Advanced Port Economics Seminar, University of Antwerp, Institute of
Transport and Maritime Management, December 17 2012
Ports, Inland Ports and Logistics
Zones: Governance Issues
Jean-Paul Rodrigue
Professor
Dept. of Global Studies & Geography
Hofstra University
New York, USA
1- Terminals and Governance
2- The Financing of Intermodal Terminals
3- Global Terminal Operators
4- Challenges to Terminal governance
Terminals and Governance

Technical and Policy Changes
Transport Terminal Governance
Intermodal Transportation: Emerging Paradoxes
Growth
Geographical and functional diffusion of
containerization.
Massive investments.
Maturity
Rationalisation (corridors and sites).
Revolution
New standards, practices and
technologies.
Increasing returns.
Deregulation
Consolidation (maritime, rail and trucking).
Emergence of large operators.
Evolution
Incremental changes.
Decreasing returns.
Governance
PPP. Supply chain control. Added-valuecapture.
Foreland / Hinterland: An Ongoing Integration Through
Containerization
Maritime Shipping
• Economies of scale
• Setting of maritime networks
• Port terminals
Inland Transportation
• Rail and fluvial shuttles
• Intermodal terminals
• Corridors (landbridges)
Intermodal Logistics
• Continuity and capacity
• Inland ports / logistics zones
Shift in Public Transport Policy Perspective
Conventional
Emerging
Independent Modes
Intermodal Systems
Local Economies
Regional / Global Economies
Independent Jurisdictions (“turf wars”)
Coalitions / Consensus
Publicly Funded
Public / Private partnerships
Users (public subsidy)
Customers (revenue generation)
Build (infrastructure provision)
Manage (optimization of existing
resources)
Plan (regulations; political signals)
Market (deregulations; price signals)
Commodity Chains and Added Value
High
Fabrication
Added value
R&D
Low
Marketing
Branding
Design
Concept
Sales / Service
Distribution
Manufacturing
Commodity chain
Logistics
Why Governance of Intermodal Terminals Matters?
■ “The exercise of authority and institutional resources to
manage activities in society and the economy. It concerns the
public as well as the private sectors, but tends to apply
differently depending if public or private interests are at stake.”
■ Terminal assets:
•
•
•
•
Capital intensive.
Consume land use.
Have externalities (noise, emissions).
Have many stakeholders (port authority, terminal operators, rail
operators, trucking companies, etc.).
Transport Terminal Governance
PPP
Ownership (Mostly
public)
Operations
(Increasingly private)
• Focused on compliance
and revenue generation.
• Challenge of rent seeking
behavior.
• Usage of concessions.
• High productivity levels.
• Generation of externalities.
The Main Activities of Landlord Port Authorities
Traffic Management
Vessel traffic management (fast turnaround, security,
reliability).
Management of inbound and outbound inland traffic.
Partnership with barge, rail and truck operators for inland
distribution.
Area Management
Develop transport infrastructures.
Provide space for port related activities (expansion or
reconversion).
Rationalize the land use.
Customer Management
Attract new customers.
Retain existing customers (satisfaction).
Find new added value activities.
Stakeholder Management
Influence regulation.
Relations with local, regional and national public agencies.
Public and Private Roles in Port Management
Ownership
Public service
port
Tool port
Landlord port
Corporatized
port
Public
Responsibility
Private service Private
Responsibility
port
Port admin.
Nautical
management
Port
infrastructure
Superstructure
Cargo handling
Pilotage
Towage &
Mooring
Dredging
Freight Cluster Governance
Scale and scope
Recognition of the city as a hub / terminal. Multimodal and
intermodal. Across jurisdictions.
Actors
Recognition of the stakes of various private and public actors.
Different forms of ownership and jurisdiction.
Decision taking
Consensus and ad hoc. Public-private partnerships. “Coopetition”.
Policy
Able to influence and articulate incentives (zoning, public
investments, regulations).
Information
technologies
Freight community system; coordination and integration of
information systems.
Labor
Foster training and research needs.
Main Governance Models for Inland Ports
Model
Characteristics
Implications
Single Ownership
A public or a private actor entirely
responsible for development and
operations.
Single vision and conformity to a
specific role.
Help combine public planning of
infrastructures with private
operational expertise.
Public (local) interests represented.
Public ownership and private
operations (a form of PPP).
Long term concession agreements.
Potential lack of flexibility in view to
changes (single mandate).
Potential conflicts with surrounding
communities.
Public – Private
Partnership
Landlord Model
Tendency to prioritize public interests
over private interests.
Managerial flexibility between the owner,
the site manager and the operators.
Most of the risk assumed by private
operators.
The Financing of Intermodal Terminals

Private Participation and Public Divesture
Privatization and Financing Models
Public / Private Partnerships
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)
Lifespan of Main Transport Assets
Port
Railway
Airport
Bridge
Highway
Jet plane
Containership
Container
Average Lifespan
Car
Optimum Lifespan
0
20
40
60
80
Years
100
120
140
160
Risk Transfer and Private Sector Involvement in PublicPrivate 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
Conditions for Port Privatization
Bidding process
Open and transparent bidding process.
Infrastructures
Capacity and quality of port infrastructure as well as for
hinterland access.
Regulations
Safety and labor conditions.
Retrenchment and retraining of labor.
Port authority
Landlord model with clear role.
Customs
Efficient and transparent procedures.
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.
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.
Port and Maritime Industry Finance
Investors
Financial
Markets
Brokers
Corporations
Money Markets
Commercial
Banks
Private
Investors
Capital Markets
Mortgage
Banks
Investments
Managers
Equity Markets
Merchant Banks
Private
Placement
Finance Houses
•Insurance Companies
•Pension Funds
•Banks
•Trust Funds
•Finance Houses
Leasing
Companies
Shipping
Companies
Port
Operators
Earnings
The Prediction of Future Outcomes
Forecasting
Scenarios
Speculations
5 years
10 years
New Project
Time
Global Terminal Operators

Global Port Terminal Portfolios
Port Operator Strategies
Added Value Strategies
Control of Global Container Terminals
900
800
700
Million TEU
600
Public Sector
500
Private Sector
400
Global Operators
300
200
100
0
1996
2003
2010
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).
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
Top Twelve Global Container Terminal Operators in EquityBased Throughput
Evergreen
7.0
SSA Marine
7.5
Modern Terminals
8.0
Ports America
8.1
China Merchants
8.9
MSC
9.9
COSCO
13.6
SPIG
19.5
APM Terminals
31.6
DPW
32.6
Hutchison Port Holdings
36.0
PSA
51.3
0
10
20
30
40
Million TEUs (2010)
50
60
Number of Terminals and Total Hectares Controlled by the
Twelve Largest Port Holdings
CMA-CGM
412
Terminals
ICTSI
466
14
Hanjin
559
16
Cosco Pacific
686
Shanghai International Port Group
734
SSA Marine
13
14
10
939
Ports America
20
1,270
Eurogate
11
1,646
APM Terminals
9
2,038
Dubai Ports World
42
2,347
Port of Singapore Authority
50
2,604
Hutchison Port Holdings
3,248
0
38
47
500 1,000 1,500 2,000 2,500 3,000 3,500 4,000
Hectares (2010)
Container Terminal Surface of the World's Major Port
Holdings, 2010
Container Terminals of the Four Major Port Holdings, 2010
Portfolio by Equity-Based Capacity of Main Global Terminal
Operators, 2010
APMT
HPH
DPW
PSA
Regional Share in the Terminal Portfolio of the Twelve Largest Global
Terminal Operators (Hectares, 2010)
CMA-CGM
ICTSI
Hanjin
Cosco Pacific
Africa
Shanghai International…
Australia
North America
SSA Marine
South America / Caribbean
Ports America
Pacific Asia
Eurogate
South Asia / Middle East
APM Terminals
Mediterranean
Dubai Ports World
Europe Atlantic
Port of Singapore…
Hutchison Port Holdings
0% 20% 40% 60% 80% 100%
Inter-firm Relationships in the Three Main Container Ports
of the Rhine-Scheldt Delta, 2010
HUTCHISON PORT
HOLDINGS
PSA
20%
Majority
shareholding
100%
Minority
Shareholding (4)
ECT
MSC
ANTWERP
50%
NYK
100%
100%
50%
Delta Terminal
Waal- and
Eemhaven
Euromax
phase 1
Rotterdam World Gateway
(Maasvlakte 2)
Operational by 2013
CYKH
Alliance
50%
50%
60%
30%
10%
APM Terminal Maasvlakte
Terminal 1
(Maasvlakte 2)
Operational by 2014
ROTTERDAM
PSA HNN
100%
100%
New World
Alliance
100%
DP World
ZIM Line (1)
42.5%
10%
MSC Home terminal
50%
North Sea Terminal
100%
Europe Terminal
50%
Deurganck Terminal
Antwerp International
Terminal (AIT)
DP World Delwaidedock
Shipping Line
(Global) Terminal
Operator
Antwerp Gateway (3)
Terminal
Cosco Pacific
20%
CMA-CGM (2)
10%
35%
65%
CHZ
APM Terminals
(AP Moller Group)
100%
Albert II-dock north (under
construction)
Shanghai
International Port
Group (SIPG)
25%
PORT
Financial Holding
75%
APM Terminal
ZEEBRUGGE
Inter-firm Relationships in the Three Main Container Ports
of North America, 2010
APL
100%
Global Gateway South
Ontario Teachers'
Pension Plan
NYK
100%
Yusen Terminals
100%
100%
TraPac Los Angeles Berth
136
Mitsui OSK
100%
APM Terminals Pier 400
Evergreen
50%
Evergreen Terminal
50%
Yangming
40%
West Basin Container
Terminal
60%
100%
100%
Deutsche Bank
RREEF
LONG BEACH
Global Terminal and
Container Services
APM Terminals Port
Elizabeth
Terminal C60
100%
Maher Terminals
100%
Maher Terminal
Ports America
100%
Port Newark Container
Terminal
MSC
50%
Terminal A
OOIL
100%
Long Beach Container
Terminal
K-Lines
100%
Pier G Berth
50%
100%
100%
California United Terminals
Cosco Pacific
51%
Pacific Container Terminal
49%
Hanjin
60%
Total Terminals International
40%
Shipping Line
APM Terminals
(AP Moller Group)
New York Container Terminal
LOS ANGELES
Hyundai
Global Container
Terminals
Terminal Operator
Stevedoring
Services of
America
NEW YORK
AIG Highstar
Capital
Macquarie
Infrastructure
Terminal
PORT
Financial Holding
Inter-firm Relationships in the Main Container Ports of the
Pearl River Delta, 2010
GUANGZHOU
APM Terminals
(AP Moller Group)
20%
China Shipping
Group
40%
50%
ZHUHAI
Zhuhai International
Container Terminals
Guangzhou South China
Oceangate Container
Terminal
Nansha Container Terminal
Guangzhou Huangpu Xinsha
Terminal
25%
HUTCHISON PORT
HOLDINGS
70%
Da Chan Bay Terminal One
35%
Shekou Container Terminals
80%
Chiwan Container Terminal
75%
49%
PSA
10%
Moderns Terminals
COSCO-HIT Terminal
10%
Hong Kong International
Terminals
20%
100%
Shenzhen Municipal
Government
China Merchants
Holdings International
67%
Asia Port Services
DP World
66%
DP World Hong Kong
55%
Asia Container Terminals
HONG KONG
SHENZHEN
Shipping Line
Guangzhou Port
Group
33%
Yantian International
Container Terminals
20%
49%
Dongguan Container
Terminal
30%
Modern
Terminals
60%
50%
Shenzhen Yantian
Port Group
65%
41%
Cosco Pacific
Nanhai International
Container Terminals
Guangzhou Huangpu
Xingang Terminal
50%
39%
Terminal Operator
Terminal
PORT
Financial Holding
33%
The Strategies of Port Operators
Profitability
Increase the profitability of terminal assets; (better equipment,
information systems and management). Port management is
very lucrative.
Financial Assets
Large financial assets and the capacity to tap global financial
markets. Terminals as equity generating returns.
Managerial Expertise
Experience in the management of containerized operations. IT
and compliance with a variety of procedures.
Gateway Access
Establishing hinterland access. Creation of a “stronghold”.
Provides a stable flow of containerized shipments. Development
of related inland logistics activities.
Leverage
Negotiate with maritime shippers and inland freight transport
companies favorable conditions. Some are subdiaries of
maritime shipping companies.
Traffic Capture
Capture and maintain traffic for their terminals.
Global Perspective
Comprehensive view of the state of the industry. Anticipate
developments and opportunities.
Challenges to Terminal Governance

Changes in the Role of Port Authorities
Security of Global Supply Chains
A Volatile Global Trade Context
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
Port Community System
Exporter
Foreland
Importer
Hinterland
Risks in Global Supply Chains
RISKS
Supply Risks
Demand Risks
Operational Risks
FACTORS
Environmental
Geopolitical
Economic
Technological
Natural disasters
Political instability
Trade restrictions
Demand shocks
ICT disruptions
Terrorism
Corruption
Theft and illicit
trade
Piracy
Border delays
Currency
fluctuations
Energy shortages
Extreme weather
Pandemic
Probability
High (>30%)
Average (15-30%)
Low (<15%)
Price volatility
Infrastructure
failures
Mitigation
Uncontrollable
Influenceable
Controllable
Thefts by Type of Cargo and Location, United States, 2010
Thefts (899 Incidents)
5% 1% 3%
Locations (497)
6%
11%
5%
1% 7%
29%
9%
10%
8%
25%
4%
7%
5%
21%
20%
23%
Truck Stops
Public Access Parking
Alcohol
Auto / Parts
Roasides
Building / Industrial
Clothing / Shoes
Unsecured Terminals / Lots
Consumer Care Products
Electronics
Secured Parking
Food / Beverages
Home / Garden
Fictitious Pickup
Miscellaneous
Pharmaceuticals
Driver Theft
Tobacco
Other
Maritime Security Initiatives Implemented by The United
States or the European Union
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 by targeting and
screening 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.
EU Authorized Economic
Operator (AEO)
Certification
2008
Identifying reliable traders and providing them with trade facilitation
measures.
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.
EU Pre-arrival and Predeparture
Advance cargo
information
2009
Advance information on goods brought into, or exported from the
Customs territory of the EU (perimeter).
100% scanning
Cargo screening
2012?
Non-intrusive inspection of 100% of all inbound cargo containers.
Global Maritime Piracy, 2008-2009
Jan-70
Jan-71
Jan-72
Jan-73
Jan-74
Jan-75
Jan-76
Jan-77
Jan-78
Jan-79
Jan-80
Jan-81
Jan-82
Jan-83
Jan-84
Jan-85
Jan-86
Jan-87
Jan-88
Jan-89
Jan-90
Jan-91
Jan-92
Jan-93
Jan-94
Jan-95
Jan-96
Jan-97
Jan-98
Jan-99
Jan-00
Jan-01
Jan-02
Jan-03
Jan-04
Jan-05
Jan-06
Jan-07
Jan-08
Jan-09
Jan-10
Jan-11
Jan-12
West Texas Intermediate, Monthly Nominal Spot Oil Price
(1970-2012)
140
120
100
80
60
40
20
0
China: The Largest Bubble in History?
Share of the World Commodity Consumption, China and United States, c2009/10
Cattle
Oil
GDP (PPP)
Wheat
Population
Soybeans
Chickens
Rice
Nickel
Aluminum
Zinc
Copper
Lead
Steel
Coal
Pork
Eggs
Cement
Iron Ore
6.1%
6.8%
10.4%
21.7%
13.6%
19.7%
16.6%
4.9%
Rebalancing in demand
19.7%
4.5%
24.9%
19.9%
25.2%
11.3%
China
30.2%
0.9%
United States
31.9%
10.1%
34.6%
8.7%
38.2%
1.8%
39.5%
9.1%
42.1%
13.7%
45.8%
4.8%
46.9%
15.2%
49.6%
8.4%
53.6%
7.8%
53.6%
2.1%
54.4%
1.9%
0%
10%
20%
30%
40%
50%
60%
70%
Jan-85
Jan-86
Jan-87
Jan-88
Jan-89
Jan-90
Jan-91
Jan-92
Jan-93
Jan-94
Jan-95
Jan-96
Jan-97
Jan-98
Jan-99
Jan-00
Jan-01
Jan-02
Jan-03
Jan-04
Jan-05
Jan-06
Jan-07
Jan-08
Jan-09
Jan-10
Jan-11
Jan-12
Baltic Dry Index, Monthly Value, 1985-2012
12,000
10,000
8,000
6,000
4,000
2,000
0
Conclusion: Terminal Governance in a New Global Economic
Setting
■ Terminal Operators and Port Authorities
• New public / private partnerships.
• Shifting balance of power (global vs. local).
■ Finding value to capture
• New forms of distribution and integration with transport terminals.
■ Finding capital to finance
• Governance as a risk mitigation strategy.
■ Governance of global freight distribution
• Governance of foreland, hinterland and supply chains.
• Strategies and policies a reflection of the scale and scope of global
supply chains.