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The rational of effective management of Seaports

By standard Times Research Team

The relevance of seaports in the efficient working of an economy cannot be understated since all goods and passengers transported by sea require the use of, at least, two ports. In the majority of countries, most international trade (export/import), and in some cases also large shares of domestic trade, is done through maritime transport. For long-haul shipments, there are no alternative transport modes to ships, with the exception of high value and small volume cargoes, for which air transport offers speed as its advantage.

Seaborne traffic depends on seaports for all its operations, since ports act as interfaces between maritime and inland modes of transport (railways, road or inland navigation).Therefore, in order to have an efficient maritime transport system, seaports must beguaranteed to work efficiently. The basic objective of a seaport is to provide a fast and safetransit of goods and passengers through its facilities, so that generalized costs forpassengers (fare+time) and for shippers (tariffs+ storage time) are minimized. Another rolethat some large seaports play is to serve as hubs for connection and transshipment, allowingcargoes on different long-haul routes to be served more efficiently by several ships. The role of a modern seaport can be summarized in the following UNCTAD definition(United Nations Conference on Trade and Development): Seaports are interfaces betweenseveral modes of transport, and thus they are centers for combined transport. Furthermore,they are multi-functional markets and industrial areas where goods are not only in transit, but they are also sorted, manufactured and distributed. As a matter of fact, seaports are multi-dimensional systems, which must be integrated within logistic chains to fulfil properly their functions. An efficient seaport requires, besides infrastructure, superstructure and equipment, adequate connections to other transport modes, a motivated management, and sufficiently qualified employees.

 

In the above definition, one of the main characteristics of seaports is stressed: a seaport is not merely an organization that provides a single service, but instead, seaports provide multiple activities. It is therefore interesting to study in detail those entire tasks, in order to evaluate the most efficient provision of these activities from an economic point of view. Moreover, since all port activities take place in a limited area, it is also relevant to study how they are coordinated, and what is the role that port authorities or any other responsible institutions must play in regulating seaports infrastructure and activities.

In the last decades, we have witnessed profound changes in maritime transport, which have modified the balance between capital and labor at seaports. Ports are now increasingly becoming capital-intensive industries, while in the past they used to be labor-intensive. This change has generated an excess of employees in most ports around the world. The development of containerized transport is another factor that has significantly modified ports operations. Containers have allowed large cost reductions in cargo handling, but they have also imposed new needs on ports in terms of equipment (gantry cranes, specialized terminals improved pavements, etc).

All these technical changes have generated a highly competitive environment in the seaport industry, especially between those large ports with the facilities to serve regular deep-sea traffic from liners. Modern ports no longer have a monopolistic position in the transport of goods to neighboring regions (hinterlands).

Description of port services

Besides the provision of basic infrastructure for the transfer of goods and passengers between sea and land, there are multiple services provided by different agents at ports, some of whom may even work outside the port area. These services cover all activities linked to the connection between port users and port, from the moment that a ship approaches a port until it ends all its operations. During this period, there are services provided to the ship, to passengers, to ships crews and to cargoes (De Rus et al, 1994).

First, there is a group of services related to berthing, which include pilotage, towing and tying. All these services can be directly provided by port authorities, or they can be offered by private firms. Pilotage is defined as those operations required for a ship to enter and exit a port safely, and it usually implies the presence in the vessels bridge (or at least a contact

by radio) of an expert with sufficient knowledge of the zone to avoid risks. Pilots can be independent private agents in some ports, licensed by the port authority, while in other cases they are public employees. Towage is the operation of moving a ship using small powerful boats (named tugs) to steer it more easily. Again, it is possible to have private firms providing services for these operations, while in other ports tugs and their operators

are directly hired by the port authority. One of the more important services provided to cargo ships is what is generically labeled as cargo handling. This encompasses all activities related to the movement of cargo from/to ships and across port facilities. There is a historic separation between the operations of moving goods from ships side until they are safely stored within the vessel (stevedoring), and those movements from berth to ships side (loading), as a result of these operations traditionally being performed by different workers. Today, however, there are specialized firms that provide all these cargo handling services, using equipment such as cranes and

surface transport elements. The process of cargo handling varies according to the type of goods involved. There is a trend toward the specialization of firms according to the type of cargo, since the equipment required can then be specially designed to be highly cost-efficient. Thus, specialization

leads to the formation of terminals, defined as specialized berths where all operations are mainly concentrated on a given type of cargo. Container terminals constitute the best example of this trend, since the handling of containers requires large gantry cranes, and land storage is relatively easy with adequate trucks and lifts, but it is highly space consuming.

All these factors make it more convenient for a firm to have a specially

designed berth in order to handle containers more efficiently than general cargo berths. Of the total cost involved in moving goods through a seaport, cargo handling charges are the most important (between 70% and 90% of total cost, approximately, depending on the type of goods).

Therefore, this is one of the services that must be supervised more closely by a regulator in order to ensure cost-efficient port operations.

Another type of service demanded by port users are those related to administrative paperwork and permits (sanitary certificates, import/export documents, taxes, etc). These are usually performed by specialized agents or consignees, who are hired by shipping companies to arrange in advance the paperwork and all matters related to the use of port facilities by a ship. Even before a ship calls at a port, consignees start working to arrange

that all services required (handling, repairs, supplies, etc) are contracted for the ship and performed in the shortest feasible period. It is essential for a modern port to have systems to minimize the burden of paperwork for

port users, since delays originating in inefficiency in administrative procedures result in large economic losses to shippers, who do not receive their goods on expected dates and thus have to alter their productive plans, and to shipping companies, which have to keep their ships in ports for longer than necessary. In the European Union, there are some guidelines established to promote ports investments in developing electronic data

interchange systems (EDI). These systems are aimed at speeding up administrative paperwork and reducing waiting times for ships and land transport modes (trucks, railways) that deliver goods to/from ports (European Commission, 1997).

 

Port services

1. Infrastructure provision

2. Berthing services:

Pilotage

TowingTying

3. Cargo handling:

Stevedoring

Terminals

Storage

Freezing (fish, others)

4. Consignees:

Administrative paperwork for

ships and cargo

Permits (sanitary, customs, etc)

Service hiring

5. Ancillary services:

Supplies

Repairs

Cleaning, refuse collection

Safety

In this model, port authorities are responsible for the port as

Traditional functions of port authorities

Provision of infrastructure for maritime access

Provision of infrastructure within the port area

Strategic port planning

Promotion and marketing

Regulation and control of safety within the port

Environmental protection

Managing port assets (infra and superstructure)

Some port facilities have traditionally been regarded as public goods (lights, access channels, etc). However, a seaport considered as a whole does not exhibit public good characteristics due to the impossibility of excluding users and the unfeasibility of producing the same quantity of services to more users without increasing costs. Therefore, seaports are organizations that from an economic point of view do not necessarily have to be in the public sector. They can be run as commercial institutions.

On the other hand, many port activities are regarded in some countries as public services, in the sense that port users believe that these services should be available to any user such as berthing services, or cargo handling but there is no reason for the public sector to be obliged to provide them directly. Only in particular situations, as in the case of very small seaports serving isolated communities, is it possible to find conditions where public intervention would be required in order to guarantee the provision of port services, since the seaport would be vital for the community basic welfare. However, even in this case, it is not strictly necessary that a public company should be providing port services, but instead they could be offered by subsidized private firms

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