Dumb and dumber

Looking back over 2009 we thought it might be ‘enlightening’ to share some of these with you. Well, what we really mean is please learn from these ‘anomalies’.

Picture, if you will, the port authority that is also a direct provider of cargo handling services and in a cargo handling context has a major competitor. How does the authority gain competitive edge – it requires its competitor to publish its tariffs for cargo handling services but does not publish its own.

Next, a fairly low level port offers for concession its general cargo/container units. First, it requires an inflated price to be paid for the bid documentation, a big number compared with the usual requirement. Second, it has nothing really in shape when potential investors begin to investigate the opportunity. The unit has significant debts that have to be taken on – and debts that look as though they have just been poured into this vehicle rather than belong to it. But how would you ever know, well it would probably be difficult to find out because the larger part of the top echelons of port management are in prison!

There is a huge labour force that has to be taken on including a maintenance company whose activities extend well beyond the port dimension – now let us think where in the Port Reform Tool Kit does it say it is recommended that government deals with such issues (and particularly the downsizing of the workforce) before offering such opportunities to investors?

It gets even better – the proposed concession agreement requires the incoming investor to build out a quay at some cost. Why? Well no logical reason that can be determined; it is not required from a trade point of view.

Next, a structural survey of the quay reveals it is in a dreadful state – to the point that the outreach of a panamax container crane cannot be fully utilised to service a containership, the quay cannot accept the loadings imposed and generally is in some danger of collapsing. Actually, what is required is over €100m of works to put the quay right, just a small thing not to mention to an incoming investor.

Oh and by the way in the meantime you can fully service a panamax containership but only by getting the vessel to turn round. And all this from a port that is really only achieving single digit cargo growth per annum.

And finally, a real cerebral scenario to finish on. A terminal is built with very little in the way of a market study. It stands empty for over a year and then wins a leading customer of another established terminal in the same country. But to do so it has to offer a discount on the terminal charges to the line of over 50%. It also has to sign up to the imposition of all kinds of penalty charges imposed by the line if the terminal doesn’t do this or that or possibly even if someone in the line’s head office sneezes at the wrong time.

The capture of this customer leads the terminal to trumpet its success far and wide – the majority of the maritime press not being that canny buy into it. The terminal cites tremendous year on year growth and the realisation of a hub concept that can only mature. Wonderful stuff, everybody involved must be happy. Or are they – well actually not? There is one simple inescapable reality that has to be acknowledged – volume does not always equate to profit and still this is miles and miles away. In fact, looking at the accounts you can see several million reasons, in a large double digit format, why the investors will not be happy at all.