Port reform

An urgent challenge for us all

There have been three notable tipping points in the history of port development.

Two of these were related to customs law and excise taxes and they occurred many years apart, in the early 13th century and in the opening years of the 19th century. They set the pattern for modern-day seaports in terms of berths, warehouses and the separate roles of ship’s crew, stevedores, shipping agents and customs authorities. The third tipping point occurred much more recently, in 1991, and in this article* I would like to focus on that event – the eighth session of the United Nations Conference on Trade and Development (Unctad) in Colombia that resulted in the Cartagena Commitment. It had a major impact not only on port development but on liner shipping as a whole. The complete logistics shipping chain was altered forever.

The Cartagena session concluded that protectionism had failed to meet objectives such as improved quality of life in developing countries. The irony is that Unctad for many years supported governments in developing countries that had a policy of protectionism whereby the state had an active role in production and in ports and ocean transportation.

In 1991 it was concluded that protectionism had failed and a new policy was needed to eradicate poverty and achieve a more equal distribution of the world’s wealth. This led to the Marrakesh Agreement and the setting up of the World Trade Organization to develop and apply a new policy.

Partnership

The new policy was liberalization, privatization and greater private-sector involvement. Partnership between the public and private sectors was to be promoted and governments were to facilitate the private sector.

Very early after being established, the WTO in 1993 introduced the Intermodal Surface Transportation Act in which it strongly appealed to all governments to make an inventory of the conditions of their ports and the accessibility to these ports by land and water. It was strongly recommended to improve these infrastructural works and port efficiency.

Whether by design or default, the replacement of protectionism by liberalization and privatization had a cascading effect. In Europe, the European Union introduced legislation to comply with the new policy of liberalization and privatization. European state-owned shipping companies were also privatized. The old French state-owned company CGM was privatized and sold to CMA, and so on. The new policy also had a domino effect. It led to the demise of state-owned shipping lines, sometimes by default. The once mighty Flota Mercante Grancolombiana disappeared, as did Lloyd Brasileiro, the Venezuela state-owned shipping line, the West Indies Shipping Company (WISCO) and many more. Private shipping lines now ruled the waves. Efficiency and customer service became the name of the game.

Global institutions introduced port reform policies to increase the private sector’s role in ports and to finance improvement of ports and the accessibilities to these ports.
In South America, Colombia was one of the first countries to really privatize its ports. Panama also understood the new policy. Other territories in the region were slower to improve efficiency and modernization of their ports.

Looking ahead

So where do we go from here? What will be the future role of customs authorities in ports, given that with single markets and the lifting of customs duties within these markets a new role for customs authority is imminent? Also, since value-added taxes replaced part of the income from import duties, how fast can governments keep up with these new developments? What about governments that have not yet understood the importance of increased private-sector involvement in ports and still feel protective? Their ports still suffer from inefficiency and labor problems. What about governments that have not yet modernized their customs legislations? And others who still have not understood the many programs of trade facilitation as promoted by many global institutions?

In certain countries, customs will not accept vessel sharing between lines and still have the old-fashioned idea that a vessel cannot carry cargo for two lines. They don’t realize that the captain can transfer the responsibility of the cargo in temporary storage to two agents.

I realize that small territories with a limited annual cargo throughput need to apply things with more diligence. But that does not mean that they could not update their legislation and transform their customs to be more efficient and effective while at the same time truly applying trade facilitation.

It is a myth that one private-sector terminal operator is a monopoly that may abuse its position. There are ways and procedures to prevent that from happening, such as a regulated tariff and the requirements of key performance indicators. Terminal operators and public terminals that serve the domestic cargo should understand they are a public service franchise, with all the social responsibilities that go with that.

How CSA can help

I think the CSA can play a role in making governments aware of the new policies of liberalization and privatization and the importance of implementing these policies. In order for any territory to demand its share of the world’s wealth, the port as a gateway to world trade is of high importance.

Unctad in the past often had presentations during CSA meetings. I think the CSA should once again invite them to make presentations because they maintain valuable statistics and write high-quality analysis with regard to trade, port and ocean transportation.

The same goes for the World Bank, which on its website has a chapter for port reform (Port Reform Toolkit). We should invite top customs officials from countries that have modernized their legislation to come and educate us with presentations. How do we get governments and politicians to understand the importance and consequences of the Cartagena Commitment to eradicate poverty in the world and have a better distribution of quality of life by facilitating the private sector as an engine of economic development?

I realize it is a challenge to get governments, and especially politicians, to understand the importance of port development. Reminding them of the Cartagena Commitment and the fact that landlord ports have a proven track record of being the most efficient terminals will help to realize the required paradigm shift.

We as captains of industry have a job to do.
*R.G.A. Vyzelman has described all three tipping points in a presentation entitled ‘Port development in a historic perspective’. We hope to cover the other points in a future edition of Caribbean Maritime.