Ramesh Shivakumaran: More Valuable Principles on Port Management

We continue with our review of the essential principles involved in managing ports and trade transport with a discussion of some vital considerations investors, consultants and managers must seriously face:

 

1. Understanding the different types of ports and access to ports (natural, man-made, river, estuary) and the diversity of specialist port operations

 

The type and purpose of the port facilities will determine one's level of financial exposure and managerial approach. Ports dedicated to dry bulk will have a different configuration to those designed for liquid cargoes. Some countries might prevent the use of certain natural waterways for transporting such products as crude oil or natural gas. Hence, if inland sources of such products are only available by land, it will mean providing for port facilities that will cater only to land transportation. Conversely, using only barges to ferry products will entail another set of support facilities. 

 

2. Understanding the highlighted role of ports in a through-transport context – hub ports, feeder/transhipment ports, intermodal interfaces

 

Specialist port facilities consist of facilities that support the overall port system through auxiliary services, for instance, hub ports that serve as intermediary access-points to other major facilities or provide linkages for other parts of the entire system. These intermodal ports allow movement of products and goods through various modes of transport (land-to- water interface, water-to-land interface or air-to-land interface, etc.) until the final delivery or transfer of goods to their port of destination is accomplished. Movement of materials or goods must follow strategic routes that comply with financial, technical and time constraints to achieve efficient and profitable results.

 

3. Being aware of the role of national and regional local government institutions in port design, management and operations

 

Recognizing the primary role of national and regional government agencies play in the construction and operations of part facilities will give a company the advantage of acquiring a thorough understanding of one's corresponding role and duties. Various taxes and fees are required throughout the process of acquiring a license to operate, using and developing of real estate, practicing one's profession and obtaining environmental requirements, for example, will involve coordinating with officials who grant the necessary permits and approvals. The upkeep of infrastructure as well as its day-to-day operations will fall under the legal supervision of these agencies tasked to ensure safety, legality, tax compliance and other technical and administrative standards provided for by law.    

 

4. Understanding the different forms of the ownership structure of ports and of port services; that is, public or private, landlord only, full or part-service provider, including terminal facilities within ports

 

Various conditions will determine and even complicate the form of ownership of port facilities and the kind of services that will be provided. Leasing the land upon which the port is located will be the best option compared to owning it. Some country will not allow full ownership and will require a local partner to own majority of the land as well as the improvements (usually 60%). How the arrangement will end up will determine the total investment required for the port terminal as well as how it will be operated. For those who have local partners already engaged in some aspects of the operations, one might provide auxiliary or support services that will reduce one's level of investment.   

 

5. Appreciating the use of Free Port/Free Trade Zones as an economics tool

 

Countries have gained the benefits of opening up Free Ports and Free Trade Zones to allow foreign investors to establish operations in regions where labor and raw materials are cheap and readily available. This has allowed port operators to take advantage of such ports and zones while enjoying the tax relief afforded them as well as their manufacturing partners. Commonly, these zones, however, have a short or limited life expectancy as many companies that use up their tax-holiday contract period move to other regions or eventually pay required customs, thus, losing their advantage over their competitors. A long-term view of entering into such an arrangement is needed to assure that port facilities will have a long duration of operation and continuing profitability.