Terminal Operations
C. Terminal Operations
The increase in specialization of maritime shipping (dry bulk, liquid bulk, neo-bulk, containers, project cargo, reefer cargo) has led to a comparable specialization in cargo-handling services. Larger vessels and increased volumes being transported by individual shipping lines or consortia has allowed ports to increase berth throughput. This has led to a transformation of ports from wharves containing common user multi-purpose berths to a collection of special-purpose berths. The private sector continues to provide cargo-handling services for multipurpose berths but the terminalization of these berths in order to place them under private operation has become increasingly popular. This transformation lies at the heart of the current expansion of private participation in port operations.
Private operation of cargo terminals located in public ports is accomplished through various contractual agreements. Management contracts allow the port to control the use of the berths and to set the tariffs while allowing the private sector to provide more efficient supervision of operations and maintenance. However, this approach has not been popular with public ports or the private sector because it does not allow for reduction in labor or changes in work rules. This approach also has difficulties with the assignment of shared responsibility for maintenance and complementary services. The recent failure of the management contract for the container terminal in Mombasa provides a useful lesson. The private operator saw considerable opportunity for restoring operations to an efficient level but the port was first required to overhaul the gantry cranes and then to facilitate the landside clearance of containers. When the government failed to meet these obligations, the terminal operator canceled the contract. The management contracts in Jebel Ali and Jeddah were more successful, but their facilities and equipment were newer and the private sector had greater control over operations and labor.
Capital leases, in combination with an operating agreement, have been the most common mechanism for private terminal operations. They are used where facilities and major equipment are already in place and little additional investment is required. The private sector operates the terminal with far fewer constraints due to government regulation. This mechanism
2 There is also less commission for those arranging a lease rather than a sales/purchase agreement. 3 The recently acquired gantry cranes in Nhava Sheva were obtained through a lease which requires the lessor to maintain Capital leases are relatively uncommon in part because there are no specific tax benefits for public ports.
crane availability at international standards. These are well above the relatively low availability the port had been able to achieve. In Valparaiso, Chile, the handling of containers was performed for many years by a single Whirley crane operated with reasonable efficiency through an operating lease.
was used for the initial “privatization” 4 of container activities in Karachi, Laem Chabang, Manila, Port Kelang, Pusan, Qasim, and Surabaya.
Capital leases can be difficult to implement where there is overstaffing or difficulties with customs and land transport. This has led some ports to use concessions to create entirely new facilities. 5 Concessions are similar to capital leases but include a commitment by the private sector for substantial capital investment. These agreements are used not only when new terminals are being constructed but also when older facilities are being renewed or converted to special-purpose terminals. Concessions have become increasingly popular as a method of financing port investment. 6