Transportation Summit 2011: Best Practices
Shaping Global Logistics, Vancouver, BC,
March 2-3 2011
Benchmarking the Canadian
Gateways and Corridors
Governance Model
Jean-Paul Rodrigue1 & Stephen Blank2
Associate Professor, Dept. of Global Studies & Geography,
Hofstra University, New York, USA; Van Horne Researcher in
Transportation and Logistics, University of Calgary, Canada
1
Adjunct Research Scholar, Center for Energy, Marine
Transport and Public Policy, Columbia University; Senior
Research Analyst, Arizona State University’s North
American Center for Transborder Studies
2
Benchmarking the Canadian Gateways and
Corridors Governance Model
1
• How does governance applies to
intermodal transportation?
2
• Which governance criteria can be used
for benchmarking?
3
• To what extent gateways and corridors
are an effective governance strategy?
Intermodal Transportation: Emerging Paradoxes
Geographical and functional diffusion
of containerization.
Massive investments.
Rationalisation (corridors and sites).
New standards, practices and
technologies.
Increasing returns.
Incremental changes.
Decreasing returns.
Consolidation (maritime, rail and
trucking). Emergence of large
operators.
PPP. Supply chain control. Addedvalue-capture.
Main Causes of Public Divesture in the Transport
Sector
Fiscal
Problems
(we’re broke)
High
Operating
Costs
(we have few
incentives)
Crosssubsidies
(profits are
spent
elsewhere)
Equalization
(everyone
must have
their fair
share)
Governance and Supply Chains Don’t Match
Logistics Chain 1
Extraction
LC 2
Processing
Transport Chain 1
LC 3
Fabrication
TC 2
Logistics Chain 4
Assembly
TC 3
Distribution
TC 4
Retailing
TC 5
Governance and Intermodal Transport: Potential
Benchmarks
Criteria
Economic Sector
Intermodal Sector
Participation
Involvement of private capital
Access to intermodal assets (modes &
terminals) by the private sector
(national and foreign)
Transparency
Clear regulatory process
Available information about policies
and actors
Fairness
Consistent regulations
Policies in line with modal market
potential
Decency
Secure property rights
Secure ownership and operational
contracts
Accountability Measures for litigation
Intermodal operators complying to
policies
Terms for renegotiation
Efficiency
Compliance costs below operating
revenues
Limited compliance costs
Transport Terminal Governance: Main Benefits and
Issues
• Compliance /
Accountability
• Monopoly /
Rent seeking
Public
Ownership
PPP
Operations
• Performance /
Productivity
Private
• Profit /
Externalities
The Governance Setting of Gateways and Corridors:
Many Actors Supporting Functional Integration
Maritime Freight Distribution
Transport Actors
Maritime shipping companies
(Private).
Waterways and navigation
channels (Public).
Gateways
Corridors and Hubs
Inland Freight Distribution
Terminal operators (Private).
Port operations (Port Authority).
Land ownership (Public and
Private).
On-dock rail (Port Authority and
terminal operators).
Near-dock rail (Rail companies).
Trucking and barging (Private).
Roads and highways (Public).
Rail lines (Rail companies;
ownership or right-of-way).
Security Trumping Trade? Maritime Security
Initiatives Implemented by The United States
Initiative
Type
Year
Description
Automated Targeting System
(ATS)
Cargo screening
1999
Weighted model applied to inbound cargo manifests to assign risk
factors.
Customs-Trade Partnership
Against Terrorism (C-TPAT)
Certification
2001
Transferring some of the Customs responsibilities to importers and
exporters to reinforce overall security levels. Benefits include reduced
likelihood that containers of participating firms will be examined.
Container Security Initiative
(CSI)
Cargo tracking
and screening
2002
Increasing security related to ocean going containers
through the targeting and screening of high risk containers bound for the
US before they are loaded.
Megaports initiative
Cargo tracking
and screening
2003
Installation of radiation detection equipment in key foreign ports.
Reducing the illicit trafficking of nuclear and other radiological materials.
24 hour rule
Advance cargo
information
2003
Implementing the cargo-related information at least 24 hours before a
container is loaded aboard the vessel at the last foreign port.
Standards to Secure and
Facilitate Global Trade (SAFE)
Certification
2005
Implementing C-TPAT and CSI security practices with foreign trade
partners.
Importer Security Filling and
Additional Carrier
Requirements (ISF, 10+2)
Advance cargo
information
2009
Implementing the collection of cargo-related information by requiring
information from both the importer (10 information elements) and the
carrier (2 information elements) to be transmitted at least 24 hours
before the goods are loaded.
100% scanning
Cargo screening
2012?
Non-intrusive inspection of 100% of all inbound cargo containers.
Pressures for Governance: Vertical and Horizontal
Integration in Port Development
Horizontal
Integration
Vertical
Integration
Maritime Services
Inland
Port
Port
Intermediate hub
Port Holding
Maritime
Shipping
Port Terminal
Operations
Port Services
Inland Services
Terminal
Port
Rail / Barge
Distribution Center
Inland Modes
and Terminals
Commodity Chain
Distribution
Centers
Governance Changes in Port Authorities: Competing
over the Hinterland
Conventional Port Authority
• Planning and
management of port
area.
• Provision of
infrastructures.
• Planning framework.
• Enforcement of rules
and regulations.
• Cargo handling.
• Nautical services
(pilotage, towage,
dredging).
Expanded Port Authority
Value Propositions behind the Interest of Equity
Firms in Transport Terminals
Sectoral and geographical asset diversification.
Mitigate risks linked with a specific regional or
national market.
Diversification
(Risk mitigation value)
Asset
(Intrinsic value)
Terminals occupy premium
locations (waterfront).
Globalization made terminal assets
more valuable.
Traffic growth linked with valuation.
Same amount of land generates a
higher income.
Terminals as fairly liquid assets.
Source of income
(Operational value)
Income (rent) linked with the traffic
volume.
Constant revenue stream with
limited, or predictable, seasonality.
Traffic growth expectations result in
income growth expectations.
Risk Transfer and Private Sector Involvement in
Public-Private Partnerships
Concession
D-B-F-M-Operate
PPP Models
Degree of Private Sector Risk
Privatization
Design-Build-Finance-Maintain
Build-Finance
Operation & Maintenance
Design - Build
Degree of Private Sector Involvement
Privatization and Financing Models
Sale or
concession
agreement
Divesture part of a political agenda (budget relief).
Public sector is forced to sell or lease some of its infrastructures.
Infrastructure is transferred on a freehold basis.
Requirement; used for its initial purpose.
Long term lease (50 – 75 years).
Requirement that the concessionaire maintains, upgrade and build
infrastructure and equipment.
Concession for
new project
Tap new sources of capital outside conventional public funding.
Fiscal restraints.
Experiment with privatization.
Getting the latest technical and managerial expertise for the
infrastructure project.
Management
contract
Ownership remains public.
Management given to a private operator.
Through a bidding process.
Popular in the terminal operation business (maritime and rail).
Efficiency improvements.
Typology of Global Port Operators
Stevedores
Maritime Shipping
Companies
Financial Holdings
Horizontal integration
Vertical integration
Portfolio diversification
Port operations is the core
business; Investment in
container terminals for
expansion and diversification.
Maritime shipping is the main
business; Investment in
container terminals as a support
function.
Financial assets management is
the main business; Investment in
container terminals for valuation
and revenue generation.
Expansion through direct
investment.
Expansion through direct
investment or through parent
companies.
Expansion through acquisitions,
mergers and reorganization of
assets.
PSA (Public), HHLA (Public),
Eurogate (Private), HPH
(Private), ICTSI (Private), SSA
(Private).
APM (Private), COSCO (Public),
MSC (Private), APL (Private),
Hanjin (Private), Evergreen
(Private).
DPW (Sovereign Wealth Fund),
Ports America (AIG; Fund),
RREEF (Deutsche Bank; Fund),
Macquarie Infrastructure (Fund),
Morgan Stanley Infrastructure
(Fund).
Container Terminal Portfolio of the four Main Global
Terminal Operators, 2010
Top ten terminal operators: 65% of the world’s total
container handlings
The Governance of Gateways and Corridors is
Effective if it Reflects a Functional Reality
The North-American Container Port System and its
Multi-Port Gateway Regions
4
2
1
3
6
5
7
Multi-port gateway regions
1. San Pedro Bay
2. Northeastern Seaboard
3. Southwestern Seaboard
4. Puget Sound
5. Southern Florida
6. Gulf Coast
7. Pacific Mexican Coast
Major Rail Corridors Improved since 2000
Conclusion: Gateways and Corridors Governance in
a New Global Economic Setting
A
• Growing complexity of supply chains and
governance.
• The “last regulatory mile”.
B
• Port authorities and terminal operators as active
actors.
• Setting of functional corridors.
C
• Finding value to capture and capital to finance.
• Governance as a risk mitigation strategy.