Strengths and Weaknesses of Port Management Models
Public Service Port
• Superstructure development and cargo handling operations are the responsibility of the same organization (unity of command).
• There is no role or only a limited role for the private sector in cargo handling operations. • There is less problem solving capability and flexibility in case of labour problems, since the port administration also is the major employer of port labour. • There is lack of internal competition, leading to inefficiency. • Wasteful use of resources and underinvestment
as a result of government interference and dependence on government budget.
• Operations are not user or market oriented.
• Lack of innovation.
• No or limited access to public funds for basic infrastructure.
• Investments in port infrastructure and equipment (particularly ship/shore equipment) are decided and provided by the public sector, thus avoiding duplication of facilities.
• The port administration and private enterprise jointly share the cargo handling services (split operation), leading to conflicting situations. • Private operators do not own major equipment, therefore they tend to function as labour pools and do not develop into firms with strong balance sheets. This causes instability and limits future expansion of their companies. • Risk of underinvestment.
• Lack of innovation.
• A single entity (the private sector) executes cargo handling operations and owns and operates cargo handling equipment. The terminal operators are more loyal to the port and more likely to make needed investments as a consequence of their long-term contracts. • Private terminal handling companies generally are better able to cope with market requirements.
• Risk of overcapacity as a result of pressure from various private operators. • Risk of misjudging the proper timing of capacity additions.
Fully Privatized Port
• Maximum flexibility with respect to investments and port operations. • No direct government interference.
• Ownership of port land enables market-oriented port development and tariff policies. • In case of redevelopment, private operator probably realizes a high price for the sale of port land. • The often strategic location of port land may enable the private operator to broaden its scope of activities.
• Government may need to create a port regulator to control monopolistic behavior. • The government (national, regional, or local) loses its ability to execute a long-term economic development policy with respect to the port business. • In case the necessity arises to redevelop the port area, government has to spend considerable amounts of money to buy back the port land. • There is a serious risk of speculation with port land by private owners.
Source: A. Baird and P. Kent (2001).