Port privatisation: Ownership involvement by external companies

Transcription

1 MASTER OF SCIENCE IN MARITIME SCIENCE MASTER DISSERTATION Academic year Port privatisation: Ownership involvement by external companies Alan Johnson Submitted in partial fulfillment of the requirements for the degree of: Master of Science in Maritime Science Supervisor: Prof. dr. Theo Notteboom Assessor: Prof. Daan Schalck

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3 PERMISSION I declare that the content of this Master dissertation may be consulted or reproduced, provided that the source is referenced. Alan Johnson

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5 PREFACE This Master dissertation marks the conclusion of my advanced studies in the Master of Science in Maritime Science. I would like to explicitly thank certain people who have contributed to the realisation of this thesis. In the first place, I wish to express my sincere gratitude to my supervisor Prof. dr. Theo Notteboom and co-promotor Prof. Daan Schalck for their confidence and valuable feedback. Their willingness and assistance have resulted in the accomplishment of this dissertation. Furthermore, my appreciation goes to the interviewees for their cooperation and insights as well as to the respondents for completing the survey regarding my qualitative research. Many thanks go to my friends who are always available for advice. Their relentless and unconditional enthusiasm mean a lot to me. Last but not least, I am deeply grateful to my parents for the opportunity they have offered me to follow and finalise this additional master programme. Their exceptional support and motivation are extremely valuable for me. Alan Johnson Ghent, 24 January 2018 I

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7 TABLE OF CONTENTS Preface... I Table of contents... III List of abbreviations... VII List of figures... VIII List of tables... IX INTRODUCTION GOVERNANCE STRUCTURE IN PORTS Port ownership models Latin model Hanseatic model Anglo-Saxon model Mixed model Summary Port management approaches Service port Tool port Landlord port Private port Summary Port devolution Modernisation Liberalisation Commercialisation Corporatisation Privatisation Motives for port privatisation Increased efficiency and flexibility Reduced public expenses Increased profits Increased competition Reduced politicisation III

8 1.5 Port regulation Port functions Port concessions Land ownership Port subsidisation Conclusion PORT PRIVATISATION IN THE UNITED KINGDOM Privatisation process First privatisation wave Second privatisation wave Current situation Port functions Operator and landlord function Regulatory function Private port holdings Associated British Ports Peel Ports Forth Ports PD Ports Hutchison Ports Privatisation results Efficiency and investments State revenues Profit-making Competition Employment National integration Conclusion PORT PRIVATISATION IN GREECE Importance of the Mediterranean port range Transhipment hubs Trans-European Transport Network One Belt, One Road Greek port reform First port reform: corporatisation Second port reform: liberalisation Third port reform: privatisation 53 IV

9 3.3 Privatisation results Efficiency and investments State revenues Profit-making and growth Competition Employment Regulation and geopolitics Conclusion QUALITATIVE RESEARCH Research methods Questionnaire Online survey Interviews Results: the effects of port privatisation Efficiency of commercial operations and administrative tasks Financial performance of the port authority and port fees Intra-port competition and inter-port cooperation Hinterland integration Employment level at the port Port regulation Risk-seeking behaviour of the port authority Foreign investments in the port Focus on short- and long-term goals by the port authority Benefits for the local communities and environmental impact on the region Results: case Port of Piraeus Integration with the TEN-T network Maritime traffic to the Northwest-European ports Cooperation with other Mediterranean seaports Protectionist reactions from other ports against privatisation Aversion from other European countries towards China s geopolitical aspirations Conclusion REFLECTION AND RECOMMENDATIONS References... I V

10 ANNEXES1 Annex A: Ownership models for the fifteen largest container ports in Europe... A-1 Annex B: Sample of respondents to the ESPO-survey on port governance of B-1 B-2 Annex C: Overview of the major commercial ports in the United Kingdom... C-1 Annex D: Overview of the major port holdings in the United Kingdom... D-2 D-1 D.1 Associated British Ports D-1 D-2 D.2 Peel Ports... D-2 D-1 D.3 Forth Ports. D-3 D-2 D.4 PD Ports.D-3 D-2 D.5 Hutchison Ports (UK)... D-2 D-3 Annex E: Ownership structure of the major port holdings in the United Kingdom... E-1 E-4 Annex F: Questionnaire of the survey... F-1 Annex G: Interviews... G-1 G.1 Mr. Daan Schalck (North Sea Port)..G-1 G.2 Mrs. Isabelle Ryckbost (ESPO) G-6 G.3 Mr. Guy Janssens (Antwerp Port Authority)..G-10 VI

11 LIST OF ABBREVIATIONS ABP BOO BOT BTC BTDB CMP EBITDA EC ECB ESPO HEAT HRADF IMF ITMMA MAT MDHC MEBO NLDS OBOR PCT PPA SOE TEN-T TEU TPA UNCTAD Associated British Ports Build-own-operate Build-operate-transfer British Transport Commission British Transport Docks Board Copenhagen Malmö Port Earnings before interest, depreciation and amortisation European Commission European Central Bank European Sea Ports Organisation Highest efficient attainable throughput Hellenic Republic Asset Development Fund International Monetary Fund Institute of Transport and Maritime Management Antwerp Maximum attainable throughput Mersey Docks and Harbour Company Management and employee buyout National Labour Dock Scheme One Belt, One Road Piraeus Container Terminal Piraeus Port Authority State-owned enterprise Trans-European Transport Network Twenty-foot equivalent unit Thessaloniki Port Authority United Nations Conference on Trade and Development VII

12 LIST OF FIGURES Figure 1.1 The relations between the government and public/private terminals (adapted from Zheng & Negenborn, 2014, p. 23) Figure 1.2 The spectrum of port reform tools (World Bank, 2007, p. 111) Figure 2.1 An overview of the major commercial ports in the United Kingdom (adapted from Baird, 1995, p. 143; updates from Monios, 2017, p. 80) Figure 2.2 The evolution of the capacity profile of a seaport (Winkelmans & Notteboom, n.d., p. 6) Figure 2.3 The port reform process in the United Kingdom Figure 3.1 Figure 3.2 Figure 3.3 Figure 3.4 Figure 3.5 Figure 3.6 The evolution of the market share of maritime ranges in the European container port system (Notteboom, 2010a, p. 570) The average annual net shifts between maritime ranges in the European container port system (Notteboom, 2010a, p. 571) An overview of the major European multi-port gateway regions (Notteboom, 2010a, p. 572) The average growth rates and market share of the Mediterranean ports during (adapted from Fageda, 2000, p. 11) The shift effect at the Mediterranean ports during (in 1000 TEU) (adapted from Fageda, 2000, p. 12) The nine corridors of the Trans-European Transport Network (European Commission, 2014) Figure 3.7 The two main trading routes of the OBOR-initiative (McKinsey & Company, 2016).. 48 Figure 3.8 The Greek ports of international and national importance (Pallis, 2006, p. 160) Figure 3.9 The three container terminals at the port of Piraeus (adapted from Psaraftis & Pallis, 2012, p. 33) Figure 3.10 The port governance framework for the Greek ports (Pallis & Vaggelas, 2017, p. 55). 59 Figure 3.11 The port reform process in Greece Figure 4.1 Figure 4.2 Distribution of responses regarding the efficiency level of the port operators commercial activities Distribution of responses regarding the efficiency level of the port authority s administration Figure 4.3 Distribution of responses regarding the financial performance of the port authority Figure 4.4 Distribution of responses regarding the price level of port dues Figure 4.5 Distribution of responses regarding the price level of land lease rates VIII

13 Figure 4.6 Distribution of responses regarding the level of intra-port competition Figure 4.7 Distribution of responses regarding the level of inter-port cooperation Figure 4.8 Distribution of responses regarding the level of hinterland integration Figure 4.9 Distribution of responses regarding the employment level at the port Figure 4.10 Distribution of responses regarding the level of port regulation Figure 4.11 Distribution of responses regarding the risk-seeking behaviour of the port authority Figure 4.12 Distribution of responses regarding the level of foreign investments in the port Figure 4.13 Distribution of responses regarding the focus on short- or long-term objectives of the port authority Figure 4.14 Distribution of responses regarding the benefits for the local communities Figure 4.15 Distribution of responses regarding the environmental impact on the region Figure 4.16 Distribution of responses regarding the integration with TEN-T Figure 4.17 Distribution of responses regarding maritime traffic to Northwest-Europe Figure 4.18 Distribution of responses regarding cooperation with other Mediterranean seaports Figure 4.19 Distribution of responses regarding protectionist reactions against port privatisation.. 83 Figure 4.20 Distribution of responses regarding aversion toward China s geopolitical aspirations. 84 LIST OF TABLES Table 1.1 Table 1.2 The allocation of management responsibilities between the public and private sector (adapted from World Bank, 2007, p. 85) The classification of port-related functions (adapted from Baltazar & Brooks, 2001, p. 7) Table 2.1 Table 2.2 An overview of the privatisations of major former publicly owned British ports (adapted from Baird & Valentine, 2006, p. 76) The main features of port ownership and management in the United Kingdom (adapted from Cullinane & Song, 2002, p. 69) Table 2.3 The berth productivity of the major European ports in 2012 (JOC Group, 2013) IX

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15 INTRODUCTION Through history ports have always significantly contributed to economic welfare and have improved global trade and international networks. Therefore, port operations and administration were predominantly the responsibility of public actors and governments. However, since the 1980s new revolutions in port systems and maritime trade have led to a redefinition of the prevailing port operations and their ability to cope with rapid macro-economic changes and growing heterogeneous markets. Trends such as the introduction of standardisation and containerisation processes, technological advances, capital-intensive investments, increasing trade scopes, intense competition, reconfiguration of logistic networks, intermodal integration, consolidation and economies of scale have put fierce pressure on the public character of mainports, in particular regarding the speed of decision-making and the availability of sufficient public funding. Several transformations in traditional port governance have already occurred, ranging from the modernisation of management structures to complete privatisation and financial self-sufficiency without any political interference. In general, port privatisation can be defined as: the sale of publicly owned assets such that there is a transfer of ownership from public to private sectors (Cullinane & Song, 2002). However, many researchers use varying definitions in the existing literature. Talley (2009, Chapter 9) for example applies two types of port privatisation: Asset privatisation. The transfer of public ownership and port assets to the private sector. Service privatisation. The transfer of public port services to private operators. This also corresponds with the two components of privatisation defined by Parker (1991): Denationalisation. The sale of state assets. Liberalisation. The introduction of competition into state-owned monopolies. Privatisation processes in the broad sense i.e. service privatisation or liberalisation have already occurred in various major ports. However, the strategic value and economic importance of seaports result in governments still being reluctant in handing over the control function to the private sector by means of asset privatisation or denationalisation (privatisation in the narrow sense ). For reasons of consistency, this dissertation will use the term port privatisation in relation to the sale of public port ownership to commercial entities other than national, regional or municipal authorities whereas the term port liberalisation will be used to refer to the transfer of responsibility of port operations from the public port authority to private port operators. The United Kingdom is one of the few countries in the world where port ownership has entirely shifted to private companies on a large scale. More recently, the Greek port of Piraeus has attracted 1

16 attention from national interest groups and European policy makers when the government sold the majority of its shares to China COSCO Shipping Group, a Chinese state-owned shipping company. Given that the port is situated at the strategic crossroads between Central and Eastern Europe s consumer markets and the major shipping routes between Western Europe and the Far East, concerns are raised by Europe s northwestern gateway ports and Mediterranean transhipment ports whether this event would pose a threat to their traffic volumes or would instead create new opportunities for their trade. Moreover, it is arguable whether this financial and strategic interference from an external party can coincide with Greek port policies and Europe s long-term transport strategies. However, in contrast to privatisation tendencies in other former public sectors such as airports and airlines, public transport, postal services, telecommunications, banking, waste disposal, energy supply, infrastructure etc. major seaports yet remain primarily in public hands until today. With this master dissertation, my objective is to investigate how ports are currently organised, how port ownership is transferred, and which effects this may have on economic, social and political factors. Therefore, the British and Greek port cases are investigated by means of a literature review and a qualitative research. Chapter 1 describes how port governance is generally organised according to theoretical propositions used in the literature and illustrated by practical examples. First, there is a brief digression of the common port ownership models and port management approaches. Second, the different forms of port devolution are explained, followed by the benefits of port privatisation as well as the critics it might face. Finally, the potential issues with respect to port regulation are considered. Chapter 2 focuses on port privatisation in the United Kingdom, which has occurred in the 1980s and 1990s. The privatisation process itself is analysed, together with the allocation of the port functions. Further, the five major holdings that own the majority of the British seaports are briefly introduced. Finally, the ex-post performance of these ports is assessed. Chapter 3 targets the recent sale of port ownership in Greece, concerning the ports of Piraeus and Thessaloniki. First of all, the importance of the Mediterranean port range is explained. Subsequently, the different stages of the Greek port reform process are described. The section is concluded by the current and possible future consequences for Piraeus and Thessaloniki and for other European ports. Chapter 4 presents a qualitative research on the potential effects of port privatisation. The applied research methods are clarified, followed by an analysis of the obtained results. Lastly, Chapter 5 contains a general reflection of the dissertation by means of a conclusion. A comparison of the British and Greek cases is made. Finally, possible implications and suggestions for further research are given. 2

17 CHAPTER 1 GOVERNANCE STRUCTURE IN PORTS It is not easy to compare different major seaports as each port has its own unique identity, depending on various port-specific aspects that are characterised by the spatial, economic, strategic and financial features of the port. Based on a study of the European Sea Ports Organisation (ESPO) in 2015, one can distinguish the following factors that determine the characteristics of a port: Competitive position and market power. In order to retain existing customers and to win new ones, rival ports have to offer an extensive package of maritime services and state-of-theart port infrastructure at competitive fees that are in line with the market expectations, especially in dense maritime ranges such as the Hamburg-Le Havre range and the Mediterranean port range. Geographical location. The physical configuration of coast lines, river banks, canals and estuaries, as well as the impact of tidal currents influence directly the accessibility of ports and the related investments in basic infrastructure and dredging works. Size. The significance and the attractiveness of a port largely depends on its capacity, in terms of cargo volumes, storage facilities, receiving ships, employment level, the variety of industrial activities in the port, the number of operators etc. Type. An important distinction must be made between a transhipment port and a gateway port. The former serves as a stopover point within global shipping routes executing hubfeeder operations and short-sea shipping whereas the latter act as an entry point for a widespread hinterland that is connected with the port by road, railways and inland waterways (Notteboom, 2010a). Specialisation. Every port is characterised by its distribution of activities. Some ports are largely diversifying in multiple segments, whereas other ports focus on one or a few core activities. Financing. Because of the economic and commercial importance, a lot of public and private stakeholders are involved with port financing. The distribution of financial responsibilities, the access to public or private funding and the self-sufficiency of ports differ strongly; it is enacted by legislation in most cases. As a result of these different features of each port, there is no single or optimal port governance structure. As a consequence, the applied organisational, administrative and operational systems can vary significantly between countries or even between ports within the same country (Cullinane & Song, 2002; ESPO, 2015). Each port is governed by either an autonomous or a government-dependent 3

18 port authority, which is in charge of the administration and management of a demarcated port area (World Bank, 2007, Chapter 3). In an attempt to perceive port policy in general, Goss (1990a) and Short (1994) consider two tiers of governance: a control level by means of ownership models and the corresponding shareholders; an executive level by means of management approaches that are carried out by the port authority acting on behalf of the owners. In this chapter, these two levels of port governance are extensively described. Thereafter, the privatisation degree and autonomy level of the port authority are addressed. Finally, the motives of port privatisation as well as remarks about port regulation are explained. 1.1 Port ownership models The type of ownership determines the manner in which the overall control over port activities is distributed and how this relates to corporate governance within the port authority (Shleifer & Vishny, 1997; Short, 1994). The majority of European seaports are publicly owned by the municipal, regional or national government, which results in a strong share of political influence. The various ownership structures that are currently applied to these ports largely depend on historical tradition and administrative heritage. Port ownership can roughly be classified into four main models: the Latin model; the Hanseatic model; the Anglo-Saxon model; the mixed model. As an illustration, the ownership models of the fifteen major European container ports are presented in Annex A. A survey by ESPO (2016) on port governance in the European Union and Norway is used to determine the share of each model in Europe. The overview of the analysed ports is given in Annex B Latin model According to the Latin model, port governance is centralised at the national level and the State is the sole owner of the port (Meersman, Van de Voorde, & Vanelslander, 2006). The port authority executes decisions made by the central government or receives final approval from the national ministry for its activities (Ferrari, Parola, & Tei, 2015). As a result, the port s financial and strategic goals depend heavily on national port policies. 4

19 ESPO (2016) has uncovered that 51% of the analysed European ports operate in accordance to the Latin model. Geographically, the majority of these ports are situated in southern Europe. In terms of container throughput, the largest Latin ports are Algeciras (Spain), Valencia (Spain), Marsaxlokk (Malta), Gioia Tauro (Italy), Le Havre (France), Genoa (Italy), Barcelona (Spain) and Sines (Portugal) Hanseatic model In the Hanseatic model, port governance is decentralised and regionalised at a subnational level. These ports are locally administered and are entirely owned by the city or municipality (Ferrari et al., 2015; Meersman et al., 2006). Consequently, there is a strong relationship between the municipality and the port. Due to the regional focus and concentration of the Hanseatic ports, strong competition exists with neighbouring ports within the same country or region (Valentine & Gray, 2001). According to ESPO (2016) 29% of the examined European ports are characterised by the Hanseatic model. These ports are mainly located in Northwest-Europe. In terms of container throughput, the largest Hanseatic ports are Rotterdam (Netherlands), Antwerp (Belgium), Hamburg (Germany) and Bremerhaven (Germany). A side note about two of these ports: Regarding the port of Rotterdam, the Dutch central government took 29.2% of the shares in 2008 as compensation for its financial support in the construction of the second Maasvlakte. In the case of the port of Bremerhaven, the ownership is officially in the hands of the city of Bremen, together with the port of Bremen. However, administration remains the responsibility of the city of Bremerhaven. Both cities are part of the Free Hanseatic City of Bremen (a citystate) Anglo-Saxon model Anglo-Saxon ports are full-fledged organisations that are entirely private, including the ownership of the port. Management is locally organised by a private operator or centralised in the case of multiport bodies (Ferrari et al., 2015; Meersman et al., 2006). These ports pose the risk to be less socially involved with local communities and regional developments, as they are rather market-driven organisations (Meersman et al., 2006). The ESPO report (2016) reveals that only 6% of the examined European ports can be called Anglo- Saxon. These ports are exclusively located in the United Kingdom. In terms of container throughput, the largest Anglo-Saxon ports are Felixstowe and Southampton. There are a few other examples outside Europe, specifically in Australia and New Zealand (Ferrari et al., 2015). 5

20 1.1.4 Mixed model Only a few ports are characterised by a mixed ownership structure of public and private shareholders. According to ESPO (2016), 7% of the examined European ports have some form of a mixed ownership model. For example, the Greek ports of Piraeus and Thessaloniki are public-private partnerships whereby the Greek state owned three quarters of the shares. However, both ports sold the majority of their shares to private investors in 2016 and 2017 respectively. The case of Piraeus is described in Chapter 3. Another example of such a mixed model is the shareholder structure of the recently created Copenhagen Malmö Port (CMP) in Denmark/Sweden a cross-border port merger established in 2001 where 47.5% is owned by the City of Copenhagen, 2.5% by the Danish State, 27.0% by the City of Malmö, and 23.0% by private investors (CMP, 2015) Summary An overview of the four traditional port ownership models is shown in Figure 1.1. PORT OWNERSHIP MODEL Latin Hanseatic Anglo-Saxon Mixed Central government Municipality Private sector Private and public partners Figure 1.1: A classification of the traditional port ownership models 1.2 Port management approaches The second aspect of port governance concerns the type of management approach that is applied within the port authority. This also includes the split of responsibilities between public and private parties, as the operation of a port involves various players such as private operators, port service providers, labour pools, social communities, ministries etc. The second edition of the Port Reform Toolkit of the World Bank (2007, Chapter 3) distinguishes four major types of management approaches: the service port; the tool port; the landlord port; 6

21 the private port. The various responsibilities of port management can generally be placed into one of the following three categories: Infrastructure. The United Nations Conference on Trade and Development (UNCTAD) defines port infrastructure as the fixed assets in the port, including the land, marine access infrastructure (e.g. breakwaters and capital dredging), and port-internal infrastructure (e.g. quays and yards) (UNCTAD, 2016, Chapter 1). Superstructure. These are the moveable assets in the port such as cranes, terminal equipment and paving (UNCTAD, 2016, Chapter 1). Operations. These are the commercial port activities related to the handling and storage of cargo, including stevedoring and warehousing Service port In a service port, the responsibilities for the development, management and maintenance of the port infrastructure and the related superstructure are subordinate to the central government and usually controlled by the Ministry of Transport (Brooks, 2004; Brooks & Cullinane, 2006; ESPO, 2015; Meersman et al., 2006). In addition, all commercial port operations are carried out by the port authority itself. Because all port services and operations are kept in-house, the term comprehensive port is also used (Cullinane & Song, 2002; Goss, 1990a). The major advantage of this management approach is that port development and growth are cohesive within a broader public policy of transport and economics, contributing to the welfare of the region and the country (Brooks, 2004). Since only one agency acts as port authority on behalf of the government, the decision-making processes are faster (Talley, 2009, Chapter 9). On the other hand, the lack of internal competition can lead to a bureaucratic administration and operational inefficiencies with little stimulus to adapt to new market requirements. In addition, service ports rely on public funding which can either be constrained or over-subsidised (Brooks, 2004; Talley, 2009, Chapter 9). The service port approach is often applied in emerging countries such as India, Sri Lanka and many African ports (Talley, 2009, Chapter 9). Also the ports in Ukraine as well as trust ports in the United Kingdom are regarded as service ports (Brooks, Cullinane, & Pallis, 2017; Ferrari et al., 2015). Before 1997, the port of Singapore was the largest service port in the world until it was corporatised (Cullinane & Song, 2002; Goss, 1990b). In 2004, Malta Freeport (Marsaxlokk) changed its strategy of being a service port towards the landlord model by outsourcing its terminal operations to the French shipping company CMA CGM Group (Malta Freeport, 2010). Furthermore, the three Israeli ports 7

22 Ashdod, Eilat and Haifa were service ports before the liberalisation of their operations since 2010 (ESPO, 2017). Port reforms in Italy and Spain during the 1990s have transferred the national ports to the landlord port model (see infra) (Ferrari et al., 2015) Tool port In a tool port, infrastructure and superstructure are still owned and managed by the public port authority. By contrast, the commercial activities such as stevedoring and warehousing are outsourced to private companies that are usually under contract of shipping lines and ship agents (Brooks, 2004; ESPO, 2015; Talley, 2009, Chapter 9). The involved private operators are typically stevedoring companies, terminal operators, shipping lines and industrial companies. As a result similar to a service port the facilities remain in the hands of a single public body, which decreases the risk of duplication. However, it may be more difficult to align the different demands and interests of the various commercial port operators with the rights and duties of the dock workers (Brooks, 2004; Talley, 2009, Chapter 9). The major French ports were administered as tool ports before the port reforms took place, resulting in the privatisation of port equipment and labour at the six grands ports maritimes, i.e. the ports of Bordeaux, Le Havre, Dunkirk, Rouen, Nantes-Saint-Nazaire and La Rochelle. The South African ports are also characterised by a tool port management approach (Ferrari et al., 2015) Landlord port The landlord port concept is the most commonly used management approach. In general, it is characterised by public infrastructure on the one hand and private superstructure on the other hand (Perez-Labajos & Blanco, 2004). The port authority leases basic infrastructure such as access roads, berths and wharves to independent private operators by means of concession agreements (Baird, 1995; Brooks, 2004; Brooks & Cullinane, 2006; Cullinane & Song, 2002; ESPO, 2015). The private parties acquire their own superstructure and equipment, whereas the public port authority is responsible for the maintenance of the basic infrastructure and for the planning and overall control of the port area (Goss, 1990a). With the involvement of private operators, the commercial activities are more flexible and closely aligned with the market demands, as their primary goal is to maximise the returns (Talley, 2009, Chapter 9). However, the high number of comparable and competing operators may increase the risk of over-capacity (Baird, 1995; Brooks, 2004). There is also a higher probability of information asymmetries between the private operator and the public port authority (Zheng & Negenborn, 2014). 8

23 A lot of landlord approaches can be found for the major ports in Continental Europe, North America and Southeast Asia (Baird, 1995; Cullinane & Song, 2002; Goss, 1990a); albeit after possible reformation processes in the past Private port In a private port, the financial, operational and administrative responsibilities are entirely contractedout to the private sector (Brooks, 2004). The port is fully owned by one or more private firms. Hence there is little public involvement, except for certain regulations stipulated under national laws (see Paragraph 1.5). The private port authority provides and maintains the infrastructure and superstructure, while the commercial activities are executed by the private owner himself or leased to other private players (Talley, 2009, Chapter 9). The privatisation of all port activities results in a more flexible market-oriented approach with regard to investment policy and tariff policies (Brooks, 2004). Nevertheless, this approach can lead to monopolistic behaviour when there is little competition, poor integration with long-term strategies and macro-economic policies, and less public regulation (Brooks, 2004; Talley, 2009, Chapter 9). The benefits and pitfalls of port privatisation are discussed in more detail in Paragraph 1.4. Worldwide, there are only a few major examples of fully privatised ports. For instance, the port of Hong Kong is owned and financed by the private sector. However, administrative tasks and development plans are governed by the public authorities (Cullinane & Song, 2002). The differences in the distribution of public and private responsibilities within privatised ports, is described in Paragraph As it is highlighted in Chapter 2, the British ports are pioneer in the port privatisation process. Also ports in Australia and New Zealand are administered by private players (Ferrari et al., 2015). Furthermore, the operations at a lot of smaller single-user ports are in private hands. These ports are mainly built for the purpose of one particular customer and often concerns activities related to raw materials (Goss, 1990c) Summary Table 1.1 presents an overview of the four traditional management approaches and the respective allocations of responsibilities between the public and private sector. 9

24 Table 1.1: The allocation of management responsibilities between the public and private sector (adapted from World Bank, 2007, p. 85) Management approach Infrastructure Superstructure Operations Service port Tool port Landlord port Private port Public Public Public Private Public Public Private Private Public Private Private Private Although the above structures are frequently used to classify ports, a lot of variations within these categories exist. Whereas the World Bank applies rather a static method, certain commentators opt for a more contextualised approach. Indeed, the governance of each individual port is often determined by the level of decentralisation, political traditions, geo-cultural embeddedness and socio-economic path dependencies (cf. Debrie, Lavaud-Letilleul, & Parola, 2013; Ferrari et al., 2015; Ng & Pallis, 2010; Notteboom, De Langen, & Jacobs, 2013; Rodrigue, Notteboom, & Pallis, 2011). Whereas the World Bank (2007) adds the aspect of port labour to the different management approaches, this element is excluded from this overview. In practice, there are a lot of variations in organised port labour, depending on national laws or regulations, for example the use of labour pools (Brooks & Cullinane, 2006). For more details about the organisation of port labour in Europe, I would like to refer to the report of the Institute of Transport and Maritime Management Antwerp (ITMMA) on dock labour by Notteboom (2010b). 1.3 Port devolution More than ever before have technological, commercial, logistic and financial evolutions in maritime economics forced ports to be adaptive in order to keep pace with the global developments. In their efforts to address these changes appropriately, a high efficiency rate and competitiveness are required (Notteboom, 2010a). Therefore, ports yearn to an appropriate strategy and a sufficient degree of autonomy in terms of ownership and management. As a result, since the 1990s and 2000s, a lot of European ports have already implemented a certain extent of port devolution by which administrative, managerial and financial responsibilities are transferred from the central government to the public port authority or even to the private sector. The type of devolution can range from administrative improvements to full privatisation (World Bank, 2007, Chapter 5): modernisation; liberalisation; commercialisation; 10

25 corporatisation; privatisation Modernisation Port modernisation is the least radical organisational reform. Increased performance and improved administration are achieved by implementing more efficient and lean management systems and working practices, by eliminating organisational discrepancies and by upgrading physical assets such as port equipment and tools (Notteboom & Winkelmans, 2001). In addition, the port authority receives more autonomy for certain decisions. Modernisation can be achieved by (World Bank, 2007, Chapter 5): the introduction of corporate planning and principles; the development of career planning and management; the integration of computer applications; the use of electronic data and communication systems. The overall legal framework in which the port operates remains unchanged Liberalisation Liberalisation or service privatisation is considered as a more fundamental form of port devolution (Talley, 2009, Chapter 9). Due to the removal of entry barriers, third parties are allowed to enter a market that was originally restricted to the public sector by means of statutory monopolies or licensing arrangements (Cullinane & Song, 2002; Notteboom & Winkelmans, 2001; World Bank, 2007, Chapter 5). As a result, relations between the public port authority and the various private operators are ascertained by concession agreements between the two parties (Ferrari et al., 2015). This topic is further described in Paragraph The deregulation of port exploitation increases port-internal competition, as more operators can enter the market; but equally these operators can be pushed out of the market if they do not perform efficiently enough (Goss, 1990d). Many former service and tool ports in Southern Europe have devolved towards landlord ports by making use of liberalisation and decentralisation reforms that allow local port authorities to get more autonomy. Examples include the port reforms in Spain (1992), Italy (1994), Portugal (1998), Malta (2004), France (2008) and Greece (2009) (cf. Brooks & Pallis, 2012; Castillo-Manzano & Asencio- Flores, 2012; Ferrari & Musso, 2011; Malta Freeport, 2010; Valleri, Lamonarca, & Papa, 2006). 11

26 1.3.3 Commercialisation A commercialised port is more privately oriented and follows a commercial strategy. Moreover, the port management has a high degree of independence as a result of increased decision power in terms of (World Bank, 2007, Chapter 5): Financial autonomy: establishing budgets, making investment decisions, managing port assets; Personnel schemes: separate labour conditions and salaries, own hiring and firing policy; Strategic planning: setting operational and performance targets, outlining the port s strategy. The increase of management autonomy results in a gradual transition from a political management style to a technocratic management style (Notteboom & Winkelmans, 2001). The former safeguards the equal distribution of costs and benefits to the stakeholders, whereas the latter focuses on efficiency and effectiveness in production and distribution (Bower, 1983). Senior managers with a commercial background are contributors of a market-oriented approach (De Langen & Heij, 2013). The port management is held accountable by a controlling board of directors, which is composed of political, corporate representatives or a mixture of both (World Bank, 2007, Chapter 5). The involvement of independent board members will lead to a more commercial approach of port management (Brooks & Pallis, 2012; De Langen & Heij, 2013). Nevertheless, the port authority is still subordinate to and integrated within the administration of the municipality or the State (Rodal & Mulder, 1993). The annual accounts and major investment decisions have to be approved by the public authority (De Langen & Van der Lugt, 2006) Corporatisation The corporatisation of a port involves the creation of an independent legal entity with the status of a private company and with share capital, albeit with the preservation of public ownership. All public port assets are incorporated to the accounts of the port authority, usually including the land lease rights (World Bank, 2007, Chapter 5). The accounting procedures and legal requirements are similar to those applied in the private sector. Although the focus tends to be more towards profit-making and entrepreneurial behaviour, corporatised ports are still urged to serve the general interest by external political decisions from their public shareholders (Notteboom & Winkelmans, 2001). Moreover, the formation of autonomous port authorities can lead to increased competition within the same country, especially in Hanseatic ports. For instance, the ports of Rotterdam and Antwerp became corporatised in 2004 and 2015 respectively, which allows them to invest in other foreign ports in emerging economic regions such as India, Brazil, 12

27 Africa, the Middle East and Southeast Asia (De Langen & Van der Lugt, 2006; Meersman et al., 2006). The Greek ports of Piraeus and Thessaloniki were transformed into autonomous corporations in 1999 as an intermediate step towards liberalisation and complete privatisation (Pallis, 2006; Vaggelas, 2007) Privatisation Port privatisation involves a denationalisation process by which port authorities sell their shares and assets to the private sector; in some cases with the inclusion of land ownership (Cullinane & Song, 2002). In all its forms, port privatisation generally has the following features (World Bank, 2007, Chapter 5): the sale of public-owned port assets ( divestiture ); deregulation; competitive tendering; private ownership of operational assets. Privatisation can be obtained by various means (Notteboom & Winkelmans, 2001): public offering of shares; private sale of shares; new private investments in commercialised state-owned enterprises (SOE); sale of governmental or SOE assets; management or employee buy-outs; financing of new investments by the private sector. There are different groups of private investors with interests in the ownership of port authorities: Foreign port authorities. They seek to expand their operating scope, their area of influence, maritime networks, and to diversify their maritime industries by means of horizontal integration. For instance, the port authorities of Rotterdam and Antwerp are investing in other foreign ports. Shipping lines. They pursue to expand their supply chain integration vertically. Major international shipping lines are for example: Maersk Group (under the name APM Terminals) with headquarters in Denmark, Mediterranean Shipping Company (under the name Terminal Investment Limited) with headquarters in Switzerland, CMA CGM Group (under the names Terminal Link and CMA Terminals Holding) with headquarters in France, and COSCO Shipping Lines (under the name COSCO Shipping Ports) with headquarters in China (Alphaliner, n.d.). 13

28 Terminal operators. They seek to expand their area of control. Large international operators include Hutchison Ports (Hong Kong), PSA International (Singapore), DP World (United Arab Emirates), China Merchants Port Holdings (Hong Kong) and Shanghai International Port (China) (Louppova, 2016). Stevedoring groups, logistic firms and industrial players. Investment groups, equity fund groups and financial institutions. It must be emphasised that privatisation processes do not only involve private firms, but also stakes by public companies. These are often foreign state-owned enterprises of which the investments are of strategic economic importance in order to expand and ensure their trading routes. These external companies are among others: China COSCO Shipping Group (owned by the Chinese government), China Merchants Port Holdings (owned by the Chinese government), Shanghai International Port (61.07% owned by the Shanghai government) and DP World (merged from Dubai Ports International and former Dubai Ports Authority). In order to expand its operations, the Port of Singapore Authority became commercialised and corporatised in 1997 under the name PSA International. Although theoretically being a private company, it is owned by Temasek (a Singapore state-owned holding firm). 1.4 Motives for port privatisation Whereas port privatisation is considered as a reaction on government failures, many major seaports still remain publicly owned to protect national and social interests against market failures (Goss, 1990c). Several authors have expressed their preferences for or against port privatisation. The most important arguments that are put forward in literature are: increased efficiency and flexibility; reduced public expenses; increased profits; increased competition; reduced politicisation Increased efficiency and flexibility The main purpose of port privatisation is to increase efficiency and performance by applying marketoriented principles (Cullinane & Song, 2002; Vickers & Yarrow, 1991). In addition, ports have the freedom to align the port charges to their corporate strategy and market situations. Generally, there are two ways to achieve higher efficiency rates (Notteboom & Winkelmans, 2001): 14

29 Allocative efficiency. Optimal efficiency is obtained by generating the highest possible outputs with given inputs or costs. Dynamic efficiency. Optimal efficiency is obtained by cost reduction and raised productivity by means of organisational reforms, technological innovations, human resource management etc. In addition, privatisation leads to a more flexible approach that meets the market demands and required productivity levels. By contrast, public port authorities are subject to historical and political statutes which could be obsolete, resulting in slowly adaptable ports (Perez-Labajos & Blanco, 2004). However, this does not necessarily mean that public ports are always less efficient than private ones. The port of Singapore for example was already one of the most efficient and customer-oriented ports in the world, even before its privatisation in 1997 (Notteboom & Winkelmans, 2001). Vickers and Yarrow (1991) highlight that efficiency advantages are only gained in highly competitive markets. Furthermore, Valentine and Gray (2001) have shown that there is no clear evidence that privately managed ports achieve higher efficiency rates than public port authorities. According to their research, port performance is more related to organisational structure than to port ownership. Based on the five types of organisation by Mintzberg (1979), they concluded that a simple structure i.e. a flexible management and reporting system with direct links to the top decision-maker results in the highest administrative efficiency. Private ports are mostly identified as divisional structures from an overarching holding company (cf. the British port case in Chapter 2). As a result, reports from the port departments are first passed to their local authority before reaching the top management of the multiport holding company, leading to delayed decision-making (Valentine & Gray, 2001). This organisational structure is nevertheless more preferable than a slower machine bureaucracy structure which often exists in publicly owned enterprises. A possible undesired effect of increased efficiency and flexibility is a decrease in employment level (in the case of dynamic efficiency) or an increase in workload (in the case of allocative efficiency) at the port, caused by automation on the one hand and cost reduction on the other hand. As a result, there could be a loss of domestic welfare and a negative impact on the level of employment (Chen, Pateman, & Sakalayen, 2017) Reduced public expenses Another reason for port privatisation is to relieve the government from its financial responsibilities, since public ports rely heavily on tax money to finance investments in port infrastructure (in the case of landlord ports), superstructure (in the case of tool ports), and port operations (in the case of service ports). As port investments become more capital-intensive in a rapidly changing port environment, the 15

30 supply of sufficient funds can cause a heavy burden for the expenditures of the government. Therefore, the transfer of financial and administrative duties to the private sector allows the port authority to have access to external capital from investors with more specific expertise (Valentine & Gray, 2001). In addition, the selling of shares to private players will result in an immediate raise in the government s revenues in the short term, especially for countries with lower credit ratings (Cullinane & Song, 2002; Vickers & Yarrow, 1991). As stated by proponents of port privatisation, access to private capital will enlarge the supply of financial resources from local and foreign investors, and therefore ameliorate the financial position of the port. However, this only applies to already profitable port operations and services; whereas for less profitable ports, public subsidies are still necessary (Notteboom & Winkelmans, 2001). Thomsen and Pedersen (2000) also draw attention to the fact that raising private capital can be more expensive than public funding, as this will involve higher interest costs and an adequate level of creditworthiness Increased profits A significant difference between private and public port authorities is their business approach. Whereas the public sector seeks to maximise social welfare by lowering distributional inequity, private parties are driven by profit maximisation, cost reductions and efficiency improvements. Therefore, privatised ports are likely to gain higher profits under the pressure of their investors. Unfortunately, there is a risk that these financial surpluses will largely stay in the company or will be distributed as dividends to the shareholders, with the consequence that local communities and environmental matters will receive less attention (Baird, 1995). On the other hand, it is harder for private port authorities to receive public grants, loan guarantees and trade protection (Vickers & Yarrow, 1991). Whereas public port authorities are eligible for crosssubsidisation when they are financially distressed, privatised ports are bound to the laws and rules of free competition. A potential consequence of a profit-driven approach and little or no subsidisation is that port dues and concession fees could be higher than at public ports, which would be a competitive disadvantage. In addition, private companies are usually prepared to take higher risks in order to increase shareholder value (Thomsen & Pedersen, 2000). Moreover, because of reporting duties of the quarterly results and increased pressure from the shareholders, private ports are focusing more on short-term goals, which could delay expensive long-term investments (Chen et al., 2017) Increased competition Liberalisation of the commercial activities allows more intensive competition from different port operators within the port area. As a result, private ports are driven by the need to improve their 16

31 efficiency; as a consequence, their financial and operational performance will increase (Cullinane & Song, 2002). Therefore, intra-port competition will lead to reduced port tariffs, which could result in a pricing advantage towards public ports. In practice however, as there are only a few large stevedoring companies and major shipping lines, the risk exists that these companies would make price agreements or tacit collusions, form secret cartels, or commit price leadership (Goss, 1990c). Consequently, due to the absence of governmental control, monopolistic behaviour and preferential treatment of port users may rise; creating inefficiencies and higher prices (Verhoeven, 2011). In addition, three types of entry barriers could protect incumbents from competition by new entrants (De Langen & Pallis, 2007): Economic entry barriers. Large initial investment costs, sunk costs and established networks could discourage newcomers. Moreover, current operators are often bound to their terminal by means of long-term concession agreements (see Paragraph 1.5.2). Institutional entry barriers. Entry conditions, political leverage, lobbying and exclusivity could lead to subjective behaviour. Locational entry barriers. The lack of sufficient port capacity restrains the inflow of newcomers. As a result, new operators have to wait for terminal expansions, undertake mergers or acquisitions if not subject to competition regulations or become part of a joint-venture (De Langen & Pallis, 2007; Notteboom & Winkelmans, 2001). With regard to comprehensive privatisation, it is often seen in practice that a privatised port authority takes over all port operations by vertical integration in downstream businesses, resulting in a private service port instead of a private landlord port (Chen et al., 2017). The lack of intra-port competition or any form of regulation enhances the monopolistic position of the private port authority which leads to potential market failures (Vickers & Yarrow, 1991). However, port authorities are often confronted with strong negotiation powers of the major shipping lines regarding infrastructural investments, expansion needs, improved accessibility etc., especially in dense maritime ranges with a lot of external competition from nearby ports (Notteboom & Winkelmans, 2001). Hence, the presence of inter-port competition diminishes the market power of the private port, especially when transport costs are low and usage fees are high (Matsushima & Takauchi, 2014). 17

32 1.4.5 Reduced politicisation Government-owned port authorities depend on the competent public body for strategic and financial decisions. Consequently, expansion or diversification of port activities are subject to political consensus, which often leads to bureaucratic processes that lack straightforwardness and flexibility compared to independent privatised port authorities (Cullinane & Song, 2002; Goss, 1990c). Hence, private port authorities are less reliant on political intervention, but are therefore harder to regulate (see Paragraph 1.5). In addition, because of the different planning systems and corporate strategies of each individual port, private ports experience poor connections with their inland networks, as well as opposing development plans with adjacent ports (Gilman, 2003). This results in a lack of hinterland integration and an oversupply of facilities. There is also often less interaction between the objectives of the port and the city (World Bank, 2007, Chapter 1). Besides, public interests and externalities such as safety, noise, traffic congestion and pollution are less closely monitored as is the case with public port authorities (Goss, 1990c). As opposed to a public port authority, the ownership structure of private ports could become dispersed when many private investors are a shareholder. This can result in conflicts of interest, slower decisionmaking and principal-agent issues (Short, 1994; Vickers & Yarrow, 1991). 1.5 Port regulation Public ports that are owned by a national or regional government are directly regulated by this public body (Thomsen & Pedersen, 2000). By contrast, in the case of port devolution and privatisation, issues could arise about the protection of public interests such as maximising social welfare and ensuring distributional equity (Notteboom & Winkelmans, 2001). As ports contribute significantly to the country s national economy, private port authorities can take advantage of their strong market position (Cullinane & Song, 2002). Therefore, specific attention is required with respect to regulatory policies and legal frameworks in order to reconcile the public services and commercial activities (Brooks, 2004). Hence, especially when the following three aspects are involved, government intervention is desired (Notteboom & Winkelmans, 2001): increasing return to scale in the production of goods or services; the presence of externalities, e.g. pollution, noise, congestion etc.; the use of public goods. When little competition is encountered, the objectives of private profit and social welfare could diverge. On the other hand, when public ownership applies, there is the risk that the port objectives are closely linked to political agendas (Vickers & Yarrow, 1991). As a result, a trade-off must be made 18

33 between short- and long-term strategies, particularly between maximising returns, optimising added value and ensuring future growth. The distribution of various port-related functions depends on country-specific policies, the presence of port concessions in terms of contractual agreements, the allocation of port land ownership, and subsidisation policies Port functions Based on the port devolution matrix of Baltazar and Brooks (2001), a clear distinction can be made between the three major port-related functions in which port activities are classified: Regulatory function. This covers activities to ensure safety and security within the port area; for example licensing and permitting, vessel traffic safety, customs and immigration, port monitoring, emergency services, protection of public interests, and environmental policies. Landlord function. This covers all activities related to the port land and infrastructure; for example waterside maintenance, marketing of the port s location, port development and planning, maintenance of port access, port security, and land acquisition or disposal. Operator function. This covers all commercial activities related to cargo handling, pilotage and towage, line handling, security and maintenance of facilities, marketing of operations, waste disposal, and landside and berth investments. An overview of the three port-related functions and their respective activities is given in Table 1.2. Table 1.2: The classification of port-related functions (adapted from Baltazar & Brooks, 2001, p. 7) Regulatory function Landlord function Operator function - Licensing, permitting - Vessel traffic safety - Customs and immigration - Port monitoring - Emergency services - Protection of public interest on behalf of the community - Environmental policies - Waterside maintenance - Marketing of port location - Port development, planning - Maintenance of port access - Port security - Land acquisition, disposal - Cargo handling - Pilotage and towage - Line handling - Facilities security, maintenance and repair - Marketing of operations - Waste disposal - Landside/berth investments The dividing line of port tasks between the public and private sector can vary across countries and depends on the legislative, economic and social environment of the port (Brooks, 2004). Because of the different levels of involvement by public and private actors, a clear separation must be made between the responsibilities of the public entities, port authorities and private operators by means of 19

34 transparent legislation, such as the establishment of a port decree or statutory body. Also mixed responsibilities often occur, even regarding the regulatory function (e.g. safety policy) (Brooks & Cullinane, 2006). In general, all three port-related functions are executed by the public sector in the case of service ports. However, some services that belong to the operator function can be outsourced to private subcontractors as well (Brooks, 2004). Regarding tool ports, all commercial activities within the operator function are carried out by private players, whereas in the case of landlord ports, only the regulatory and landlord function are in the hands of the public sector. Related to fully privatised ports, all three port-related functions fall to the private sector. However, prevention of maritime pollution and ensuring public safety and even port planning and development often remain the responsibility of the government, as is the case with the port of Hong Kong for example (Brooks, 2004; Brooks et al., 2017; Cullinane & Song, 2002). This does not apply to privatised ports in the United Kingdom, by which the regulatory function is also transferred to the private sector (Baird, 1995; Brooks & Pallis, 2012). It often implies the enactment of new legislation to regulate the transfer of ownership and to redefine the public and private responsibilities (World Bank, 2007, Chapter 6). More details about port regulation at the British seaports is provided in Chapter Port concessions Port concessions are the most common and powerful policy tool for public port authorities when terminal operations are outsourced to private companies (Ferrari et al., 2015; Notteboom, Pallis, & Farrell, 2012). A port concession is defined as a contract in which a government transfers operating rights to private enterprise, which then engages in an activity contingent on government approval and subject to the terms of the contract. (World Bank, 2007, Chapter 6). Hence, it does not involve the sale of physical assets (Vickers & Yarrow, 1991). There are three main types of contracts between the port authority and the private operator (Ferrari et al., 2015; Theys, Notteboom, Pallis, & De Langen, 2010; World Bank, 2007, Chapter 6): Management contract. The financial and operational risks are borne by the port authority, whereas the private operator receives a fee for his services that are carried out on behalf of the port authority. Lease contract. The private operator bears the financial and operational risks and pays a lease fee to the port authority for the use of the terminal. Concession contract. The private operator is engaged in terminal-related investments, usually by means of a build-operate-transfer (BOT) contract. 20

35 Figure 1.2 illustrates the relation between the government and the terminal operators. Whereas public terminals remain under direct control of the government, private terminals under a lease or concession contract pay a rental fee to the government in exchange for a concession to operate. Terminals are mostly awarded by competitive bidding processes, while direct appointment and private negotiation occur far less (Notteboom & Verhoeven, 2010). Figure 1.1: The relations between the government and public/private terminals (adapted from Zheng & Negenborn, 2014, p. 23) In general, a concession contract defines the following elements (Notteboom & Verhoeven, 2010; Theys et al., 2010; World Bank, 2007, Chapter 6): the applied allocation mechanisms; the duration of the concession terms; the price of the concession fees; specified targets such as minimum throughput, minimum employment level, modal split clauses, environmental actions, renewal or extension requirements etc. Selection criteria for granting concessions include (Notteboom & Verhoeven, 2010): The operator s activities and strategies should be in line with the commercial and development policy of the port. The duration of a concession and the possibility of prolongations may not hamper the entry of potential new entrants. As a general rule, the concession term must be sufficient to pay off the investment with an acceptable return. Usually, a term of 21 to 40 years is used, proportional with the size of the facility and the corresponding investments. The legitimate interests of the port authority and the involved communities must be protected. 21

36 Whereas concessions allow public authorities to retain the ownership of port land, further reform tools such as build-own-operate (BOO) contracts, divestitures by license or by sale, and comprehensive privatisation result in the outright sale of land ownership (World Bank, 2007, Chapter 6). This aspect is explained in Paragraph Supplementary, Figure 1.3 gives an overview of the port reform tools according to the Port Reform Toolkit of the World Bank (2007). Figure 1.2: The spectrum of port reform tools (World Bank, 2007, p. 111) Land ownership Corporatised port authorities lease port land from the city or State for a trivial fee, whereas its use is often contracted-out to operators by means of concessions or by law. In the case of service, tool and landlord ports, the ownership of port land remains public (Baird, 1995). There are only a few cases of private ownership of port land. Most examples can be found in the United Kingdom, where ports have undergone a complete asset privatisation or comprehensive 22

37 privatisation, including the sale of land ownership to private companies (Talley, 2009, Chapter 9; World Bank, 2007, Chapter 6) Port subsidisation In most situations, port authorities rely heavily on subsidisation of public goods for the general interest such as maritime access channels and sea locks as well as on public financing for expensive port infrastructure of which returns on investment can only achieved in the long term (Notteboom & Winkelmans, 2001). This is especially the fact at ports whereby the government retains ownership. Another common practice of governmental intervention is the public purchase of shares of the port authority (De Langen & Heij, 2013). This is for instance the case for Port of Rotterdam of which the Dutch government became co-shareholder, and for Port of Ghent recently renamed as North Sea Port, after the merger with Zeeland Seaports whereby the Belgian Province of East-Flanders became shareholder. As a result, governance and corporate strategies of many ports are seriously influenced by party politics. Moreover, concerns often arise whether subsidisation of port activities and infrastructure or additional public shareholdership can be considered as state aid, creating unequal level playing fields between ports. 1.6 Conclusion For the classification of ports according to their governance framework, it is important to segregate the executive role from the control function. For this reason, this chapter has distinguished four basic types of ownership models (Latin model, Hanseatic model, Anglo-Saxon model and mixed model) and four conventional management approaches (service port, tool port, landlord port and private port). Since the 1990s, seaports were rapidly expanding into large entities that operate on a worldwide scale. In order to address the accelerating global economic developments in maritime trade, a process of decentralisation has initiated in order to get more managerial autonomy and commercial responsibilities. Consequently, ports have devolved by means of modernisation, liberalisation, commercialisation, corporatisation and eventually privatisation. As a result, there are five different types of hybrid governance structures (Brooks & Pallis, 2012): ports that are owned and managed by the central government (e.g. ports in Eastern Europe); ports that are publicly owned by a federal, regional or municipal government, but with management decentralised to a local government body (e.g. Latin ports in Spain, Italy and Portugal after their reforms); 23

38 ports that are publicly owned by a federal, regional or municipal government, but with management decentralised to a corporatised entity (e.g. Hanseatic ports in Belgium, the Netherlands and Germany); ports that are publicly owned by a federal, regional or municipal government, but with management devolved to a private entity by concessions, lease or via public-private partnerships (e.g. ports in emerging countries); ports that are owned and managed by a private entity (e.g. Anglo-Saxon ports in the United Kingdom). However, there is no consensus on which model or framework will lead to the most effective performance (Brooks & Pallis, 2012). Proponents of port privatisation argue that the transfer of port ownership and assets to the private sector leads to increased allocative or dynamic efficiency, increased profits and increased competition by the removal of entry barriers on the one hand, and reduced public expenses and reduced politicisation on the other hand. Nevertheless, some issues arise with port privatisation. First, it requires a modified delineation of regulatory, landlord and operator functions between the port authority and commercial operators. Second, port land has to be allocated to the private owner, either by means of port concessions or the full transfer of land ownership. Third, the entitlements for public subsidisation become less obvious. Two cases will be elaborated in the next chapters to evaluate the practical implementation and the various effects of port privatisation. Chapter 2 describes the British privatisation process and Chapter 3 handles the Greek port reforms. 24

39 CHAPTER 2 PORT PRIVATISATION IN THE UNITED KINGDOM The United Kingdom was the first country to take the step towards fully privatised ports by means of the outright sale of port assets, including land property rights. This corresponds with the Anglo-Saxon port model as discussed in Chapter 1. The major incentives to make this move were (World Bank, 2007, Chapter 3): modernisation of institutions and installations; financial stability and self-sufficiency; labour stability. Still to date, the United Kingdom remains a unique example of a country where a comprehensive privatisation programme took place on such a large scale. More recently, Australia has applied some form of semi-privatisation by which port assets and port land are given in concession for a period of 99 years, yet retaining the regulatory function to the public authorities (Brooks et al., 2017; Chen et al., 2017). The geography of the United Kingdom as an island has resulted in the development of many seaports and harbours, especially on the southeast coast. This chapter covers the various managerial approaches applied in the United Kingdom, the distribution of the port functions, the major private port operators, and the effects of the privatisation process on national port policy. 2.1 Privatisation process After the Second World War, many British commercial ports which were previously liberalised and thereafter owned by private railway companies became nationalised under the Transport Act 1947 by the then prevailing Labour government. The main intention was to intervene in the accumulated deficits and high capital debts of the private owners (Kahn-Freund, 1963). As a result, these ports became financially reorganised and were placed under the control of the British Transport Commission (BTC), a public body operating under the behalf of the Minister of Transport (Cullinane & Song, 2002; Kahn-Freund, 1963). Subsequently, the BTC was subdivided into five distinguished public corporations, by which control of the commercial docks was assigned to the British Transport Docks Board (BTDB) under the Transport Act 1962 (Pettit, 2008). At that time, the BTDB covered the operations and management of nineteen public ports. 25

40 However, following the election of Prime Minister Margaret Thatcher of the Conservative Party in 1979 and the resulting neoliberal and market-oriented policies of deregulation and privatisation, many British ports were once again devolved to the private sector. Directly affected by the economic recession of the 1970s, reasons behind this approach were (Vickers & Yarrow, 1991): limiting public sector deficits caused by heavy subsidisation; generating immediate revenues from the port sales, as well as from corporate taxes afterwards; increasing efficiency and competitiveness of state-run companies. The privatisation process occurred in two waves: the first wave took place during the 1980s, while the second wave followed in the 1990s First privatisation wave ( ) By cause of the Transport Act 1981, the entire British Transport Docks Board became corporatised into a private limited company holding under the name Associated British Ports (ABP). This entity was initially owned by the British government, but subsequently sold for 51.8% of the shares on the London Stock Exchange in 1983; whereas the remaining part was publicly offered in the following year (Baird & Valentine, 2006; Pettit, 2008). By selling Associated British Ports as a whole, it was intended to raise investor interests and to increase the probability of success. In addition, the employees received one million shares free of charge as compensation for potential losses and to promote worker productivity (Haarmeyer & Yorke, 1993). With the privatisation of the port sector, it was generally aimed to reduce service costs, to increase competitiveness towards the European mainland ports, and to diversify and commercialise port business (Haarmeyer & Yorke, 1993). Before this, the ports under Associated British Ports were known as trust ports. These are public autonomous statutory port authorities, set up by an Act of Parliament and governed by an independent Conservancy Board or Harbour Commission (Baird, 1995; Butcher, 2013). In most cases, trust ports act as public service ports, although they are selfgoverned and have to pay interests on governmental loans (Baird, 1995; Cullinane & Song, 2002). They operate in accordance with the governing legislation and are accountable to the Department of Transport. Their two major functions are (Baird, 1995): providing the rightful facilities for cargo and passenger handling; acting as a regulator body in terms of safety of navigation, pilotage and overall control. Due to the Transport Act 1981, the British port sector was characterised by three different types of ownership (cf. Bassett, 1993; Cullinane & Song, 2002; Haarmeyer & Yorke, 1993; Liu, 1995; Pettit, 2008): 26

41 Private port authorities under ABP, which encompasses nearly one third of all port traffic and one quarter of the total port revenues in the United Kingdom at that time. Besides ABP, the ports of Felixstowe (then owned by European Ferries), Liverpool (then owned by Mersey Docks and Harbour Board) and Manchester (then owned by Manchester Ship Canal Company) were the only other private ports. Remaining national trust ports under the control of the central government. Minor municipal ports under the control of local authorities Second privatisation wave (1991- ) A second privatisation wave was initiated by the UK Ports Act of It was implemented to allow and assist the remaining trust port authorities to equally establish a private limited port company by corporatisation and subsequent privatisation (Brooks, 2004; Butcher, 2013; Cullinane & Song, 2002). A trust port can either opt for privatisation on a voluntary basis or the port can be forced by the government if the annual turnover is above five million pounds (Baird, 1995; Bassett, 1993; Cullinane & Song, 2002; Pettit, 2008). The transfer of public ownership to the private sector usually happened by means of competitive tender. As a result, seven former trust ports became privatised between 1992 and It concerns the voluntary privatisation of the ports of Clyde, Forth, Medway, Tees & Hartlepool and Tilbury in 1992; while the ports of Dundee and Ipswich were mandatorily privatised in 1996 and 1997 respectively (Meersman, Van de Voorde, & Vanelslander, 2014, Chapter 4; Monios, 2017). Mersey Docks & Harbour Company (MDHC) that managed the ports of Liverpool and Medway was 13.9% owned by the British government due to financial difficulties in 1971 (Baird & Valentine, 2006). These public shares were sold in Table 2.1 gives a general overview of the privatisations of the major former publicly owned ports in the United Kingdom since Table 2.1: An overview of the privatisations of major former publicly owned British ports (adapted from Baird & Valentine, 2006, p. 76) Date of privatisation Company name Percentage sold Privatisation method 1 February 1983 Associated British Ports 51.5% Public offering 1 April 1984 Associated British Ports 48.5% Public offering 31 January 1992 Teesport 100% Private sale 11 March 1992 Port of Tilbury 100% Management buyout 18 March 1992 Forth Ports 90% Public offering 27

42 (Table 2.1 continued) 24 March 1992 Clyde Port Authority 100% Management buyout 30 June 1992 Medway Ports Authority 100% Management buyout 17 November 1995 Dundee Port Authority 100% Private sale 20 March 1997 Ipswich Ports Authority 100% Private sale 2 March 1998 MDHC 13.9% Public offering Current situation At this moment, fifteen of the twenty largest British ports by tonnage are privately owned. In total, these private ports handle 69% of the seaborne tonnage in the country (Monios, 2017). Nevertheless, there still exist trust ports of national importance of which the seven largest i.e. the ports of Dover, Harwich Haven, London, Milford Haven, Poole, Shoreham and Tyne were categorised as Public Corporations in 2001 (Butcher, 2013). These ports have considered changing their legislation in order to gain more financial autonomy by means of Harbour Revision Orders. Until today however, only Port of London Authority the managing trust company for the river Thames has yet achieved this benefit. The Port of Dover wanted to assess the impact of the Channel Tunnel in 1995, before making a decision regarding privatisation (Butcher, 2013). The port of Bristol which is the largest municipal port in the United Kingdom became privatised in 1991, when it was purchased by First Corporate (Bassett, 1993). However, the transfer of operational responsibilities from the municipality to the private operator occurred by means of a long-term concession of 150 years, hence retaining municipal ownership (Baird & Valentine, 2006; Goss, 1998; Monios, 2017). As a result, this approach is somewhat similar to the Hanseatic port model The privatisation wave has virtually ceased since the Labour Party became the main governing party in The privatisation request of Port of Tyne was rejected in 1997 because of political opposition (Butcher, 2013). In addition, the economic crisis of 2008 has delayed the potential privatisation of the ports of Dover, Harwich Haven, Milford Haven, Poole and Shoreham. As a result, all existing trust ports continued to remain publicly owned. Despite falling under the conditions of compulsory privatisation, the application of Port of Dover was rejected in 2012 because of the following reasons (Baird & Valentine, 2006; Butcher, 2013; Pettit, 2008): its strategic trade position with the European mainland; the lack of community support for privatisation; the already very efficient operations; the presence of privately operated ferry terminals. 28

43 Table 2.2 compares the main features in terms of ownership and management of the three current port models in the United Kingdom. Table 2.2: The main features of port ownership and management in the United Kingdom (adapted from Cullinane & Song, 2002, p. 69) Private port Trust port Municipal port Ownership Shareholders Public trusts Local authorities Management Elected by shareholders Appointed by the Ministry Appointed by local authorities Objectives Profit-making Public interests Local interests Financing Share-issuing, borrowing from markets Fixed-interest loans (limited) Fixed-interest loans (limited) Activity area Free to diversify Legislatively restricted to its port activities Legislatively restricted to its port activities Figure 2.1 shows the locations of the major commercial ports (private, trust and municipal) in the United Kingdom. More information about the respective port owners and the type of ownership is presented in Annex C. Particular attention must be given regarding the private ports of Felixstowe, Harwich International, London Gateway and Tilbury, of which the harbour authority still remains a public trust (see Paragraph 2.2.2). The port of Bristol is an exceptional case of a municipal port that leases its commercial activities to a private operator (see supra). 29

44 Figure 2.1: An overview of the major commercial ports in the United Kingdom (adapted from Baird, 1995, p. 143; updates from Monios, 2017, p. 80) 2.2 Port functions Port privatisation in the United Kingdom is very unique and far-reaching as the government adopts a non-interventionist laissez-faire policy, completely relying on free-market mechanisms. As a result, the British government is not involved in the commercial and administrative management of ports (Brooks & Pallis, 2012; Gilman, 2003). Regarding pure private ports, the three ports functions (operator, landlord and regulator) are transferred to the private port operator. 30

45 2.2.1 Operator and landlord function Obviously, private ports are responsible for the financing and management of all commercial activities falling under the operator function (Baird, 1995). In addition, the British government requires private ports as well as trust ports to be financially independent, even for landlord expenses related to the maritime accessibility, such as maintenance dredging, navigational aids, estuarial safety, river management, harbour protection, pilotage, hinterland connections and port planning (Baird, 1995, 1999; Baird & Valentine, 2006). Nevertheless, the costs of landlord activities are difficult to be fully recovered without public contribution or without increasing the port charges (Baird, 1999). However, at the time of privatisation, very large discounts on port sale prices have allowed the new private owners to have some additional financial buffer (see Paragraph 2.4.2) Regulatory function Port regulation is in the hands of private parties, typically of the involved port operator. Activities such as port monitoring and emergency services are usually outsourced to a private party (often the port owner itself), although the distribution of responsibilities differs from one port to another. For example, the private ports of Bristol, Felixstowe, Hartlepool, Larne, Liverpool, Portland, Tilbury and Tees, as well as the trust ports of Belfast, Dover and Falmouth, have their own private police force. Furthermore, vessel traffic safety, channel maintenance and pilotage at Felixstowe and Harwich International on the one hand, and London Gateway and Tilbury on the other hand, are executed by statutory harbour trusts, namely Harwich Haven Authority and Port of London Authority respectively (Baird, 1999; Monios, 2017). There hardly exists any national port policy that encompasses the market needs, commercial viability, economic strategies and environmental issues of the British port network. Private ports are deemed to be financially independent, formulate their own development plans and submit it to the Secretary of State for approval (Gilman, 2003). However, according to Baird (1999), the local communities still have a strong influence on port development, by means of district or county councils. Objections against adverse environmental effects, employment declines and congestion issues can hamper the extension plans of the port. In addition, raised environmental issues are subject to public inquiries, whereas new port developments require a Harbour Revision Order (Baird & Valentine, 2006). For example, plans to construct a new container terminal at Dibden Bay (Southampton) have been suspended due to a negative environmental judgement of the public inquiry (Baird & Valentine, 2006; Monios, 2017). Furthermore, port users can appeal against the level of port charges as well as to pilotage fees (Goss, 1998). 31

46 Initially, port labour was regulated by the National Dock Labour Scheme. However, this was abolished in 1989 in order to increase operational efficiency (see Paragraph 2.4.5). 2.3 Private port holdings The majority of private port authorities in the United Kingdom is owned by only a handful of port holdings. Indeed, the involvement of financial markets has resulted in heavy consolidations in the British port sector (Brooks & Pallis, 2012). The five largest port owners are: Associated British Ports; Peel Ports; Forth Ports; PD Ports; Hutchison Ports. Some background information of each of these port owners is given below. In addition, an overview of the respective ports is given in Annex D Associated British Ports Associated British Ports is a wholly owned subsidiary of Associated British Ports Holdings and is the largest port operator in the United Kingdom. Formerly owned by the British government under the name British Transport Commission ( ) and British Transport Docks Board ( ), it became the first listed port owner in the United Kingdom, as a result of the Transport Act 1981 (see supra). Currently, Associated British Ports owns nineteen commercial ports across England, Wales and Scotland, including the major ports of Grimsby & Immingham, Hull and Southampton. In addition, it runs the commercial activities of the municipal port of Cardiff and the trust port of Teignmouth. Its headquarters are located in London and the ownership structure consists of a consortium of various private equity funds: 33.3% is owned by Borealis (a private pension fund from Canada), 33.3% by Anchorage Ports (a public-private partnership between the Canadian Pension Plan Investment Board and UK s Hermes Infrastructure), 23.3% by Cheyne Walk Investment (a public investment fund from Singapore), and 10.0% by Kuwait Investment Authority (a public investment fund from Kuwait) (Financial Times, 2015). 32

47 2.3.2 Peel Ports Peel Ports is a subsidiary of The Peel Group and is the second largest port operator in the United Kingdom. The company owns a total network of ten ports across Scotland (grouped as Clydeport), England and the Republic of Ireland, as well as the Manchester Ship Canal. In 1993, Peel Ports became owner of the Manchester Ship Canal that links the city of Manchester with the Irish Sea. Ten years later, the company acquired Clydeport a former trust port that became privatised in 1992 incorporating the ports of Ardrossan, Hunterson, Glasgow and Greenock. In 2005, Mersey Docks and Harbour Company (MDHC) was added to the portfolio of Peel Ports. MDHC compromises the ports of Liverpool and Medway, of which the latter contains Chatham and Sheerness (Peel Ports Group, n.d.). The headquarters of Peel Ports are located in Manchester. The company is 50.1% owned by Peel Group and 49.9% by Deutsche Asset Management (a private investment fund of Deutsche Bank). Peel Group s majority stakeholder is the British Chairman John Whittaker (75.0%), while the remainder of 25.0% is owned by the Olayan Group (a private Saudi conglomerate) Forth Ports Forth Ports owns eight ports across Scotland and the port of Tilbury in England. Its headquarters are located in Edinburgh. Forth Ports was established in 1967 as Forth Ports Authority, a public trust port that encompasses five commercial ports in the Firth of Forth: i.e. the ports of Burntisland, Grangemouth, Kirkcaldy, Leith and Methil. Eventually, it became privatised in 1992 under the Transport Act The ports of Dundee and Tilbury were acquired in 1995, as well as the port of Rosyth in 1997 (Forth Ports, n.d.). Since 2011, Forth Ports is owned by Arcus European Infrastructure Fund, a British private investment fund (Fraser, 2011) PD Ports PD Ports owns four ports in England; these are Teesport and Hartlepool on the river Tees, as well as the short-sea ports of Howden and Keadby. In addition, PD Ports acts as commercial operator in seven other ports. Its headquarters are located in Middlesbrough. PD Ports was originally known as Powell Duffryn and started its activities with coal mining in After the Second World War, the company diversified in engineering and shipping. PD Ports became co-owner of Tees and Hartlepool Port Authority after its privatisation in 1992 and eventually acquired all the shares in After several take-overs of PD Ports in the 2000s, it became 33

48 fully owned in 2009 by Brookfield Asset Management, a Canadian-based public asset manager (PD Ports, n.d.) Hutchison Ports Hutchison Ports is a subsidiary of CK Hutchison Holdings (80%), formerly known as Hutchinson Whampoa. It is a Hong Kong-based public conglomerate that operates various container terminals worldwide. Moreover, it is the largest terminal operator in the world (Louppova, 2016). The remaining 20% of the shares is owned by PSA International (World Cargo News, 2006). Hutchison Ports owns three ports in England: Thamesport, Harwich International and Felixstowe. The latter is UK s busiest container port, ranking seventh in Europe on the basis of container throughput (Notteboom, 2017). The port of Felixstowe was taken over from P&O Group in Thamesport and Harwich International Port were purchased from Rutland Trust in The latter acquisitions allowed Hutchison Ports to transfer excess capacity of Felixstowe to the brownfield site of Thamesport, as well as to relocate its roll-on/roll-off activities to Harwich International. Indeed, expansion was limited at Felixstowe due to spatial and environmental issues (Baird, 1999). Furthermore, Hutchison Ports has shares in Freeport (The Bahamas) and Port Klang (Malaysia). 2.4 Privatisation results More than 35 years after the first port privatisation under the Transport Act 1981, it is difficult to assess and interpret the results of port privatisation itself. Indeed, various side-effects have contributed to the outcomes: Geographical factors and deregulation could have a greater influence on port performance (Cullinane & Song, 2002). Proximity to the continental ports in the Rhine-Scheldt Delta and Le Havre can lead to external competition (substitutability), as well as to mutual dependency between these ports (complementarity) (Notteboom, 2009). The reported figures from the major port holdings are often consolidated. Therefore, it is hard to examine the specific results of each port on a case-by-case basis (Goss, 1990c) Efficiency and investments Port capacity is subject to exogenous global developments on the demand side which makes traffic flows control difficult (Pettit, 2008). Winkelmans and Notteboom (n.d.) use the term HEAT (highest 34

49 efficient attainable throughput) to indicate the port efficiency limit and the term MAT (maximum attainable throughput) to indicate the port capacity limit. In order to meet the demand, the HEAT- and MAT-levels should be increased in due time. Adequate global traffic growth forecasts are necessary to predict the need for facility expansion or optimisation. Indeed, undercapacity will lead to congestion and a loss of traffic, whereas overcapacity will raise the average port user costs (Winkelmans & Notteboom, n.d.). Because private ports seek to maximise their return on investment in the short term (typically three to five years) and therefore strive to use their existing facilities to the fullest extent possible, they are more cautious about expanding their capacity (Baird, 2000, 2013). Moreover, largescale capital investments with long pay-back periods are hardly acceptable to private investors (Baird, 1999). By contrast, public port authorities are usually applying a longer-term strategy by increasing their capacity well before the MAT-point is reached, preferably at the HEAT-optimum. The solid line in Figure 2.2 represents the capacity curve when no facility expansions are made. The dotted line represents the new capacity curve when capacity is upgraded, shifting the new HEAT- and MATlevels upwards. Figure 2.2: The evolution of the capacity profile of a seaport (Winkelmans & Notteboom, n.d., p. 6) During the 1990s, increased maritime traffic was often addressed with consolidation (Farrell, 2013). However, during the early 2000s, the British ports have missed the opportunity to benefit from the container traffic boom, due to their inability to cope with the increased supply (Monios, 2017). This has led to congestion issues at the major seaports (Farrell, 2013). Although since 2010, ports on the 35

50 southeast and west coast of the United Kingdom are investing in new deep-water container terminals. Examples include London Gateway, Liverpool2, Felixstowe South, Northern Gateway Terminal at Teesport, and Bristol Deep Sea Container Terminal (Asteris & Collins, 2010). To illustrate port performance in practice, a report by JOC Group (2013) classifies the private port of Southampton as the most productive container port in Europe, based on berth productivity, i.e. the average number of total container moves divided by the average number of hours during which the vessel is at berth. Table 2.3 gives an overview of the ten most productive ports in Europe for Table 2.3: The berth productivity of the major European ports in 2012 (JOC Group, 2013) Rank Port Country Berth productivity 1 Southampton United Kingdom 71 2 Zeebrugge Belgium 65 3 Rotterdam Netherlands 63 4 Bremerhaven Germany 62 5 Hamburg Germany 62 6 Algeciras Spain 53 7 Antwerp Belgium 50 8 Felixstowe United Kingdom 49 9 Piraeus Greece Le Havre France State revenues Because port privatisation in the United Kingdom was a first of its kind, there were a lot of valuation discrepancies, which resulted in former trust ports being sold at only 10% to 25% of their true market value (Baird, 2000). In addition, in order to make the sale of the ports attractive, 50% of the sale price was transferred back to the port authority successor, being in fact the buying party (Baird, 1995; Vickers & Yarrow, 1991; World Bank, 2007, Chapter 6). Moreover, public loans of financially distressed ports were written off, as was the case with the sale of the port of Bristol (Bassett, 1993). Because of these forms of state aid, the newly privatised ports had considerably lower debts and gained very high profits, resulting in substantial welfare losses for the taxpayers and port users (Baird & Valentine, 2006; Brooks et al., 2017; Chen et al., 2017; Saundry & Turnbull, 1997; World Bank, 2007, Chapter 6). 36

51 Also the initial lack of interest by private investors at the competitive bidding phase has led to an excessive undervaluation of the port assets. This became particularly evident when the ports of Clyde, Forth, Medway and Tilbury were taken over between 18 and 30 months after privatisation at a price that was five to eight times higher than the original government levy (Baird, 1995; Baird & Valentine, 2006). Since many privatisations started with management and employee buyouts (MEBO), these high profits ended up in the accounts of individuals (Goss, 1998; World Bank, 2007, Chapter 6). It even has resulted in deliberate asset-stripping behaviour of speculators (Butcher, 2013; Rodrigue et al., 2011). Concerns about the role of accounting firms regarding the initial port valuations are raised as well (Arnold & Cooper, 1999) Profit-making Three years after the privatisation of five trust ports in 1992, the profits of these ports have risen by 224%, tonnage by 91%, revenues by 21% and capital expenditures by 53% (Farrell, 2013). However, due to the fact that the private equity funding is treated as debt on the account of the port authorities, port surpluses are primarily used to repay these debts together with the accumulated interests, instead of investing in new infrastructure (Baird, 2013). This could possibly explain the fact that port charges are likely higher at British ports (Chen et al., 2017). Nonetheless, the strong market power of the major shipping lines forces ports to offer attractive port rates, resulting in the ports being price takers (Baird, 1999; Farrell, 2013). Furthermore, private ports are also involved in non-port related activities such as real estate development, which contributes significantly to the profits caused by the higher land values after privatisation (Bassett, 1993) Competition Due to the high number of ports in the United Kingdom, sufficient inter-port competition is present. However, competition from seaports in neighbouring countries can be more threatening, especially since feeder traffic becomes more widespread. For example, the port of Le Havre can be a shipping alternative for the hinterlands of Southampton, whereas the ports of Rotterdam, Antwerp and Zeebrugge can be used to tranship cargo to the hinterlands of Felixstowe. On the other hand, intra-port competition is mostly absent as a result of the private service model. Indeed, the private port company often combines the roles of port authority, landowner and port operator (Baird & Valentine, 2006; Brooks et al., 2007; Monios, 2017). Hence, gains in efficiency and competitiveness are largely neglected to the detriment of the port users. Remarkably, even regulatory powers were transferred to the private port authority (Baird & Valentine, 2006). 37

52 In addition, ports that are situated in the same river estuary are usually consolidated into one port authority in order to achieve higher economies of scale. Examples include the Firth of Clyde (Peel Ports), the Firth of Forth (Forth Ports), the Firth of Tay (Forth Ports), River Humber (ABP), River Medway (Peel Ports), River Mersey (Peel Ports), River Tees (PD Ports), and the north bank of Bristol Channel (ABP). Notably, since the regulatory rights and responsibilities are transferred to the private port authority, estuarial monopolies at certain locations are formed (Baird, 1995; Monios, 2017) Employment Labour productivity has increased significantly since the beginning of the 1990s. However, many commentators attribute this effect rather to the abolition of the National Labour Dock Scheme (NLDS), which became effective in 1989 (e.g. Arnold & Cooper, 1999; Baird, 1995; Baird & Valentine, 2006; Cullinane & Song, 2002; Monios, 2017; World Bank, 2007, Chapter 6). Prior to the abolition of the NLDS, private port authorities such as Associated British Ports had to assign port labour activities to members of the Employment Scheme (Pettit, 2008). This labour regulation gave registered dock workers exclusive labour rights, often resulting in overmanning and higher operating costs (Haarmeyer & Yorke, 1993). In the years after the cessation of the NLDS, wages have been reduced and the rights of employment, pensions and sickness benefits were withdrawn. Furthermore, the number of employees in the British port sector has decreased with more than two-thirds (Arnold & Cooper, 1999). As a consequence, the impact of social costs must not be ignored. On the other hand, labour deregulation has led to the following results (Turnbull, 1991): increased labour market flexibility; efficient restructuring of working practices; increased productivity and profits National integration Despite attempts by the British government to implement a form of national port policy approach for example the Modern Ports policy in 2000 the private ports have always received a high level of operating freedom without public interference. The constant failure to apply a national port framework is primarily caused by the wide variety of different port owners, applied governance models and individual corporate strategies (Pettit, 2008). The micro-economic approach of each port is detrimental for the alignment of throughput growths at the ports with hinterland developments and national transport strategies (Gilman, 2003). An exceptional case has occurred with the licensing of London Gateway. It concerns a terminal facility within Port of London, which is regulated as a trust by Port of London Authority. In order to 38

53 develop and operate the terminal, private operator DP World was obliged to invest in road and rail infrastructure as well, connecting the terminal with the hinterland (Thames Gateway Forum, 2007). It is often seen with the privatisation of British ports that especially foreign investors are involved in having control over these ports. This could result in certain tension fields regarding port development aspirations of the British government and commercial interests of the private owners (Baird, 1999; Pettit, 2008). This is particularly an issue with the absence of a public regulatory body. 2.5 Conclusion The port sector in the United Kingdom has a long history of nationalisations and privatisations (see Figure 2.3). The Labour Party nationalised the financially distressed ports that were owned by private railway companies. As a result, the public British Transport Commission (BTC) was established under the Transport Act 1947 and transformed to the British Transport Docks Board (BTDB) under the Transport Act A first privatisation wave was initiated by the Conservative Party under the Transport Act 1981, whereby the BTDB was corporatised under the name Associated British Ports (ABP) and was subsequently sold to the private sector. A second privatisation wave followed under the UK Ports Act The aim was to privatise the remaining public trust ports in the United Kingdom. Transport Act 1947 Transport Act 1962 Transport Act 1981 UK Ports Acts 1991 Nationalisation I (BTC) Nationalisation II (BTDB) Privatisation I (ABP) Privatisation II (other ports) Figure 2.3: The port reform process in the United Kingdom A major issue of the British private port sector is the lack of a holistic port policy, due to the fact that even the regulatory function was transferred to the private port owner. There are currently five major port owners active in the United Kingdom: ABP, Peel Ports, Forth Ports, PD Ports and Hutchison Ports. It is noteworthy that these enterprises are largely owned by foreign investment and pension funds. An overview of the shareholder structures of these port operators is presented in Annex E. The financialisation of the port industry can result in increased consolidation and less embeddedness between the shareholders interests and the regional, strategic and operational challenges of the port (Rodrigue et al., 2011). Among these external shareholders are also foreign state-owned enterprises involved. 39

54 Summarised, the port privatisation in the United Kingdom has resulted in: higher efficiency, but less long-term investments and developments compared to landlord ports in Europe; significant losses to the public welfare, because of the undervaluation of the port assets during the bidding period; increased profits, but also higher debts to the shareholders; monopolistic behaviour regarding the terminal and estuarial operations, due to consolidation and the absence of regulation; a sharp decline in the employment level, mainly due to the abolition of the National Dock Labour Scheme at the start of the privatisation processes; a lack of national integration, due to individualistic strategies and foreign shareholdership. 40

55 CHAPTER 3 PORT PRIVATISATION IN GREECE The Mediterranean Sea has various seaports between which fierce competition exists. In order to retain a favourable position and to attract new cargo traffic, high productivity and efficiency rates are required. Originally, most of the Mediterranean ports were characterised as Latin service ports or tool ports by which administrative, regulatory and commercial activities are directed from a central government. Port reforms towards the devolution of autonomy have occurred during the 1990s for the major ports in Spain, Italy, Turkey and Portugal. Subsequently, the liberalisation wave of commercial activities reached Malta (2004), France (2008), Port of Eilat in Israel (2011) and recently Port of Limassol in Cyprus (2017) (Brooks et al., 2017; Panayides, Lambertides, & Andreou, 2017). More liberalisation and privatisation processes are planned for the Israeli ports of Haifa and Ashdod in 2020 (Castillo- Manzano & Ascensio-Flores, 2012). Greece was the first country within the Mediterranean port range to take privatisation a step further by also selling the controlling shares of its major seaports (the ports of Piraeus and Thessaloniki) to the private sector. Hence, besides the United Kingdom, Greece is the second European country of which the major seaports are in the hands of external parties. In this chapter, the economic importance of the Mediterranean region, the privatisation process of the ports of Piraeus and Thessaloniki, and the resulting effects are presented. 3.1 Importance of the Mediterranean port range After the Hamburg-Le Havre port range, the Mediterranean port range has the largest share of container traffic in Europe (Notteboom, 2010a). Situated at the crossroads of Europe, Asia and Africa, as well as its proximity to the Suez Canal, make this region economically and strategically important. This has resulted in attracting many foreign investments from shipping lines (Valleri et al., 2006). Especially since the mid-1990s, these ports have achieved high growth rates due to four major macroeconomic events: the creation of the European Single Market and the resulting European integration, which facilitates EU-members to compete at continental level (Pallis, 2007); the establishment of hub-and-spoke transhipment and intermediate hubs in the Mediterranean Sea for intra-med traffic and short-sea transport to Northern Europe, the Black 41

56 Sea region and West-Africa (cf. Notteboom, 2010a; Notteboom & Rodrigue, 2005, 2008; Pallis, 2006; Rodrigue & Notteboom, 2010); port reforms and major port investments in France, Italy and Spain (Pallis, 2007); increased import of goods from China and India (Medda & Carbonaro, 2007). Remarkably, the market growth in container throughput at the Mediterranean seaports was proportionally accompanied with a decrease in container traffic at the Hamburg-Le Havre range. This may indicate the complementarity between these two port ranges. Figure 3.1 shows the market share in container traffic for the major European port ranges, whereas Figure 3.2 represents the average annual net shifts in container traffic. Figure 3.1: The evolution of the market share of maritime ranges in the European container port system (Notteboom, 2010a, p. 570) 42

57 Figure 3.2: The average annual net shifts between maritime ranges in the European container port system (Notteboom, 2010a, p. 571) The importance of the Mediterranean port range has led to stronger competition between the ports in this region. In addition, it is geographically located at the junction of two supranational transport networks, specifically the Trans-European Transport Network of the European Union and the One Belt, One Road initiative of China Transhipment hubs Whereas gateway ports act as entry points for goods destined for extensive hinterlands, transhipment ports serve as freight hubs, from where feeder services and short-sea shipping operations are executed (Notteboom, 2010a). The Mediterranean port range consists of several multi-port gateway regions, such as the Spanish Med (i.a. Barcelona, Valencia), the Ligurian range (i.a. Genoa, La Spezia), and the North Adriatic (i.a. Koper, Venice), as shown in Figure 3.3 (Notteboom, 2010a). 43

58 Figure 3.3: An overview of the major European multi-port gateway regions (Notteboom, 2010a, p. 572) Also the East-Mediterranean region is currently developing its ports into gateways (especially the port of Piraeus), in order to cope with the growing consumer markets in Central and Eastern Europe as well as in the Balkan region. This can be explained by the evolution towards terminalisation of supply chains, by which port terminals and their logistic operators play a bigger role because of the following reasons (cf. Notteboom & Rodrigue, 2005, 2008; Pallis, 2006; Rodrigue & Notteboom, 2009, 2010): the expansion of intermodal links and inland transport systems; the improved integration and synchronisation with the hinterland; the use of regional distribution centres, or a tiered system with one main distribution centre and several regional distribution centres ( port regionalisation ). The intense competition between the East-Mediterranean ports necessitate continuous investments in infrastructure, administrative efficiency, operational cost-effectiveness, high productivity rates, laytime flexibility, expansion margins, customer services and intermodal coordination. The three largest ports are: Piraeus (Greece), Gioia Tauro (Italy) and Marsaxlokk (Malta). Other important East-Med ports are among others: Limassol (Cyprus), Damietta (Egypt), Port Said (Egypt), Kumport (Turkey) and Beirut (Lebanon). The port of Piraeus, however, has suffered from high Greek public deficits and stringent inflation measures, so public investments were strictly limited (Pallis, 2007). As a result, the 44

59 growth rates at Piraeus were lower than in other Mediterranean ports (see Figure 3.4). The same applies for the shift effect i.e. a method to represent TEU-shifts (twenty-foot equivalent units) between ports in the region in the Mediterranean port range (Fageda, 2000) (see Figure 3.5). More recently, additional competition has arrived in the region driven by the success of the Turkish ports and the Romanian port of Constanta (Pallis, 2007). Figure 3.4: The average growth rates and market share of the Mediterranean ports during (adapted from Fageda, 2000, p. 11) Figure 3.5: The shift effect at the Mediterranean ports during (in 1000 TEU) (adapted from Fageda, 2000, p. 12) 45

60 3.1.2 Trans-European Transport Network The Trans-European Transport Network (TEN-T) is the investment programme of the European Commission, initiated in The programme aims to improve the transport infrastructure and mobility within and between the EU Member States with regard to roads, railway lines, inland waterways, maritime shipping routes, airports and rail-road terminals (European Commission, 2018a). The network is composed of nine transnational corridors (see Figure 3.6): Baltic - Adriatic. This corridor connects the Polish seaports with the Adriatic seaports of Slovenia and Italy, through the Czech Republic, Slovakia and Austria. North Sea - Baltic. This corridor connects the North Sea ports of Belgium, the Netherlands and Germany with the seaports of the Baltic States, through Central Poland. Mediterranean. This corridor connects the West-Mediterranean seaports of Spain and their hinterland with the Hungarian capital of Budapest, through the southeast of France, the north of Italy and the north of Croatia. Orient / East-Med. This corridor connects the German seaports with the Greek East- Mediterranean seaports, through the Czech Republic, Austria, Slovakia, Hungary, Eastern Romania and Bulgaria. Scandinavian - Mediterranean. This corridor connects the seaports of Southern Scandinavia and Finland with the Central-Mediterranean seaports of Italy and Malta, through Central Germany and Western Austria. Rhine - Alpine. This corridor connects the North Sea ports of Belgium and the Netherlands with the port of Genoa, through Western Germany and Switzerland. Atlantic. This corridor connects the cities of Manheim and Strasbourg with the Portuguese seaports, through the French ports of Le Havre, Rouen and Bordeaux, and through the Spanish hinterland. North Sea - Mediterranean. This corridor connects the Irish and British seaports with the port of Marseille, through the North Sea ports of the Netherlands and Belgium, and through Luxembourg and Eastern France. Rhine - Danube. This corridor connects the Rhine cities of France and Germany with the Romanian Black Sea ports, through Austria, the Czech Republic, Slovakia and Hungary. 46

61 Figure 3.6: The nine corridors of the Trans-European Transport Network (European Commission, 2014) Motorways of the Sea is the maritime pillar of the TEN-T programme. It has assigned 83 ports as core ports, which means that these ports are of strategic importance within the European transport network. There are six trans-european corridors that link the Mediterranean basin with the European hinterland. The Spanish ports (especially Barcelona, Valencia and Algeciras) claim the West-Med hub, the Italian and Maltese ports (especially Genoa, La Spezia, Gioia Tauro and Marsaxlokk) claim the Central-Med hub, and the Greek and Cypriote ports (especially Piraeus and Limassol) claim the East-Med hub. Subsidies for investments in the TEN-T network can be granted from various public funds of the European Union, i.e. the Connecting Europe Facility, the European Fund for Strategic Investment, Horizon 2020 and the European Structural and Investment Funds. The latter includes the Cohesion Fund and the European Regional Development Fund (European Commission, 2018b). In addition, Member States can ask for credit loans from the European Investment Bank (European Court of Auditors, 2016). 47

62 3.1.3 One Belt, One Road The One Belt, One Road (OBOR) initiative was unveiled in late 2013 by Chinese President Xi Jinping. It is an ambitious economic and geostrategic programme to link China with Europe both by land and by sea, and is expected to be completed in The investments in infrastructure are financially supported with funds from the Chinese-led Asian Infrastructure Investment Bank which several EUcountries have joined and the Chinese state-owned Silk Road Fund. The OBOR-concept consists of two major trading routes (see Figure 3.7): The Silk Road Economic Belt. It concerns the revival of the ancient Silk Road, connecting the Chinese city of Xi an with Eastern Europe by land through Central Asia and the Middle East. The 21st Century Maritime Silk Road. It connects the east coast of China with the East- Mediterranean by sea through Southeast Asia, Eastern Africa and the Suez Canal. Figure 3.7: The two main trading routes of the OBOR-initiative (McKinsey & Company, 2016) One of the first major investments in Europe related to the OBOR-programme was the upgrade of two container terminals at the Greek port of Piraeus, with the aim of turning this port into a Chinese hub for the export and distribution of goods to Europe (Casarini, 2015; Meunier, 2015). The state-owned enterprise China COSCO Shipping Group which is the result of the merger between China Ocean 48

63 Shipping Company and China Shipping Group in 2016 was involved in this strategic decision. Currently, China COSCO Shipping Group is the fourth largest shipping group in the world, both in terms of TEU-capacity and number of vessels (Alphaliner, n.d.).. Further investments within the OBOR-framework include the modernisation of rail infrastructure between Belgrade (Serbia) and Budapest (Hungary) and the upgrade of the Greek railway system (Casarini, 2015). The ultimate goal is to link the Greek ports of Piraeus and Thessaloniki with the Belgrade-Budapest railway connection and the Danube river through the Former Yugoslav Republic of Macedonia. As a result, shipping times between the Far East and Central Europe will be reduced significantly (Casarini, 2015). Initially, the Italian port of Gioia Tauro was also considered to act as China s hub for Europe, but investments eventually went to Piraeus (Sanfilippo, 2014). With China being at the doorstep of Europe, concerns could arise whether these foreign involvements sometimes referred as neocolonialism could hamper the economic, social and political strategies of the European Union. Indeed, some critics fear that China will use OBOR to export its products more easily at dumping prices (Casarini, 2015). In addition, social conditions have to be closely monitored and the geopolitical powers of Europe should be protected (Minghao, 2015). Nevertheless, Jean-Claude Juncker (President of the European Commission) and Chinese Prime Minister Li Keqiang have agreed on the EU-China Summit of 29 June 2015 to look for synergies between the European Fund for Strategic Investments and the OBOR-initiative (Casarini, 2015). 3.2 Greek port reform Greece is known to be an important maritime flag state (Lloyd s List, 2017). Nonetheless, the position of Greece as a port state was seriously lagging behind, compared to its major competitors in the Mediterranean Sea. Several issues such as poor hinterland connections, political management, user-unfriendliness, obsolete infrastructure and the absence of a long-term vision have led to major port reforms since the end of the 1990s (Pallis, 2006; Pallis & Vaggelas, 2017); in particular for Greece s two largest ports (Piraeus and Thessaloniki). The ports of Piraeus and Thessaloniki are classified as trans-european ports or ports of international interest ; 95% of the container traffic in Greece passes through one of these ports (Pallis & Vaggelas, 2017). The port of Piraeus acts as the major gateway and transhipment hub of the country. Estimations in 2007 have shown that 62% of the cargo throughput was destined for domestic use, 37% for transhipment to other ports, and only 1% for transit transport to neighbouring inland countries (Psaraftis & Pallis, 2012). On the other hand, the port of Thessaloniki primarily serves as a transit port for the Balkans and the hinterlands of Romania and Hungary. 49

64 The Greek government always preferred to keep their ports in central hands by the Ministry of Mercantile Marine as a cash tool for their national economic and social policies, such as pension payments (Pallis, 2007). As a result, Greece was one of the last EU-countries to relinquish its public service port model by means of port devolution (Psaraftis & Pallis, 2012). Nevertheless, the Greek port reform process eventually initiated in 1999 under the socialist Prime Minister Konstantinos Simitis. It occurred a posteriori in three phases: corporatisation; liberalisation; privatisation. Before the port reform took place, three major shipping lines were calling at Piraeus service port: Norasia until 1998, China Shipping Container Lines (then competitor of COSCO) until 2001, and Mediterranean Shipping Company until 2009 (Pallis, 2007; Psaraftis & Pallis, 2012) First port reform: corporatisation (1999) A first step in the port reform was the corporatisation of Piraeus Port Authority (PPA) and Thessaloniki Port Authority (TPA) in 1999, in order to grant more operational and administrative responsibilities to their respective local authorities and management teams. This would result in a modernisation of corporate governance, a more commercial approach, local integration and adaptability (Pallis, 2007). However, the Greek state still retained full ownership (Psaraftis & Pallis, 2012). In order to further improve local autonomy, the State subsequently granted port land concessions to the respective port authorities in 2001 and 2002 for a duration of 40 years. As a result, the port authorities were able to use and exploit the port facilities on their behalf. In return, they pay an annual concession fee which amounts 1% of the operating income for the first three years and 2% thereafter (Pallis & Vaggelas, 2017; Psaraftis & Pallis, 2012). In addition to the corporatisation process, a quarter of the shares of both TPA and PPA were offered on the Athens Stock Exchange in 2001 and 2003 respectively. Pallis (2007) gives two main reasons for this move: securing private funds; limiting the fiscal burdens of port modernisation. The floated shares were purchased by retail investors, resulting in the following ownership structures: PPA: 74.5% owned by the State, 25.5% by private investors (PPA, n.d.); TPA: 75.0% owned by the State, 25.0% by private investors (TPA, 2014). 50

65 Moreover, since 2001, ten smaller ports of national interest i.e. Alexandroupoli, Corfu, Elefsina, Heraklion, Igoumenitsa, Kavala, Lavrio, Patra, Rafina and Volos also became limited autonomous companies, yet still fully owned by the Greek state (Pallis, 2006; Pallis & Vaggelas, 2017). The 53 remaining regional ports became municipally owned (Pallis, 2006). Figure 3.8 shows the geographical locations of the two Greek ports of international importance (i.e. Piraeus and Thessaloniki) and the ten ports of national importance. Figure 3.8: The Greek ports of international and national importance (Pallis, 2006, p. 160) A central control body the Ports and Port Policy General Secretariat was established in 2003 under the Ministry of Mercantile Marine to safeguard the common good (Pallis, 2007) Second port reform: liberalisation ( ) A second step in the Greek port reform was the liberalisation of both the ports of Piraeus and Thessaloniki by means of granting concessions to third parties for the terminal operations. In this way, the government aimed to attract private capital for new developments and investments in the terminal facilities, to remove administrative burdens, and to improve productivity (Psaraftis & Pallis, 2012). The liberalisation concerned public tenders for the concessions of Thessaloniki Container Terminal on the one hand, and Piraeus Container Terminal Pier I, Pier II and Pier III on the other hand (Pallis & Vaggelas, 2017). Pier III still had to be constructed at that time, as it was a greenfield project. The 51

66 purpose of the development of the latter terminal is to increase capacity for transhipment cargo. Because this market is very volatile and risky, public financing would be difficult to justify (Psaraftis & Pallis, 2012). Figure 3.9 gives an overview of the three main container terminals at Port of Piraeus. Pier III Pier I Pier II Figure 3.9: The three container terminals at the port of Piraeus (adapted from Psaraftis & Pallis, 2012, p. 33) The public tendering processes suffered from delays due to the electoral results of 2004 in favour of the conservative Prime Minister Konstantinos A. Karamanlis. Eventually, talks were held between the Greek government and the following entities (Pallis, 2007; Psaraftis & Pallis, 2012): Shipping companies: Mediterranean Shipping Company and ZIM; Terminal operators: COSCO Shipping Ports (then known as COSCO Pacific), Hutchison Ports, DP World and APM Terminals; The national governments of China and South Korea. Economic and locational entry barriers apply because of the following requirements for potential bidders (cf. Paragraph 1.4.4) (Psaraftis & Pallis, 2012): operational experience; a sound financial solvency; minimum throughput guarantees. Finally, an agreement was reached with the Chinese government to appoint COSCO Pacific as the exclusive operator of the three container terminals at the port of Piraeus. However, the decision was immediately countered by opposition from the port unions who feared for job losses and wage reductions (Psaraftis & Pallis, 2012). In addition, the preferential treatment of COSCO Pacific conflicts with the EU Competition Law. It resulted in a two-month strike during December 2006 and 52

67 January 2007 (Pallis, 2007). The social actions and tight operational conditions at Piraeus had led to the decision of Mediterranean Shipping Company at that time the only shipping line calling at the port to contemporarily divert a large share of its traffic to other ports in the Mediterranean, for example to ports in Italy and Cyprus (Pallis, 2007; Psaraftis & Pallis 2012). Due to these pressures, the government renegotiated the liberalisation process in 2008 by allowing public tenders instead of making private agreements with foreign governments. Furthermore, it was decided that concessions would solely be granted for the operations at Pier II and for the construction and operations at Pier III, whereas Pier I would remain public under Piraeus Port Authority (Psaraftis & Pallis, 2012). Only two candidates signed up, namely COSCO Pacific and a consortium of Hutchison Ports and a local company. COSCO Pacific offered the highest bid and could guarantee the throughput requirements (Psaraftis & Pallis, 2012). As a result, a concession was once again awarded to COSCO Pacific in 2009 under the name Piraeus Container Terminal (PCT) for a duration of 35 years and expandable with five years (Pallis & Vaggelas, 2017). Operations at Pier II commenced in October 2009 (PCT, n.d.). Nevertheless, new labour union strikes and the electoral victory of the socialist Prime Minister George Papandreou have led once more to renegotiations in As a result, labour flexibility was diminished at the expense of the terminal operator. More specifically, COSCO Pacific had to employ the existing personnel under Piraeus Port Authority at its Pier II for the first eighteen months, and new employees had to be paid the same salaries as the existing ones (Psaraftis & Pallis, 2012). Regarding the port of Thessaloniki, concessions for the operations at the container terminal were offered by public tendering at the same time as Piraeus. Hutchison Ports withdrew its interest because of the economic recession (Pallis & Vaggelas, 2017; Psaraftis & Pallis, 2012). Also DP World was interested, but did not make a concrete bid Third port reform: privatisation ( ) In 2010, the Greek government-debt crisis succeeded the global financial crisis of As a consequence, the Greek economy was subject to bailout measures from the European troika, i.e. a triumvirate of the European Commission (EC), the European Central Bank (ECB) and the International Monetary Fund (IMF). The port authorities of Piraeus and Thessaloniki were offered two options (Pallis & Vaggelas, 2017): The port authorities sell all their minority shares to the private market, with the State still retaining the controlling stake. In addition, all commercial operations must be granted to third parties through concessions. This corresponds with a landlord port and is the preferred model of the EC and the ECB. 53

68 The port authorities sell all their assets and shares to the private market. This corresponds with a private port and is the preferred model of the IMF. Before the Greek government under conservative Prime Minister Antonis Samaras made any decision on which option it would adopt, all public shares of both port authorities were transferred in 2012 from the State to the Hellenic Republic Asset Development Fund (HRADF), at that time a stateowned asset development fund established to organise the privatisation programmes. In addition, the General Secretariat for Ports and Policy will act as public regulator and develop the national port policy (Pallis & Vaggelas, 2017). Moreover, COSCO Pacific and Piraeus Port Authority confirmed by means of two friendly agreements in 2012 and 2015 to strengthen cooperation with the other port users. The port authority also renegotiated labour conditions with the port unions in good harmony (Pallis & Vaggelas, 2017). Meanwhile, Pier II became fully operational in May 2012, whereas the newly constructed Pier III was inaugurated in June 2013 (PCT, n.d.). In 2014, the HRADF recommended to sell 67% of the ownership of both Piraeus Port Authority and Thessaloniki Port Authority by international tender (Pallis & Vaggelas, 2017). The only concrete bid for Piraeus came from China COSCO Shipping Group (then known as China Ocean Shipping Company) the parent company of COSCO Pacific but it was rejected in 2015 by the newly elected socialist Prime Minister Alexis Tsipras who was opposed to port privatisation and foreign direct investments in particular (Meunier, 2015). However, privatisation of both ports would result in an easing of the restrictive monetary policies imposed by the troika. Hence, the government eventually agreed to a 51%-stake sale to China COSCO Shipping Group, with an option to be raised to 67% if a minimum of 300 million euro will be invested in the port area in the next five years (Samseer, 2015). In August 2016, China COSCO Shipping Group eventually acquired the desired 67%-stake after it was approved by the HRADF and the Greek parliament earlier that year. The deal includes a diversification of activities of the shipping group as it will also be involved in ferry services, cruise facilities and ship repairing (Ship Technology, 2016). In addition, management and operations at Piraeus Container Terminal Pier I will be in hands of China COSCO Shipping Group as well. Regarding the privatisation of Thessaloniki Port Authority, the sale of a 67%-stake was promptly offered, without an intermediate stage as was the case with Piraeus. The concession agreement has a term of 34 years, with the commitment to invest at least 180 million euro in the container terminal during the next seven years (Hope, 2017). Three international players were involved in the final bid (Barnard, 2017a): International Container Terminal Services (a private terminal operator from the Philippines); P&O Steam Navigation (a UK-subsidiary of DP World from the United Arab Emirates); 54

69 A private consortium of Deutsche Invest Equity Partners (a German private-equity firm), Terminal Link (a subsidiary of the French shipping group CMA CGM) and Belterra Investments (a Cypriote asset manager, controlled by the Russian-Greek businessman Savvidis). The highest bid was offered by the latter in April 2017, who will consequently be appointed as the new private owner of Thessaloniki Port Authority in March Privatisation results At this moment, it is premature to judge the results of the Greek port privatisation. Piraeus Port Authority became only privatised in 2016, whereas Thessaloniki Port Authority is still in the process of privatisation. Therefore, many effects are primarily the result of the liberalisation of the port of Piraeus in It remains currently unclear whether these findings will remain the same or will change due to the privatisation of the port authority. Nevertheless, the following effects are analysed for the port of Piraeus: efficiency and investments; state revenues; profit-making and growth; competition; employment; regulation and geopolitics Efficiency and investments The allocation of the terminal operations of Piraeus Container Terminal Pier II and Pier III to COSCO Shipping Ports has resulted in a competitive improvement compared to the commercial activities of Piraeus Port Authority on Container Terminal Pier I. The lower labour costs and the investments in port facilities and equipment have contributed to increased efficiency. Containers are unloaded more than twice as quickly at Pier II and Pier III than at Pier I (Meunier, 2015). In addition, neighbouring companies as well as the operations at Pier I are able to benefit from the positive impact and technological spill-overs of COSCO s operations, which is called the reverse Marco Polo-effect by Pietrobelli, Rabellotti and Sanfilippo (2010). Nonetheless, the activities at Pier I had reached such low efficiency levels that Piraeus Port Authority earned more from the concession fees paid by China COSCO Shipping Ports than from its own business (Meunier, 2015). 55

70 Between 2010 and 2015, Piraeus Port Authority barely spent 75 million euro for investments in its terminal, whereas COSCO Shipping Ports invested more than 340 million euro in infrastructure and superstructure (Pallis & Vaggelas, 2017). For instance, expenses were made for the modernisation of cranes, the construction of deep-water docks that accommodate larger vessels, the installation of an oil terminal, the developments of Container Terminal Pier III, and the integration of the terminals with the national railway system (Meunier, 2015; Casarini, 2015). The local communities are involved in these investments as Greek companies are contracted for these constructions (Alderman, 2012). Moreover, COSCO s activities have attracted large multinationals such as HP, Huawei, Samsung and ZTE to establish main distribution centres near the port (Van der Putten, 2014) State revenues The privatisation of Piraeus Port Authority was heavily influenced by political decisions. Indeed, the port authority itself had no say in the process. Moreover, the proceedings of the sale went directly to the central government and were used to compensate other public debts (Pallis & Vaggelas 2017, Psaraftis & Pallis 2012). It was also widely communicated that the State would receive 4.3 billion euro in total from the concession over 35 years, which is 123 million euro per year. However, the effect of discount rates on future cash flows was not taken into account. If a yearly discount rate of 9% is assumed, the State would rather gain 830 million euro in those 35 years, which is only 24 million euro per year (Psaraftis & Pallis 2012). Moreover, COSCO Shipping Ports has benefited from income tax exemptions and more favourable depreciation regimes. In addition, accumulated losses could be offset by taxable profits at any time (Pallis & Vaggelas, 2017). As a result, the private terminals had significant competitive advantages towards the public terminal of Piraeus Port Authority. In 2015, it was decided on the basis of the EU Competition Law that COSCO Shipping Ports had to reimburse these benefits to the Greek state (Pallis & Vaggelas, 2017) Profit-making and growth The situation at the port of Piraeus is rather unique as, until 2016, one part of the port was operated by the port authority itself and another part was operated by an external party. This allows us to compare the profit and growth figures between these two port operators. Since the commencement of operations by COSCO Shipping Ports, revenues at Piraeus Container Terminal Pier II and Pier III have more than doubled: from 62.8 million euro in 2010 to million 56

71 euro in By contrast, terminal revenues at Pier I have decreased with 17% between 2005 and 2010 and with 11% between 2010 and 2014: million euro in 2005, million euro in 2010, and million euro in 2014 (Pallis & Vaggelas, 2017). Regarding the earnings before interest, depreciation and amortisation (EBITDA), these had increased from -4.8 million euro in 2010 to 44.2 million euro in 2014 at Piraeus Container Terminal Pier II and Pier III. The loss in the first year is the result of increased spending in the terminals and facilities. On the other hand, the EBITDA at Pier I had decreased from 26.9 million euro in 2005 to 26.7 million euro in 2010 (-1%), and to 22.0 million euro in 2014 (-18%) (Pallis & Vaggelas, 2017). COSCO Shipping Ports has gradually increased its traffic share at the port of Piraeus, by attracting cargo from Container Terminal Pier I as well as from external supply. In 2010, 34.0% of the total containers at the Greek ports were handled at Piraeus Container Terminal Pier I and 45.3% at Pier II. In 2015, only 7.9% was served by Piraeus Container Terminal Pier I, whereas Pier II and the recent Pier III handled 81.5% (Pallis & Vaggelas, 2017). The container growth at COSCO s terminals in Piraeus is remarkable. Despite the Greek governmentdebt crisis in 2010, the port showed the strongest TEU-growth figures of all container ports in the world in 2011 (73%), 2012 (77%) and 2013 (20%) and the strongest growth in Europe in 2014 (21%) (Meunier, 2014; Pallis & Vaggelas, 2017). In the year of privatisation (2016), 3.7 million TEU was handled at Piraeus, which is 21% more than the previous year. In this way, COSCO Shipping Ports outperformed its other terminals, such as Antwerp Gateway (1.9 million TEU, -4.6%), APM Terminals Zeebrugge (277,444 TEU, +3.4%) and Suez Canal Container Terminal at Port Said (2.6 million TEU, -13.8%) (Barnard, 2017b). Moreover, COSCO Shipping Ports has attracted additional calls from major shipping lines (Pallis & Vaggelas, 2017). For instance, COSCO Shipping Lines is part of the Ocean Alliance, which includes CMA CGM, OOCL and Evergreen. It has also signed an agreement with 2M Alliance, which consists of Maersk, Mediterranean Shipping Company and Hyundai Merchant Marine (Pallis & Vaggelas, 2017). Before the privatisation of the port of Piraeus, only Mediterranean Shipping Company was calling at the port (Meunier, 2015) Competition As mentioned in Paragraph 3.1.1, the ports of Gioia Tauro and Marsaxlokk are the biggest competitors of the port of Piraeus for traffic in the East-Mediterranean. Whereas Piraeus only handled 433,000 TEU in 2008 and therefore fell outside the top-125 of largest container ports worldwide, Gioia Tauro handled 3.5 million TEU (rank 30) and Marsaxlokk 2.3 million TEU (rank 46). In 2014, Piraeus has passed both ports by handling 3.6 million TEU (rank 40), whereas Gioia Tauro handled 3.1 million 57

72 TEU (rank 45) and Marsaxlokk 2.9 million TEU (rank 51) (American Association of Port Authorities, n.d.). The fast-rising growth of the port of Piraeus can become a threat for other major seaports such as Rotterdam, Antwerp and Hamburg regarding the share in the growing Eastern European market (Casarini, 2015; Grey, 2016; Van der Putten, 2014). Especially the transit of cars from Asia has gained increased importance at Piraeus (Glass, 2014) Employment Initially, there were fears in Europe that Chinese investments could lead to situations as be seen in Africa, where social dumping, deterioration of labour rights and less focus on environmental standards occur (Meunier, 2015). When COSCO Shipping Ports began operations in Piraeus, short-term contracts were used and displaced workers at its terminal were transferred to Piraeus Port Authority at Pier I (Meunier, 2015). However, contrary to situations in Africa, COSCO Shipping Ports employ local labour forces at Piraeus; only the six top managers are of Chinese nationality. It is estimated that COSCO has already created one thousand additional jobs at the port of Piraeus (Meunier, 2015). Before the actual privatisation, the liberalisation process at Piraeus has experienced strong opposition and major strikes that are led by the powerful port unions. As a result, the government had to make concessions to the dock workers regarding job security, benefits and wage guarantees. However, such concessions conflict with the commercial orientation of the terminal operator. To date, there are still no new labour statutes created by the government, so traditional labour schemes remain largely unchanged (Pallis, 2006, 2007). Decisions related to port labour reforms are still to be expected (Pallis & Vaggelas, 2017) Regulation and geopolitics It must be noted that, despite the high degree of privatisation, the ports of Piraeus and Thessaloniki are not fully privatised ports because of the following provisions (Pallis & Vaggelas, 2017): the port land is still owned by the State; the use of port assets is limited to the duration of the concession; the government has the right to terminate the concession under certain conditions; one-third of the shares is still owned by the State. Therefore, the term master concession privatisation is used (cf. long-term concessions in Australia and at the port of Bristol). Besides COSCO Shipping Ports landlord and operator roles, it also acts 58

73 up to a certain level as regulator because of its power to make decisions on planning, managing and operating the port (Pallis & Vaggelas, 2017). In order to have control on the activities of external parties, the Regulatory Authority for Ports was established in It is an independent supervisory entity financed by the State and the Greek ports that governs the following aspects (Pallis & Vaggelas, 2017): legislation compliance; the provision of port services; competition rules; licensing of commercial port operators; a framework for port charges. In addition, the Public Authority for Ports was created in 2016, under the Ministry of Shipping and Island Policy. Its main targets are (Pallis & Vaggelas, 2017): contribution to local, regional and national communities; environmental protection; service quality of port operators; enforcement of labour rights and union freedoms. Figure 3.10 gives an overview of the port governance framework for the Greek ports. Figure 3.10: The port governance framework for the Greek ports (Pallis & Vaggelas, 2017, p. 55) 59

74 The privatisation of the ports of Piraeus and Thessaloniki was a heavily politicised process. The constant change of political power in Greece has led to delays in the port reform programme and continuous changes of strategies, from port concession policies to master concession privatisation (Pallis & Vaggelas, 2017). Also the geopolitical sensitivities related to the management and ownership by a foreign state has initially led to hesitations from Greek and European policy makers. Since ancient times, the port of Piraeus was the national source of wealth and the Greek nation s pride (Meunier, 2015). Moreover, Piraeus and Thessaloniki are strategic core ports within the European TEN-T network. The privatisation of these ports and the investments involved could make Greece dependent on Chinese control and strategies (Van der Putten, 2014). 3.4 Conclusion The Greek port reforms took place under the pressure from fierce competition in the transhipment market since the 1990s. The devolution process was accelerated and intensified in the 2000s and 2010s due to the global financial crisis and the perilous Greek government-debt situation. Fortunately, the Greek ports are strategically located at the junction of two extensive transport networks (TEN-T and OBOR), which attracts foreign investments. The first port reform took place in 1999 when both Piraeus Port Authority (PPA) and Thessaloniki Port Authority (TPA) were corporatised. Moreover, 25% of the public shares of both port authorities were sold to the private sector in 2001 and 2003 respectively. Thereafter, a second port reform occurred when Pier II and Pier III at the port of Piraeus were liberalised and consequently given in concession to COSCO Pacific, under the name Piraeus Container Terminal (PCT). Finally, under the third port reform, 67% of the shares of Piraeus Port Authority were transferred to the Chinese stateowned company COSCO Shipping Ports in Thessaloniki Port Authority will soon be privatised by a private consortium of Deutsche Invest Equity Partners, Terminal Link and Belterra Investments. A chronological overview of the Greek port privatisation process is presented in Figure Corporatisation 1999 Stock market 2001 / 2003 Liberalisation 2009 Privatisation 2016 / 2018 Port reform I (PPA & TPA) Sale 25% shares (PPA / TPA) Port reform II (PCT) Port reform III (PPA / TPA) Figure 3.11: The port reform process in Greece 60

75 Despite the fact that the privatisation of Piraeus Port Authority took place only two years ago, this dissertation has already demonstrated some initial effects and potential consequences of this last reform: higher efficiency, together with long-term investments; increased revenues for the State, however at low asset valuations; increased profits, together with a strong growth in market share; monopolistic behaviour at the port, but a strong competitive position in the region; more flexible labour conditions, however still no labour reforms; the implementation of regulatory bodies by the Greek state in order to monitor compliance and social welfare. 61

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77 CHAPTER 4 QUALITATIVE RESEARCH In order to gain valuable insights into the position of enterprises and port authorities on port privatisation, a qualitative research was performed. In this chapter, two aspects are investigated on the basis of different statements and hypotheses derived from the literature research in the previous chapters: Wat is the impact of port privatisation on economic, social and political factors? What is the impact of the privatisation of Piraeus Port Authority on European strategies and policy? The qualitative data were collected through different research methods. Thereafter, the results were further analysed to make conclusions. 4.1 Research methods The population for this qualitative research consists primarily of port policy makers, port managers, financial investors and economists. A questionnaire was prepared in order to assess the personal opinions of the target group towards the possible consequences of port privatisation and their view on the recent privatisation of Piraeus Port Authority by China COSCO Shipping Group. The data are collected by means of an online survey and interviews Questionnaire The questionnaire contained fourteen statements on the potential effects that may result from port privatisation. All statements were based on the theories and conclusions that various researchers and commentators made in the literature. The following questions were asked: 1. Will port privatisation result in a change in the efficiency level of the port operators commercial activities? 2. Will port privatisation result in a change in the efficiency level of the port authority s administration? 3. Will port privatisation result in a change in the financial performance of the port authority? 4. Will port privatisation result in a change in the price level of port dues and port concessions? 5. Will port privatisation result in a change in the level of intra-port competition? 6. Will port privatisation result in a change in the level of inter-port cooperation? 63

78 7. Will port privatisation result in a change in the level of hinterland integration? 8. Will port privatisation result in a change in the employment level at the port? 9. Will port privatisation result in a change in the level of port regulation? 10. Will port privatisation result in a change in the risk-seeking behaviour of the port authority? 11. Will port privatisation result in a change in the level of foreign investments in the port? 12. Will port privatisation result in a change in the focus on short- or long-term goals by the port authority? 13. Will port privatisation result in a change in benefits for the local communities? 14. Will port privatisation result in a change in environmental impact on the region? In addition, five statements were given about the impact of the privatisation of Piraeus Port Authority and the increasing Chinese involvement in Europe. The following questions were asked: 1. Will the privatisation of Piraeus Port Authority result in a change in integration with the TEN-T network? 2. Will the privatisation of Piraeus Port Authority result in a change in maritime traffic to the Northwest-European ports? 3. Will the privatisation of Piraeus Port Authority result in a change in cooperation with other Mediterranean ports? 4. Will the privatisation of Piraeus Port Authority result in a change in protectionist reactions from other ports against privatisation? 5. Will the privatisation of Piraeus Port Authority result in a change in aversion from other European countries towards China s geopolitical aspirations? Online survey In order to reach a wide group of respondents, an online survey was sent to various companies operating in port areas engaged in the following activities: port administration; maritime services; shipping lines; transports and logistics; warehousing and stevedoring; energy, oil and gas civil works and construction; manufacturing and production. 64

79 The questionnaire was set up in Qualtrics, an online research platform for the purpose of creating surveys, the collection of data and the execution of analyses. The statements that are mentioned in Paragraph were given, with each of them having several qualitative options on an interval scale, as shown in Paragraph 4.2 and Paragraph 4.3. An overview of the questionnaire is presented in Annex F Interviews Furthermore, several personal interviews were held with experienced port policy makers and port managers in order to gather more in-depth information. The same questions as in Paragraph were asked. Three oral interviews were conducted with the following respondents: Mr. Daan Schalck, Chief Executive Officer at North Sea Port; Mrs. Isabelle Ryckbost, Secretary-General at the European Sea Ports Organisation (ESPO); Mr. Guy Janssens, Chief Corporate Affairs Officer at Antwerp Port Authority. 4.2 Results: the effects of port privatisation This paragraph describes the results of the impact of port privatisation. The findings from the literature review are compared with the results from the online survey and the opinions from the interviewees (freely translated from Dutch). The interviews are presented in Annex G Efficiency of commercial operations and administrative tasks One of the main drivers in both the United Kingdom and Greece for the privatisation of their ports was to improve allocative efficiency or dynamic efficiency by executing a more commercial and marketdriven approach. Empirical evidence has shown that the private British ports applied primarily allocative efficiency during the 1990s and 2000s resulting in postponed investments whereas the operations at the port of Piraeus have reached high efficiency levels and productivity rates since its privatisation by the means of organisational reforms, innovations and increased investments (dynamic efficiency). In addition, decreased politicisation usually leads to less bureaucratic administration of the port authority, on the condition that no excessive multi-port bodies are involved. However, this is still the case for ABP, Peel Ports and Forth Ports in the United Kingdom The options in the survey related to these two determinants range from lower commercial efficiency (-2) to higher commercial efficiency (+2), and from lower administrative efficiency (-2) to higher 65

80 Number of respondents Number of respondents administrative efficiency (+2) respectively. The majority of the respondents assume a neutral to positive effect on the efficiency of commercial operations. The same applies to the efficiency of administrative tasks (see Figure 4.1 and Figure 4.2) Lower Higher Figure 4.1: Distribution of responses regarding the efficiency level of the port operators commercial activities Lower Higher Figure 4.2: Distribution of responses regarding the efficiency level of the port authority s administration The interviewees generally agree that the effect of port privatisation on the efficiency of commercial operations depends on the number of operators that are active in the port area, corresponding to the landlord model. In addition, certain capital-intensive investments are less evident to be financed by private companies. Mr. Daan Schalck (North Sea Port): The benefits of profit maximisation can only be realised when the activities are integrated within the private port authority. [ ] In the United Kingdom, these ports are predominantly private service ports, because the gains in efficiency, leverage and economic results are higher than in the case of private landlord ports. 66

81 Mrs. Isabelle Ryckbost (ESPO): Higher operational efficiencies are predominantly obtained by liberalisation and commercialisation. Mr. Guy Janssens (Antwerp Port Authority): At Port of Antwerp, we have governance principles that are strongly linked with efficiency targets, as is the case with private enterprises. In addition, the public character of our port has several advantages. For example, a port authority often invests in expensive infrastructure with a long lifespan, which does not necessarily have an interesting return for private port authorities. The interviewees generally agree that the effect of port privatisation on the efficiency of port administration is positive. However, some investments still require public involvement. Mr. Daan Schalck (North Sea Port): Port administration will definitely be more efficient in private ports because of the fact that new management approaches and business plans are applied. [ ] It also leads to faster decision-making. Mrs. Isabelle Ryckbost (ESPO): Cooperation with public authorities will always be necessary, even for a privatised port. Construction of transport and energy networks to the hinterland, for example, will always need the approval from the public authorities. Mr. Guy Janssens (Antwerp Port Authority): As a public port authority we are bound to rules, which can sometimes be considered as administrative burdens, for example the regulations regarding public contracts Financial performance of the port authority and port fees It is expected that the commercial behaviour of private ports results in higher financial performance. However, increased surpluses are mostly used to pay off the debts to the investors, as is the case with the British ports. In addition, because the public service tasks are carried out by the private port operator itself, port dues and concessions fees are usually higher than at public ports. By contrast, revenues and EBITDA at the port of Piraeus have increased significantly since its privatisation and after initial investments were made. Yet, it must be noted that although China COSCO Shipping Group is acting as a private port owner, it is a foreign state-owned enterprise with public funding. The options in the survey related to these three determinants range from lower financial performance (-2) to higher financial performance (+2), from lower port dues (-2) to higher port dues (+2), and from lower concession fees (-2) to higher concession fees (+2) respectively. The majority of the respondents assume a positive effect on the financial performance of the port authority, and a neutral to positive effect on the price level of port dues (see Figure 4.3 and Figure 4.4). The positive effect on the price level of concession fees is less pronounced (see Figure 4.5). 67

82 Number of respondents Number of respondents Number of respondents Lower Higher Figure 4.3: Distribution of responses regarding the financial performance of the port authority Lower Higher Figure 4.4: Distribution of responses regarding the price level of port dues Lower Higher Figure 4.5: Distribution of responses regarding the price level of concession fees The interviewees generally agree that the effect of port privatisation on the financial performance of the port authority is positive. However, public port authorities also establish financial partnerships 68

83 with the private sector, while some private investments still require public subsidies. It depends on the timeframe as well. Mr. Daan Schalck (North Sea Port): Private shareholders possess their own funds. However, some private port authorities are also listed on the stock market. By contrast, funding capacity by public shareholders is often limited. Mrs. Isabelle Ryckbost (ESPO): Being a private port does not mean that you automatically lose public subsidies, as also private ports can rely on European funding. [ ] Vice versa, also public ports have easy access to private capital as they are more and more involved in public-private partnerships. Mr. Guy Janssens (Antwerp Port Authority): A port authority with private shareholders is focused on direct return, preferably on the short or medium term. This will play a role in the investment decisions. By contrast, a public port authority has other objectives and invests in infrastructure with a long payback period or with a weak return. The interviewees have different opinions on the effect of port privatisation on the price level of port dues and concession fees. Mr. Daan Schalck (North Sea Port): Privatisation could lead to an increase of the price of port dues and concession fees, because of the higher expectations on the return on investments. Mrs. Isabelle Ryckbost (ESPO): There is no direct link between port rates and the private character of ports. Mr. Guy Janssens (Antwerp Port Authority): Our port dues are unilaterally defined and are not negotiable. Hence, profit maximisation by means of adaption of the port dues will not be a possibility Intra-port competition and inter-port cooperation Increased competition between various port operators was also one of the main drivers of port privatisation in the United Kingdom. However, the open-market approach of the British government has led to the consolidation of ports under large private holdings and monopolistic behaviour at the terminals and river estuaries. As a consequence, economic and locational entry barriers often apply at these ports. Also in the port of Piraeus, intra-port competition is completely absent after the privatisation took place. Nevertheless, after its privatisation, Piraeus has become a major competitor of other ports in the Mediterranean Sea, such as Gioia Tauro and Marsaxlokk. Even more, the developments of Piraeus could possible lead to a traffic shift from the Northwest-European ports to the port of Piraeus. 69

84 Number of respondents Number of respondents The options in the survey related to these two determinants range from less intra-port competition (-2) to more intra-port competition (+2), and from less inter-port cooperation (-2) to more interport cooperation (+2) respectively. The majority of the respondents assume a neutral effect on intraport competition, and a negative effect on inter-port cooperation (see Figure 4.6 and Figure 4.7) Less More Figure 4.6: Distribution of responses regarding the level of intra-port competition Less More Figure 4.7: Distribution of responses regarding the level of inter-port cooperation The interviewees generally agree that the effect of port privatisation on intra-port competition is negative. Mr. Daan Schalck (North Sea Port): Landlord ports outsource the commercial operations to private players, which results in more internal competition. [ ] As a result, these ports are more competitive than in the private case when only one operator is involved. Mr. Guy Janssens (Antwerp Port Authority): Intra-port competition can be limited when the port owner is also the operator at the port, instead of a pension fund for example. It will be 70

85 Number of respondents more justifiable when the port authority makes a distinction between the regulatory and the operational responsibilities. According to Mr. Daan Schalck, the effect of port privatisation on inter-port cooperation is negative. Mr. Daan Schalck (North Sea Port): Inter-port cooperation will be rather limited. Nonetheless, there exist some forms of networks between the different ports of the same private operator which allows the ports to spread their customers on the basis of their preferences Hinterland integration Private port authorities tend to be less connected with national public port policies because of their individual corporate strategies. Therefore, infrastructural investments are often limited to the boundaries of the port itself. This can be seen in the United Kingdom, where no national port framework exists. More recently however, private operators that wish to further develop their terminals, are also required to invest in the adjacent hinterland connections. This was the case with the licensing of London Gateway. Regarding Greece, China COSCO Shipping Group will contribute significantly to hinterland connections as Piraeus is part of the long-term OBOR-initiative of the Chinese government to become a hub on the maritime Silk Road towards Central and Eastern Europe. The options in the survey related to this determinant range from less hinterland integration (-2) to more hinterland integration (+2). There is no clear one-sided effect on hinterland integration (see Figure 4.8) Less More Figure 4.8: Distribution of responses regarding the level of hinterland integration 71

86 Number of respondents The interviewees have different opinions on the effect of port privatisation on the hinterland integration. Mr. Daan Schalck (North Sea Port): Looking across the borders of the port area is less common with private ports, which can create bottlenecks in the hinterland. This effect is even amplified in the United Kingdom due to the private character of the railway operators. Mrs. Isabelle Ryckbost (ESPO): Also private port authorities will benefit from investments in the hinterland. Nevertheless, they need governmental support and funding for these realisations. Mr. Guy Janssens (Antwerp Port Authority): It depends on the wider context rather than on the type of ownership Employment level at the port The increased efficiencies at privatised ports could lead to a reduction in employment due to automation of processes and cost reductions. When the National Labour Dock Scheme was abolished in the United Kingdom during the privatisation reforms, productivity and flexibility have increased at the expense of the number of workers. In Greece, on the other hand, no new labour statutes or port labour reforms are yet established by the government. Despite the fact that a lot of workers had lost their job during the liberalisation and privatisation of Piraeus Port Authority, the private port has now created a lot of new job opportunities in the port area. The options in the survey related to this determinant range from less port labour (-2) to more port labour (+2). The majority of the respondents assume a neutral effect on the employment level at the port (see Figure 4.9) Less More Figure 4.9: Distribution of responses regarding the employment level at the port 72

87 The interviewees generally agree that the effect of port privatisation on the employment level would be negative. However, it rather depends on the automation processes of the terminal operators. Mr. Daan Schalck (North Sea Port): The employment level is lower at a private port because it often concerns private service ports with less diversification of activities than at public landlord ports. Hence, the integration with logistical and industrial activities is less profound. Mrs. Isabelle Ryckbost (ESPO): The employment level is more related to the recent trends of automation and technological advancements. Nevertheless, public ports were traditionally maybe more characterised by bureaucracy and labour statutes that guarantee lifelong employment. Mr. Guy Janssens (Antwerp Port Authority): It rather depends on the investment behaviour of the operators. For example, the terminal activities at the public port of Rotterdam are highly automated Port regulation In theory, fully privatised ports inherit all three port-related functions i.e. operator, landlord and regulatory function as seen in the case of the British ports. The port operator is owner of the port land, port assets and terminal concessions. This could be a sensitive issue when foreign state-owned enterprises are involved. Until today, the British government has not succeeded yet in establishing a nation-wide port policy. By contrast, the privatised Piraeus Port Authority is still under concession contract ( master concession privatisation ) with the Greek government for the use and exploitation of port land and assets. In addition, the Regulatory Authority for Ports was created in 2014 for the legal supervision of the private port activities. The options in the survey related to this determinant range from less port regulation (-2) to more port regulation (+2). The majority of the respondents assume a neutral effect on the port regulation (se Figure 4.10). 73

88 Number of respondents Less More Figure 4.10: Distribution of responses regarding the level of port regulation The interviewees have different opinions on the effect of port privatisation on port regulation. Two of them assume a slightly negative effect. Mr. Daan Schalck (North Sea Port): There will be slightly less regulation. Spatial planning and environmental policies obviously remain the responsibility of the local or central governments. Also European legislation with respect to bird migration routes, marine and estuary environments should be complied with. Mrs. Isabelle Ryckbost (ESPO): Every port has public service duties, for example in ensuring maritime accessibility. However, in the United Kingdom, these public functions are limited. Nonetheless, regulations with regard to environmental laws always have to be respected. Mr. Guy Janssens (Antwerp Port Authority): There is not necessarily a causal link. For example, the liberalisation policies that the European Commission has executed in various sectors, have not always led to deregulation. It often requires even more regulation in order to liberalise an industry Risk-seeking behaviour of the port authority Private ports usually aim to maximise their return on investments and to increase its shareholder value in the short term. Therefore, it is conceivable that they tend to be more reluctant regarding investment decisions. The options in the survey related to this determinant range from lower risk-seeking behaviour (-2) to higher risk-seeking behaviour (+2). The majority of the respondents assume a positive effect on the risk-seeking behaviour of the port authority (see Figure 4.11). 74

89 Number of respondents Lower Higher Figure 4.11: Distribution of responses regarding the risk-seeking behaviour of the port authority The interviewees have different opinions on the effect of port privatisation on the risk-seeking behaviour of the port authority. Two of them assume a negative effect. Mr. Daan Schalck (North Sea Port): Private port authorities will take fewer risks because they expect a guaranteed return before making any new investments. This is especially the case in the United Kingdom. [ ] We see that the British ports have not made any large investments during recent years, because they rather aim to increase their returns as much as possible with the existing infrastructure. Mrs. Isabelle Ryckbost (ESPO): I believe that there is no difference for public as for private port authorities. Mr. Guy Janssens (Antwerp Port Authority): Privatisation will certainly result in different investment behaviours. For instance, when infrastructural developments would not offer sufficient returns, private port authorities can decide to disinvest Foreign investments in the port Port privatisation results in an increase of private capital, especially from external funds. Indeed, both the ports in the United Kingdom and Greece have allowed direct foreign investments. However, the concerned ports are primarily private service ports, restricting the entry of other port operators. Hence, commercial investments from other sources than from the port owners shareholders are rather limited. The options in the survey related to this determinant range from less foreign investments (-2) to more foreign investments (+2). The majority of the respondents assume a positive effect on foreign investments in the port (see Figure 4.12). 75

90 Number of respondents Less More Figure 4.12: Distribution of responses regarding the level of foreign investments in the port The interviewees generally agree that the effect of port privatisation on foreign investments at the port is limited, because full privatisation of the port authority is rather exceptional. On the other hand, partial privatisation or terminal privatisation is more common. Mr. Daan Schalck (North Sea Port): There will always be a certain level of protection against foreign investments in the port authority, even at private ports. On the other hand, foreign investments in terminal operations are more common. Mr. Guy Janssens (Antwerp Port Authority): An intermediate step towards a hybrid structure of public and private shareholders could also be a possibility to attract private capital. [ ] Public-private partnerships are becoming more and more attractive for complex projects Focus on short- and long-term goals by the port authority Because of the obligation for quarterly reporting, private ports in the United Kingdom tend to focus on short-term targets rather than on long-term goals. Similarly, investors expect returns on investment within an acceptable timeframe. However, referring to the Greek case, the port of Piraeus is part of a long-term development plan in the OBOR-network of the Chinese government, expected to be completed in The options in the survey related to this determinant range from focus on short-term goals (-2) to focus on long-term goals (+2). The majority of the respondents assume a stronger focus on shortterm goals by the port authority (see Figure 4.13). 76

91 Number of respondents Short-term Long-term Figure 4.13: Distribution of responses regarding the focus on short- or long-term objectives of the port authority The interviewees fully agree that port privatisation results in a stronger focus on short-term goals by the port authority. Mr. Daan Schalck (North Sea Port): There will be more focus on the short term, as quarterly results and annual profits are required by the shareholders in order to determine their returns. Mr. Guy Janssens (Antwerp Port Authority): Private shareholdership is less stable. The ownership structure can change after a few years, when the targets are met or when there are other opportunities. This can conflict with the long-term perspectives of a port Benefits for the local communities and environmental impact on the region When private investors especially foreign companies are engaged in the privatisation of a port, the interests of the port owners and the local communities could be different, resulting in less interaction between the port and the city objectives. This is the case with the British private ports. The same applies to the port of Piraeus, whereby Chinese strategic and geopolitical interests are involved. Furthermore, when ports are not owned by regional or public authorities, it requires stringent control of externalities such as safety, noise, traffic congestion and pollution. Therefore, the Greek Public Authority for Ports was established in 2016 to supervise the social and environmental impacts of the ports on the region. The options in the survey related to these two determinants range from less local benefits (-2) to more local benefits (+2), and from less environmental impact (-2) to more environmental impact (+2). The majority of the respondents assume a negative effect on the benefits for the local communities, and a neutral effect on the environmental impact on the region (see Figure 4.14 and Figure 4.15). 77

92 Number of respondents Number of respondents Fewer More Figure 4.14: Distribution of responses regarding the benefits for the local communities Less More Figure 4.15: Distribution of responses regarding the environmental impact on the region The interviewees generally agree that the effect of port privatisation on the benefits for the local communities is rather negative because of foreign shareholders. However, the same applies for port authorities that are directed by the central government (cf. Latin port model). Mr. Daan Schalck (North Sea Port): It rather depends on the local embeddedness. [ ] Private ports are not automatically integrated in the region as there is no connection with local shareholders or with the municipality. Mrs. Isabelle Ryckbost (ESPO): When a port authority is governed on a pure private level, a strong corporate governance framework is required to ensure social and economic welfare. [ ] The issue of local commitment is not exclusively a problem related to privatisation; it is more associated with the centralisation of port governance. Mr. Guy Janssens (Antwerp Port Authority): Regarding the British ports, I presume that there are similar agreements between the public authorities and the port authority with respect to the public goals they have to guarantee. 78

93 Number of respondents According to Mr. Guy Janssens, the effect of port privatisation on the environmental impact on the region is neutral. Mr. Guy Janssens (Antwerp Port Authority): Every port still has to comply with European legislation. But perhaps, there will be less proactive initiatives regarding environmental actions. 4.3 Results: case Port of Piraeus This paragraph deals with the ex-ante potential effects of the privatisation of Piraeus Port Authority. Contrary to Paragraph 4.2, the outcomes of the given statements cannot yet be found in literature, as the privatisation took place recently. Therefore, the results from the online survey and the opinions from the interviewees (freely translated from Dutch) give supplementary viewpoints on the expectations of enterprises, port authorities and supranational organisations towards these recent developments. The interviews are presented in Annex G Integration with the TEN-T network As the port of Piraeus is located at the edges of two strategic transport network projects the Trans- European Transport Network of the European Union and the One Belt, One Road network of China the question arises whether these two long-term visions would interfere each other or would merge into one extensive Eurasian trade network. The options in the survey related to this determinant range from less integration (-2) to more integration (+2). The majority of the respondents assume a neutral effect on the integration with the TENT-T network (see Figure 4.16) Less More Figure 4.16: Distribution of responses regarding the integration with TEN-T 79

94 Number of respondents The interviewees have different opinions on the effect of the privatisation of Piraeus Port Authority on the integration with the TEN-T network. Two of them assume a positive effect. Mr. Daan Schalck (North Sea Port): I assume that China COSCO Shipping Group will cooperate with the TEN-T network. In this way, they can possibly receive European funds for the infrastructural developments out of Athens. [ ] On the other hand, China COSCO Shipping Group has more financial resources than the Greek state. Hence, they could in turn support investments for which European funding is restricted. Mrs. Isabelle Ryckbost (ESPO): Chinese investors will certainly have an interest in the completion of the TEN-T network. It is important that foreign investors follow the same set of rules as the EU-investors in terms of transport and competition policies. Mr. Guy Janssens (Antwerp Port Authority): I fear that the European TEN-T policy will be jeopardised by players like China, who select preferential partners in Europe in order to establish gateways for the export of their goods Maritime traffic to the Northwest-European ports The increased role of Piraeus as maritime hub for the consumer markets in Central and Eastern Europe can result in a decreasing market share of the three major Northwest-European seaports (Rotterdam, Antwerp and Hamburg) in these regions. Empirical evidence from the 1990s on the shift effects has shown that an increase in container growth in the Mediterranean port range was compensated by a decline in the Hamburg-Le Havre range. The options in the survey related to this determinant range from less maritime traffic (-2) to more maritime traffic (+2). The majority of the respondents assume a neutral effect on the maritime traffic to the Northwest-European ports (see Figure 4.17) Less More Figure 4.17: Distribution of responses regarding maritime traffic to Northwest-Europe 80

95 The interviewees clearly agree that the effect of the privatisation of Piraeus Port Authority on the maritime traffic to Northwest-European ports is neutral. Mr. Daan Schalck (North Sea Port): A large part of the consumer market remains in Northwest-Europe and the port of Piraeus will not be an efficient alternative for this region. Hence, container flows will certainly not decrease. However, in the case of high-value goods such as finished cars, the port of Piraeus can offer an advantageous position in terms of delivery speed. Mrs. Isabelle Ryckbost (ESPO): The West-European ports are closely located to important consumer markets with dense hinterland connections and efficient industrial integrations. [ ] When South-Europe is becoming more important, this will equally create opportunities for all European ports. Mr. Guy Janssens (Antwerp Port Authority): I think that not many changes will occur in cargo flows to the port of Antwerp. A lot of our traffic goes from Antwerp to neighbouring markets. As a result, we are more competing in the region with the ports of Rotterdam, Hamburg and Le Havre, and less with the South-European ports. Our volumes that are destined for the East-European markets are rather small Cooperation with other Mediterranean seaports Because the Mediterranean port range is an important maritime trade route and transhipment hub, there is a lot of inter-port competition in the region. The ports of Gioia Tauro and Marsaxlokk are the main competitors of Piraeus. The question arises whether these other ports will benefit from the increased investments and developments at the Greek port by means of cooperation. The options in the survey related to this determinant range from less cooperation (-2) to more cooperation (+2). The effect on the cooperation with other Mediterranean seaports is rather uncertain (see Figure 4.18). 81

96 Number of respondents Less More Figure 4.18: Distribution of responses regarding cooperation with other Mediterranean seaports The interviewees have different opinions on the effect of the privatisation of Piraeus Port Authority on the cooperation with other Mediterranean seaports. Mr. Daan Schalck (North Sea Port): The port of Piraeus will become a dedicated hub for China. As a consequence, other major shipping lines such as Maersk, CMA CGM and Mediterranean Shipping Company will be inclined to move cargo to alternative ports in the Mediterranean region. Mr. Guy Janssens (Antwerp Port Authority): Many ports are already suffering from the consequences of the privatisation of Piraeus Port Authority. The port of Piraeus is doing well and this results in cargo shifts from other South-European ports Protectionist reactions from other ports against privatisation In order to retain control and retain the strategic assets, other ports could react with protectionism against privatisation by external companies, especially foreign state-owned enterprises. The options in the survey related to this determinant range from less protectionism (-2) to more protectionism (+2). The majority of the respondents assume a neutral to positive effect on the protectionist reactions from other ports against privatisation (see Figure 4.19). 82

97 Number of respondents Less More Figure 4.19: Distribution of responses regarding protectionist reactions against port privatisation The interviewees generally agree that the effect of the privatisation of Piraeus Port Authority on protectionist reactions from other ports against privatisation is negative. Mr. Daan Schalck (North Sea Port): It depends on the need of external capital. In Eastern Europe for example, there are still some issues with public financing in emerging countries such as Romania, Bulgaria and Ukraine. So privatisation could be an interesting option for them. Mr. Guy Janssens (Antwerp Port Authority): The success of the port of Piraeus could be a precedent for other ports. There are many ports that favour cooperation with China [ ]. However, I am not sure whether this will lead to Chinese shareholdership Aversion from other European countries towards China s geopolitical aspirations The long-term economic and geopolitical strategies from China and its involvement in European infrastructural and economic projects could raise aversion from other European countries that are afraid of possible neocolonialism. The options in the survey related to this determinant range from less aversion (-2) to more aversion (+2). The majority of the respondents assume a neutral to positive effect on the aversion from other European countries towards China s geopolitical aspirations. 83

98 Number of respondents Less More Figure 4.20: Distribution of responses regarding aversion toward China s geopolitical aspirations The interviewees have different opinions on the effect of the privatisation of Piraeus Port Authority on the aversion from other European countries against China s geopolitical aspirations. Mr. Daan Schalck (North Sea Port): The port of Piraeus will certainly take advantage from the privatisation in terms of growth. Also the other ports in the Mediterranean port range will benefit due to the traffic shifts from Piraeus by shipping lines other than COSCO Shipping Lines. Mr. Guy Janssens (Antwerp Port Authority): EU Member States that are not financially distressed, will react rather cautiously regarding Chinese acquisitions, especially in the case of strategic assets. Indeed, ports and infrastructure are of national importance. 4.4 Conclusion The determinants and findings from the literature study in the previous chapters were verified by a qualitative research. Data was collected by means of an online survey and in-depth interviews of port policy makers and port managers, and thereafter analysed. Two general aspects were investigated: the impact of port privatisation on economic, social and political determinants; the impact of the privatisation of Piraeus Port Authority on European strategies and policies. Regarding the first aspect, the following opinions were provided: 1. Efficiency level of the port operators commercial activities. Researchers have pointed out that port privatisation leads to a higher allocative or dynamic efficiency. The result from the 84

99 survey indicates a slightly increased operational efficiency. The interviewees attribute this effect more to the landlord port model. 2. Efficiency level of the port authority s administration. Researchers have pointed out that port privatisation leads to a higher administrative efficiency; however, multi-port holdings risk becoming as bureaucratic as public port authorities. The result from the survey indicates a slightly increasing effect, which is generally confirmed by the interviewees. 3. Financial performance of the port authority. Researchers have pointed out that port privatisation leads to a higher financial performance; however, the debts could also increase. The result from the survey indicates an increasing effect, which is generally confirmed by the interviewees. 4. Price level of port dues and port concessions. Researchers have pointed out that port privatisation leads to a higher port dues and concessions. The result from the survey indicates a neutral to increasing effect. The interviewees have different opinions on this determinant. 5. Level of intra-port competition. Researchers have pointed out that port privatisation leads to less intra-port competition. The result from the survey indicates a neutral effect. The interviewees generally agree on a decreasing effect on this determinant. 6. Level of inter-port cooperation. Researchers have pointed out that port privatisation does not lead to change in inter-port cooperation. The result from the survey indicates a decreasing effect, which is generally confirmed by the interviewees. 7. Level of hinterland integration. Researchers have pointed out that port privatisation leads to less hinterland integration in the British port case, and to more hinterland integration in the Greek port case. The result from the survey does not indicate a one-sided effect. The interviewees have different opinions on this determinant. 8. Employment level at the port. Researchers have pointed out that port privatisation leads to less employment in the British port case, and that there is eventually no change in the employment level in the Greek port case. The result from the survey indicates a neutral effect. The interviewees attribute this effect more to the increasing role of automation on this determinant. 9. Level of port regulation. Researchers have pointed out that port privatisation leads to less port regulation in the British port case, and to eventually more port regulation in the Greek port case. The result from the survey indicates a neutral effect, which is confirmed by the interviewees. 10. Risk-seeking behaviour of the port authority. Researchers have pointed out that port privatisation leads to a lower risk-seeking behaviour of the port authority. The result from the survey indicates an increasing effect. The interviewees agree on a decreasing to neutral effect on this determinant. 85

100 11. Level of foreign investments in the port. Researchers have pointed out that port privatisation leads to more foreign investments in the port, albeit contributing to the port authority. The result from the survey indicates an increasing effect. The interviewees agree on a neutral effect on this determinant. 12. Focus on short- or long-term goals by the port authority. Researchers have pointed out that port privatisation leads to a stronger focus on short-term goals in the British port case, and to a stronger focus on long-term goals in the Greek port case. The result from the survey indicates an effect towards short-term goals, which is confirmed by the interviewees. 13. Benefits for the local communities. Researchers have pointed out that port privatisation leads to fewer benefits for the local communities. The result from the survey indicates a decreasing effect, which is confirmed by the interviewees. 14. Environmental impact on the region. Researchers have pointed out that port privatisation leads to more environmental impact on the region. The result from the survey indicates a neutral effect, which is confirmed by the interviewees. Regarding the second aspect, the following conclusions can be made: 1. Integration with the TEN-T network. The result from the survey indicates a neutral effect. The interviewees have different opinions on this determinant. 2. Maritime traffic to the Northwest-European ports. The result from the survey indicates a neutral effect, which is confirmed by the interviewees. 3. Cooperation with other Mediterranean ports. The result from the survey does not indicate a one-sided effect. The interviewees have different opinions on this determinant. 4. Protectionist reactions from other ports against privatisation. The result from the survey indicates a neutral to increasing effect. The interviewees have different opinions on this determinant. 5. Aversion from other European countries towards China s geopolitical aspirations. The result from the survey indicates a neutral to increasing effect. The interviewees have different opinions on this determinant. 86

101 CHAPTER 5 REFLECTION AND RECOMMENDATIONS The purpose of this Master dissertation was to investigate the process of port privatisation and the transfer of ownership to external companies. Therefore, the British and Greek port reforms were evaluated on the basis of various economic, social and political factors. Two research questions were put forward: What is the impact of port privatisation on economic, social and political determinants? What is the impact of the privatisation of Piraeus Port Authority on European strategies and policies? To answer these questions and to delineate the research domain, the dissertation firstly described the various existing port governance models. We learned that several devolution processes have already led to a certain level of port autonomy whereby comprehensive privatisation is the ultimate step towards full control and ownership. Economic motives such as improved efficiency and competitiveness clearly favour privatisation. Also political reasons such as decreased public spending and less political influence play a role. However, port privatisation also entails externalities and social issues for which independent regulation is crucial. While the British and Greek port privatisation processes show several similarities, there are also many differences between these two remarkable cases. In both instances, the port reform plans were initiated in a period of economic downturn. Indeed, the Greek government considered privatisation as an opportunity to alleviate its severe financial difficulties, whereas the British reforms were part of the neoliberal measures of the Conservative Party. After privatisation, the efficiency levels increased rapidly and the competitive position improved. The intra-port competition however is very weak as the port owner is also the operator. In fact, former public monopolies have now become private monopolies. Moreover, the British ports possess the property rights of the port land, so public regulation in the port area is seriously limited. This contrasts with the privatisation of the Piraeus Port Authority, whereby the government still has a stake in the shareholdership and owns the land as well. The privatisation of Piraeus is actually a long-term concession agreement with the government ( master concession privatisation ). In the United Kingdom, port regulation is virtually completely absent. The analysis of these two particular cases of port privatisation allowed the formulation of several hypotheses with regard to the effects of port privatisation on the basis of fourteen determinants and similarly, the effects of the privatisation of Piraeus Port Authority on the basis of five specific economic and political developments. To complement the study, a qualitative research was conducted 87

102 by means of an online survey and in-depth interviews of port policy makers and port managers. Based on the results, one can conclude that port privatisation leads to the six following perceived effects: an increased administrative efficiency; an increased financial performance of the port authority; less intra-port competition; less inter-port cooperation; a stronger focus on short-term goals by the port authority; less benefits for the local communities. Changes in the eight other determinants i.e. operational efficiency, the price level of port dues and port concessions, the level of hinterland integration, the employment level at the port, the level of port regulation, the level of foreign investments in the port, and the environmental impact on the region are rather caused by other factors such as liberalisation and the automation of terminal operations. Regarding the privatisation of Piraeus Port Authority, the study did not show unambiguous results. This could be explained by the fact that the privatisation took place only recently and neither elaborated information nor detailed publications are currently available. Caution is required when interpreting and generalising these results. The sample size of the survey was limited due to the low response rate (although 300 mails were sent). Also, the effect of central tendency should be taken into account, especially regarding questions that may have a sensitive and political connotation. More accurate analyses could be made by enlarging the sample size or by using quantitative data to measure port efficiency, financial performance, port fees and employment level for example. Nevertheless, as port privatisation is still rather unique, the results obtained from the survey give a good overall understanding of how port privatisation and its effects are perceived. The issues that have arisen since the port reforms in the United Kingdom prove that privatisation is not without risks. Therefore, the transformation from a service port to a landlord port is already a significant step forward for many South-European ports. Indeed, there are currently several devolution processes ongoing in the East-Mediterranean Sea, which have often issues pertaining labour and operational matters. Furthermore, port strategies are subject to macro-economic evolutions. For instance, it can be interesting to follow up the developments of British port policy in terms of public financing and private ownership after the Brexit. For further research, I would suggest to have also a look into hybrid ownership structures, as public-private shareholdership allows ports to get access to private capital while retaining the control function. Current examples of mixed ports are Copenhagen Malmö Port (77% public, 23% private) and Port of Koper (54% public, 46% private). Port of Tallinn plans to sell 30% of its shares in the near future. 88

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115 ANNEXES Annex A: Ownership models for the fifteen largest container ports in Europe Rank Port Country TEU (x1000) Ownership 1 Rotterdam Netherlands 12,385 Hanseatic 1 2 Antwerp Belgium 10,037 Hanseatic 3 Hamburg Germany 8,910 Hanseatic 4 Bremerhaven Germany 5,487 Hanseatic 2 5 Algeciras Spain 4,760 Latin 6 Valencia Spain 4,722 Latin 7 Felixstowe United Kingdom 3,745 Anglo-Saxon 8 Piraeus Greece 3,675 Mixed 3 9 Marsaxlokk Malta 3,064 Latin 10 Gioia Tauro Italy 2,797 Latin 11 Le Havre France 2,519 Latin 12 Genoa Italy 2,298 Latin 13 Barcelona Spain 2,238 Latin 14 Southampton United Kingdom 1,957 Anglo-Saxon 15 Sines Portugal 1,513 Latin Note. Figures for 2016, source: container-ports-in-europe-in-2016-has-teu-growth-resumed 1 The Dutch central government took 29.2% of the shares in 2008 as compensation for its financial support for the construction of the second Maasvlakte. 2 The ownership is officially in the hands of the city of Bremen, together with the port of Bremen. However, administration remains the responsibility of the city of Bremerhaven. Both cities are part of the Free Hanseatic City of Bremen (a city-state). 3 The Piraeus-case is explicitly discussed in Chapter 3 of this dissertation A-1

116 Annex B: Sample of respondents to the ESPO-survey on port governance of 2016 Source: ESPO (2016) B-2 B-1