example could include a government looking to expedite port reform initiatives, but requires extensive amounts of time for legal statutes to be established. Laws and regulations for establishing a tool port may be less extensive since no state assets are being transferred to the private sector, and therefore make it an easier model to adopt in the first phase of reform.

Landlord Ports

As noted, the landlord port is characterized by its mixed public-private orientation. Under this model, the port authority acts as regulatory body and as landlord, while port operations (especially cargo handling) are carried out by private companies. Examples of landlord ports are Rotterdam, Antwerp, New York, and since 1997, Singapore. Today, the landlord port is the dominant port model in larger and mediumsized ports.

In the landlord port model, infrastructure is leased to private operating companies or to industries such as refineries, tank terminals, and chemical plants. The lease to be paid to the port authority is usually a fixed sum per square meter per year, typically indexed to some measure of inflation. The level of the lease amount is related to the initial preparation and construction costs (for example, land reclamation and quay wall construction). The private port operators provide and maintain their own superstructure including buildings (offices, sheds, warehouses, container freight stations, workshops). They also purchase and install their own equipment on the terminal grounds as required by their business. In landlord ports, dock labor is employed by private terminal operators, although in some ports part of the labor may be provided through a portwide labor pool system.

Fully Privatized Ports

Fully privatized ports (which often take the form of a private service port) are few in number, and can be found mainly in the United Kingdom (U.K.) and New Zealand. Full privatization is considered by many as an extreme form of port reform. It suggests that the state no longer has any meaningful involvement or public policy interest in the port sector. In fully privatized ports, port land is privately owned, unlike the situation in other port management models. This requires the transfer of ownership of such land from the public to the private sector. In addition, along with the sale of port land to private interests, some governments may simultaneously transfer the regulatory functions to private successor companies. In the absence of a port regulator in the U.K., for example, privatized ports are essentially self-regulating. The risk in this type of arrangement is that port land can be sold or resold for nonport activities, thereby making it impossible to reclaim for its original maritime use. Moreover, there is also the possibility of land speculation, especially when port land is in or near a major city. Furthermore, sale of land to private ports may also sometimes raise a national security issue.

The U.K. decided to move to full privatization for three main reasons:

Box 5 summarizes the strong and weak points of the principal port management models. Box 6 outlines the sectors (public or private) and their various responsibilities under the four basic port management models.

Globalization of Terminal Operations

Port authorities are increasingly confronted with the globalization of terminal operations. During the 1990s, a number of terminal operators and major shipping lines merged to invest in and take control of a large number of terminals all over the world. This trend has far reaching consequences for the strategic position of port management in relation to some of their major clients.

This trend toward globalization has affected mainly containerized operations. Today, a handful of major carrier alliances and independent terminal operators increasingly dominate the major global container trades. The global carriers have sought to secure their competitive positions by concluding long-term contracts for dedicated container terminals in major, strategically located ports. Their reasoning is that they believe they need to control all stages of the transport chain to remain competitive. These efforts to establish integrated transport chains pose a challenge for port authorities in their relations with the larger carriers. For example, how should a port respond if a large container operator demands to operate a dedicated terminal and threatens to leave the port when it does not get its way?

It should be emphasized that full control of the transport and logistics chain by one consortium (a global monopolist) is not a desirable development. Because of regulatory measures by the United States and the EU, the complexity of the transport and logistics chain, and the number of players, a carrier’s ability to control of the full chain seems like an illusion. However, some alliances may attain a significant degree of market dominance. Box 7 lists the fleets of the major container carriers, showing the number of vessels operated, the capacity expressed in TEUs, and the number of vessels under construction.

The container shipping market is still much commoditized compared to other industries (energy, rail, and the like) with global market shares of the largest carrier not exceeding 18–19 percent (2005). However, the carrier industry, as well as the terminal operator industry, is moving toward greater consolidation and larger global players and operators are emerging.

Competition between major carriers is intense. The scale of investment in a new generation of container vessels represents a massive commitment. To fill these vessels, the carriers try to secure local control and coordination over inland cargo haulage and feeder operations. In this way, they try to secure their market share and meet perceived service needs. Port handling charges are considered as being of secondary importance in achieving these goals.

Relationships between ports and carriers fall into four broad categories:

The Port of Singapore did not meet the requests of Maersk Line, which resulted in the carrier initiating the development of the nearby Malaysian Port of Tanjung Pelepas with its affiliate A. P. Moller Terminals, which conducts business under the name APM Terminals.

However, in this particular case it should be noted that the container operations in Singapore are carried out by PSA Corporation, which itself is competing globally in the container terminal market.

The changes in terminal management are fast. Container lines may use a common user terminal with the advantage that they can switch easily to a competing facility when the need arises, which has competitive advantages. On the other hand, major container carriers are increasingly interested in securing berth and throughput capacity, with the larger ones aiming at operating their own dedicated terminals directly or through affiliated global terminal operators. Strategic alliances between global terminal operators and major container lines are likely to continue in the near future.

With such consolidation and alliances increasing in the industry, there is the growing concern of dominant market shares or monopolies or oligopolies developing at both local and regional levels. Governments should be aware of these trends and the impacts.

Apart from the major container lines, a number of global terminal operators have also emerged during the 1990s and the top 10 have distanced themselves from the rest of the market over the last three to five years (see Box 8). These companies operate a large number of terminals all over the world. Their main objective is not to control the transport chain, but to make a profit by offering terminal services. However, when too many terminals within a region are controlled by one operator, the competent authority or government agency may decide that special regulatory measures are needed to protect against the danger of a monopoly. This was the case in Rotterdam when Hutchison Port Holdings (Hutchison – HPH) bought 49 percent of the shares of ECT. The European Commission decided to refuse permission for this transaction on the grounds that this would have allowed Hutchison to establish a dominant market position in Northwestern Europe since Hutchison already owned Felixstowe, Thamesport, and Harwich.

Box 9 lists the portfolio of the largest terminal operators as of June 2005.

Port Management and Competition

Competition within and between ports has a bearing on the management structure of the port and the relations between the port authority and the terminal operators and cargo handling companies.

These changing relations are often cited as an important reason for changing the port management structure. Many port authorities consider the creation of competitive conditions among port operators the cornerstone of their port policy.

One can distinguish between interport competition (competition between different ports) and intraport competition (competition between different enterprises within one port complex). To reduce the risk of monopolies, port authorities usually stimulate intraport competition. However, medium-sized and smaller ports, because of their limited traffic, often accommodate only one port terminal operator. In such cases, port authorities often use their quasi-governmental powers to regulate port charges and tariffs.

Key factors affecting interport competition include:

Box 10 summarizes the key elements influencing port competition.

Port Sector Regulator

When interport competition is muted or absent, port authorities or public or private terminal owners are apt to use their monopoly market positions to raise tariffs (in particular for captive cargoes), which may justify regulation. The need for such regulation may lead to the creation of an independent port sector regulator.

The objectives of the port sector regulator are to ensure fair competition among competing operators in the port; to control monopolies (including public ones) and mergers; and to prevent anticompetitive practices.

A port sector regulator typically has legal powers to counter anticompetitive practices, such as:

Smaller ports are more vulnerable to anticompetitive abuses because their traffic volumes limit the number of container, bulk, and oil terminals. Generally, when a monopoly or merger situation does not operate against the public interest, it may be permitted provided it is properly regulated. Examples of regulation in such cases could include tariff caps, volume or traffic thresholds to trigger any additional future concession, or expansion limits to incumbent operators that otherwise require an open tender.

The establishment of a port sector regulator should only be effected in the event of serious threats to free competition within the port. It should preferably have the character of an arbitrator instead of a court of law, and be accepted by the port community as being independent. For a more detailed discussion of the economic regulation of ports, see Module 6.

Value-Added Services

Generally, the function of a port as a node in the transport chain depends on its location and on the economic and technical developments that exist in its hinterland. Modern production techniques and consumption patterns increase the use of transportation systems beyond levels suggested purely by the growth in trade and commerce. As a result, more specialized handling, storage, and other logistics facilities are needed. More and more, ports are becoming part of integrated logistics chains. This process of specialization and changing demands, which has taken place over the last two decades in most Western countries, is now taking place with even greater speed in new market economies.

From the port’s point of view, creating new services boosts economic performance as well as its attractiveness to existing and potential clients. This, in turn, can help maintain and improve a port’s competitive position. When assessing the wisdom of developing new services, it is important to pay attention to the valueadding potential of the services. This potential can vary product by product and activity by activity. Numerous activities can be classified as value-added services (VAS). Box 11 identifies a number of them.

VAS can be divided into value-added logistics (VAL) and value-added facilities (VAF). VAL has two major components: general logistics services (GLS) and logistics chain integration services (LCIS). GLS are, among other activities, loading and unloading, stuffing and stripping, storage, warehousing, and distribution. These are the more traditional logistics activities and do not directly affect the nature of the product as it moves through the port.

Beyond these traditional activities, more complex LCIS are being developed. To carry out activities that manufacturers do not consider part of their core business, logistics service providers may take over parts of the production chain (for example, assembly, quality control, customizing, and packing) and after sales services (for example, repair and reuse). However, LCIS are only appropriate for certain types of goods. The products that have the highest potential to benefit from such services include consumer electronics, pharmaceutics, chemical products (except for those carried in bulk), clothing, cosmetics and personal care products, food, machinery, and control engineering products.

The second group of VAS, that is, VAF, is very diverse. These types of activities cannot generally be assigned to a particular type of product or freight flow. It is possible, however, to impute a certain VAF potential by analyzing freight flows such as dry and liquid bulk, general cargo, containerized cargo, and roll-on roll-off. A large container throughput might create the economic basis for establishing container repair facilities, handling vast quantities of chemicals requires port reception facilities, and substantial roll-on roll-off traffic might justify truck maintenance and repair shops. Box 12 broadly depicts the potential for both VAL and VAF activities for different types of cargoes.

Containerized and general cargoes typically have the highest VAL potential. GLS and LCIS have the best opportunity to serve these cargoes. The VAL potential for roll-on roll-off is very limited. Trucks with drivers are too expensive to be delayed while the cargo is modified; additionally, these loads are usually customer tailored. VAF, such as tanking, cleaning, repair, parking, security, renting, and leasing facilities have a better potential to serve the roll-on rolloff market. Dry and liquid bulk flows have the lowest potential for both VAL and VAF.

To provide a favorable environment for VAL and VAF, many ports are developing distriparks. A distripark is an area where companies are established to perform trade and transportrelated value-added services and can also include locations within the port’s larger hinterland region. There is no standard development plan for a distripark. As can be seen from the various developments in the Netherlands, France, Germany, and the U.K. for instance, there is a large variety in distriparks. For example, in Rotterdam, there are three distriparks. The oldest one (Eemhaven) is devoted to container cargo distribution, the second one (Botlek) is devoted mainly to chemicals, and the third and most recent one is also dedicated to containerized cargoes, and includes large warehouses containing goods for European distribution (for example, Reebok).


How To Use The Toolkit


Framework for Port Reform

The Evolution of Ports in a Competitive World

Alternative Port Management Structures and Ownership Models

Objectives and Overview

Evolution of Port Institutional Frameworks

Port Functions, Services, and Administration Models

Port Finance Overview

Port Reform Modalities

Reform Tools

Marine Services and Port Reform

Legal Tools for Port Reform

Financial Implications of Port Reform

Port Regulation:
Overseeing the Economic Public Interest in Ports

Labor Reform and Related Social Issues

Implementing Port Reform


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