Logistics and Port Management

1. Logistics and Port Management C. Bert Kruk Senior Port Specialist The World Bank April 2004

2. Logistics • Military origin: Getting the right supplies in the right place, in the right quantity, at the right time • In transport: Getting the right goods in the right place, in the right quantity, at the right time at the least possible costs • Essential: Price / Quality Ratio • Possibility of choice is essential

3. Port Competition • Inter-port competition • Within-port competition • Intermodal competition • Competitive ports should offer selection of choice of hinterland connections • Example: Dedicated Freight Railway line in the Netherlands

4. Trade Facilitation • Commonly accepted definition? • Logistics of moving goods through Customs or more efficiently processing documentation associated with cross-border trade • Indicators can be useful

5. Trade Facilitation Indicators • Basis for development of further Indicators for analysis of impact of Trade Facilitation • Guide for project preparation, supervision and evaluating logistics project performance • Benchmark for regional comparisons • Track effectiveness of domestic reform processes associated with accelerating Trade Facilitation • Assist in shaping policy-oriented empirical research in sectors which suffer from lack of data

6. Need for effective Customs and EDI • In ‘just in time’ manufacturing, outsourcing and global production sharing, firms cannot afford delays with complex and inefficient Customs rules and lack of modern systems of information • Reduction of trade-related transaction costs can expand trade and create employment opportunities

7. Some figures • Hummels (1999): Exporters with 1% lower shipping costs enjoy 5 to 8% higher market share • Limao and Venables (2001): Infrastructure quality accounts for 40% of variation in transport costs for coastal countries and up to 60% for landlocked countries • Fink et al (2001): Liberalization of provision of port services and regulating exercise of market power in shipping could reduce shipping costs by nearly 33%

8. Port Management models • Public Service Port • Private Service Port • Tool Port • Landlord Port

9. Basic Port Management table

10. Examples • Public Service Port: common model of ports in developing countries • Private Service Port: usually industrial types of ports • Tool Port: French model • Landlord Port: Larger, developed ports

11. Introduction of Containerization • Difficult for many developing ports: • Lack of funds • High investment costs • Lack of skilled labor • High risk investment • Change in management structure was option

12. Other reasons for change • Higher labor costs • Higher ships’ costs • Globalization of commerce • Introduction of EDI and ICT • Pressure of shipping lines regarding turnaround time of their vessels • Intermodal and multimodal requirements • Bureaucracy • Possibility to decrease staff and / or labor force

13. Sharing the Commercial Risks • A method often applied is introduction of (usually) private and often foreign partner • Partner has required skills and often also sufficient capital • Process is Commercialization, not Privatization • Privatization requires transfer of ownership

14. Commonly used methodologies • Concession: usually leasing of facility to operator (Joint Venture or single operator) • Management Contract

15. Concession • Operator leases plot for long period of time • Lease is amount of money to be paid per m2 per year (Flat Rate Lease) • Combination of land lease and performance hardly applied (Shared Revenue Lease) • Lease usually indexed • Long period (> 15 years) to allow operator to develop business and get return on investments

16. Equipment existing terminals • Operator may buy existing from Port Authority / Government • Usually at second hand price • Operator will provide new equipment, systems and facilities from his own resources • Former staff may be contracted by Operator • Operator takes Commercial Risk

17. Operator existing facility • Private single operator, or Joint Venture of new operator and previous operator (Government / Port Authority) • Joint Venture: Sharing of Commercial Risks

18. Operator new facility • Option 1: Government invests in infrastructure and new operator or Joint Venture in superstructure • Lease can be Flat Rate of Shared Revenue • Other options: BOT or BOO

19. Build-Operate-Transfer (BOT) • New Operator develops new facility (infrastructure and superstructure) from his own funds • Operates terminal • Income used to get return in investment • After agreed period, terminal operator hands over terminal (infra- and superstructure) to public sector

20. Build-Operate-Transfer (BOT) - 2 • BOT period at least 15 years • Handover usually at written-down value • BOT for container terminals hardly used: income insecurity (competitive market) • If operator is linked to major shipping line more chance of success

21. Build-Own-Operate (BOO) • Basically same principle as BOT, but • No pre-determined date of handing over of facility to Government / Port Authority

22. Management Contract • Experienced operator provides expertise (staff and means) to existing or new terminal • Operator is paid agreed Management Fee • Possibility of Contract: • Under-Performing: Penalty • Over-Performing: Bonus • No Commercial Risks for Management Contract party

23. Regulatory Function • In all options some form of Regulation essential • High level authority to control articles of agreement between public and private parties • Not complying: Penalties • Involves intervention in functioning of markets in terms of setting or controlling tariffs • Also deals with control of market and fair and competitive behavior and practices • Regulation essential in case of monopoly or significant market power

24. Port Performance Indicators • Useful tools to obtain insight in performance of port or terminal on comparative level • Definition of Indicators important for comparison • Most commonly used Indicators: • Ship Productivity • Ship Waiting Time • Cargo Dwell Time • Cargo Handling Charge

25. Ship Productivity • Total number of moves (containers) or tons (break-bulk and bulk cargoes) divided by total number of ship hours in port

26. Average Ship Waiting Time • Total number of hours or days vessels wait for a berth (buoy-to-berth time) divided by total number of hours ships are at berth

27. Average Cargo Dwell Time • Product of cargo handled and period of time (hours or days) between moment of unloading of cargo and time cargo exits port or terminal (for export cargo) divided by total quantity of cargo handled • Import cargo: vice-versa

28. Cargo Handling Charge • Total charges for handling of given quantity of cargo in units or tons divided by total number of units of tons handled

29. Examples of Container Ship Productivity • Average container gantry crane productivity for multi-berth terminal and Berth Occupancy Factor (BOF) in range of 50%: 60 to 70,000 moves per year • PSA record 2000: handling of 1,375 moves in 6 berth hours, or 234 moves or 376 TEU per berth hour

30. Top 5 Operators 2002 • Hutchison 37 mio TEU • Port of Singapore Authority 26 mio TEU • AP Moeller 17 mio TEU • P&O Ports 13 mio TEU • Eurogate 10 mio TEU • Total: 103 mio TEU, or 37% of world total

31. Hutchinson Whampoa Limited FELIXSTOWE KWANGYANG ENSENADA HARWICH BUSAN THAMESPORT ROTTERDAM HONGKONG LAZARO CARDENAS DAMMAN VERACRUZ FREEPORT MANZANILLO KARACHI BALBOA CRISTOBAL DAR ES SALAAM RANGOON PORT KLANG BUENOS AIRES LAEM CHABANG SHANGHAI, WAIGAOQIAO, YANTIAN, BEILUN, JJIANGMEN, NANHAI, SHANTOU, XIAMEN, ZHUHAI March 2004 Cbk/wb JAKARTA

32. SHANGHAI APM Global Terminals BREMERHAVEN YOKOHAMA NEW ORLEANS AARHUS KAOSHIUNG KOBE CONSTANTZA ROTTERDAM GIAO TAURO TACOMA ALGECIRAS BALTIMORE OAKLAND PELAPAS CHARLESTON LOS ANGELES PIPAPAV ONNE PORT SAVANNAH PORTSMOUTH HOUSTON MIAMI SALALAH PORT ELIZABETH PORT EVERGLADES LAEM CHABANG KINGSTON BUENOS AIRES PORT SAID MARCH 2004 JACKSONVILLE CBK / WB

33. Port Reform Toolkit • Comprehensive document produced beginning of this century • Update of practical examples in FY 2004-2005 • Download from web: www.worldbank.org/transport

34. Trade Logistics Agenda • Trade Facilitation and Competitiveness • Transit Logistics and Ports • Border Crossing and Clearance Management • Customs Reform • Multimodal Transport • Transport Security

35. Trade Facilitation and Competitiveness • Economic Benefits of Trade Facilitation • Logistics Costs and Export Earnings: Geography, Competitiveness and Poverty • Facilitation Performance and Competitiveness Index

36. Transit Logistics • Port Efficiency • Bilateral and Regional Transit Agreements • Landlocked Developing Countries Access: Corridor Agreements • Transit Guarantee Systems : Customs/Insurance/Operators (TIR, TIF and similar) • Cost/Benefits of Transit Trade for Transit Countries

37. Border Crossing Management • Single Window Environment • Adjacent Border Posts • Border Monitoring Systems • Inland Clearance Facilities

38. Customs Reform • Streamlining and Harmonization of Procedures • Information Technology and Electronic Processing • Risk Assessment Methods: Security with Facilitation • Integrity Programs • Training / Capacity Building : Customs Officials / Private Operators

39. Multimodal Transport • Legal Aspects • Regulatory Framework • Liability Regime of MTO • Implementation/Amendments of/to MTO Regimes

40. Transport Security • US Regulations: CSI, 24 hour-Rule • IMO Revised Standards: ISPS Code • Supply Chain Security Concept • Security with Facilitation

41. Thank you for your attention