The benefits of togetherness

03 Feb 2017

COMMENT: In fully private markets, the ‘invisible hand’ ensures the survival of the fittest, writes Peter de Langen.

Under these markets, private organisations can generally be said to be efficient, whether they are globally operating multinationals such as aircraft manufacturers or internet search engines or small to medium enterprises such as restaurants. If they survive we can assume that they are efficient, such is the nature of a private market.

 

The same cannot be said of government-owned organisations, as these are not subject to the same competitive pressures. It also does not apply to state-owned port authorities. Here, inefficient organisations may survive, as state ownership protects them from takeovers.

 

My ‘bold assertion’ here is that small-scale local port authorities are dysfunctional beasts that survive solely because of state protection. In the UK, where the majority of port companies are privately owned, a process of mergers and takeovers has led to the emergence of port groups, such as Associated British Ports and Peel Ports. In contrast, most of the government-owned or trust ports (such as Dover and Belfast) continue to operate just one port.

 

In many European countries, the model with one port authority that develops one port dominates, even though some merger initiatives have been taken – and are widely regarded as a success.

 

While there certainly is not one geographical size that fits all, I would argue that if nearby ports are clearly complementary, integrated port development - that is one port authority/port development company that is responsible for both ports – would be the next logical step. If we follow this argument, if nearby ports are similar in terms of draft, hinterland connections, available space, the less complementary they are and consequently the potential benefits from integrated development are lower.

 

On the contrary, nearby ports that are dissimilar are more complementary and could benefit greatly from integrated development. Examples of nearby European ports that seem complementary but are still being developed in competition would be Portugal’s Lisbon and Setubal, Spain’s Tarragona and Barcelona, and Italy’s Venice and Trieste. Ports such as these should urgently analyse whether integrated development would be fitting for future growth.