World Bank Port Reform Toolkit

Module 2

The Evolution of Ports in a Competitive World

Module 22World Bank Port Reform Toolkit

•Overview of the competitive landscape

Evolution of Ports in a Competitive World

•Ports dynamics in the 21st Century

•Challenges and Opportunities

Module 23World Bank Port Reform Toolkit

Threat of New Entrants

Rivalry among Existing Competitors

Potential for Global Substitute

Bargaining power of Service Providers

Bargaining Power of Port Users

Forces governing the competitive landscape

Module 24World Bank Port Reform Toolkit

Rivalry among existing competitors : determining factors

•Hinterland market access

•Ability to service transshipment trade

•Regional port capacity and demand

•Ability to create competition within the port

•Stakes at risk

Module 25World Bank Port Reform Toolkit

Rivalry among existing competitors : determining factors (cont’d.)

•Ability to absorb losses

•Ability to control operations

•Limits on rivalry within ports

•Government willingness to subsidize operations

Module 26World Bank Port Reform Toolkit

Threat of New Competitors : determining factors

•Capital expenditure for new port facilities

•New distribution patterns

•Provisions in operating agreements

•Natural barriers

•Magnitude of switching costs

•Cost advantages and customer loyalties

Module 27World Bank Port Reform Toolkit

Potential for Global Substitutes : determining factors

•Other global sources for products moving through the port

•Substitute products for exports and imports

•Magnitude of switching costs for substitution

•Demand elasticity of exports and imports

•Importance of port costs in total delivered price

Module 28World Bank Port Reform Toolkit

Bargaining Power of Port Users : determining factors

•Concentration of port user power

•Impact of changing business relationships

•Presence of large value adding tenants

•Importance of the port to the economy

•Ability to replicate port services

•Facility investments by ports users

Module 29World Bank Port Reform Toolkit

Bargaining Power of Service Providers : determining factors

•Experience and capabilities of service provider

•Participation in facility financing

•Choke points in the port

•Ability to absorb downtime

•Interrelationships between providers and port users

•Rights and obligations conveyed by contractual agreements

Module 210World Bank Port Reform Toolkit

•Overview of the competitive landscape

Evolution of Ports in a Competitive World

•Ports dynamics in the 21st Century

•Challenges and Opportunities

Module 211World Bank Port Reform Toolkit

Globalization of Production : observed trends

•Vertical specialization

•Focused manufacturing

•Expanded logistics reach

•Increased sourcing alternatives

•Impact of globalization on ports

Module 212World Bank Port Reform Toolkit

Impacts of technological changes (1/4)

•Containerization of world trade

•Future containership designs

•Impact on port operations : reduction of ship’s time in port and at berth, reduction of personnel requirements for cargo handling, raise of berth productivity, increase of capital intensity of port operations.

Module 213World Bank Port Reform Toolkit

Impacts of technological changes (2/4)

•Need for container port productivity improvements

Module 214World Bank Port Reform Toolkit

Impacts of technological changes (3/4)

• Impact of increasing port productivity on voyage cost per TEU

Module 215World Bank Port Reform Toolkit

•Growing role of information technology

Impacts of technological changes (4/4)

•Port requirements for large cruise ships

•Other technology impacting port services : podded drive propulsion systems, self unloading bulk carriers, …

Module 216World Bank Port Reform Toolkit

Shifting Bargaining power

•Consolidation among ocean carriers

•Emergence of global terminal operators

•Potential emergence of other global port service suppliers

•Emergence of global logistics service providers

•Different ways to buy and sell port services

Module 217World Bank Port Reform Toolkit

Changing Distribution Patterns : the Hub and Spoke distribution

•Expected attributes of hubs : strategic location, sufficient depth, extend of terminal facilities, efficiency of container handling operations, availability of frequent feeder services, attractive cargo-handling charges

•Benefits of hub status : increased income, reduced transport time, increased competitiveness of exporters, creation of jobs

•Problems hubs face : competition from other hubs, lower income from terminal services charges

•Inland container terminals are shifting activities away from the port

Module 218World Bank Port Reform Toolkit

Environmental and safety concerns

•Growing environmental concerns : Oily ballast water discharge

Water pollution, air pollution, aesthetics, noise, etc.

•Issue of sub-standard ships

Port State Control

Regional cooperation

Module 219World Bank Port Reform Toolkit

•Overview of the competitive landscape

Evolution of Ports in a Competitive World

•Ports dynamics in the 21st Century

•Challenges and Opportunities

Module 220World Bank Port Reform Toolkit

Transferring Port Operations to the Private Sector

•The need for change : private sector companies have proved their ability…

•Impacts of privatizing operations : success stories and failures•Lessons learned from the past :

•Contingency plan

to improve port efficiencyto transfer their knowledge to the port personnelto bear the financial burden of port expansion and

development.

need for transparency and open competitionneed to plan the transition to private operation and the

future functioning scheme of port after reform

Module 221World Bank Port Reform Toolkit

Opportunities for the Private Sector :available annual revenue

•Terminal operations : $30 to $40 billion

•Tug assist services : $4 to $5 billion

•Maintenance dredging : $4 to $5 billion

•Information technology : $2 to $3 billion

•Environmental facilities and ship safety : $1 to $2 billion

•Other port services : warehousing and storage, port security, pilotage, etc. : $4 to $5 billion

• Total : $45 to 60 billion