There are three things that we can say with confidence about maritime security: improvements to maritime security are essential; shipowners, ports and port service providers are spending and will spend a lot of money meeting the demands of new regulations intended to improve port security; a great deal of that money will be wasted.<\/p>\n
Andrew Burgess’ article in the April edition of PS persuasively makes the case for improved port security. The concern of this article is with the effectiveness of our investment in port security, and in particular with the influence of funding arrangements on effectiveness.<\/p>\n
An assessment of the cost of meeting new security requirements seems the logical place to start. Disturbingly, with only a month to go before the deadline for ISPS Code implementation, we still have only very provisional estimates to go on.<\/p>\n
On the shipping side, the OECD has estimated the direct cost of compliance with the ISPS code at $1.28 billion initially, and $0.73 billion per annum thereafter 1. These estimates seem reasonably consistent with industry estimates, which draw on experience with the implementation of ISM Code, of around $20,000 per ship 2. But they have been challenged by some industry associations, which place the full cost of compliance at several times this level.<\/p>\n
There is an even greater degree of uncertainty surrounding the cost of implementing the port facility aspects of the ISPS Code. The information that is available is fragmented, incomplete and often inconsistent. Early US Coast Guard estimates place the cost of additional security measures in US ports alone at $5.4 billion over a 10-year period, with $1.15 billion of this incurred in the first year alone 3.Later estimates suggest initial implementation costs may be higher, at $1.5 billion. Australian port interests estimate the total initial cost in that country at $200m, with an ongoing annual cost of around $70m. The Canadian government has agreed to provide $86m over three years for ‘eligible’ security expenditure: this is intended to cover 75% of the capital costs involved in security upgrades.<\/p>\n
A number of individual ports and terminal operators have also made public estimates of the cost of new security requirements, or proposed new charges or levies to cover these costs. The range of such estimates is wide, but a figure of $10-$15\/TEU is reasonably representative.<\/p>\n
Using these figures as a guide, a conservative estimate is that the direct costs of implementing ISPS-related security measures in the world’s ports is likely to be around $2.5 billion a year (including depreciation on capital equipments).<\/p>\n
To these costs, we must add the cost of unilateral and ‘voluntary’ initiatives such as the 24-hour rule and the Container Security Initiative (CSI). The OECD estimates the cost of the 24-hour rule at between $287m and $10 billion a year: it is likely that the costs are closer to the lower end of this range. We estimate a broadly similar cost for the CSI.<\/p>\n
In total, the direct cost of new security measures is likely to be at least $4 billion a year. Indirect costs of cargo delays are almost impossible to quantify, but are likely to add at least as much again to this total.<\/p>\n
It is almost certain that much of this expenditure will achieve very little. This is intended as a statement of fact, not a criticism of those who were involved in developing the ISPS Code, the CSI, or any other of the initiatives that are driving changes in maritime security practices. They had no alternative. They had to act quickly. It would have been irresponsible to do nothing while reams of studies were undertaken to gather the information required to support a detailed objective analysis of alternatives.<\/p>\n
But the fact that the policy-makers may have done the best that they could under the circumstances does not alter the fact that their best is likely to be a very long way from perfect. There is little in the . way of objective analysis of cost and benefits to support the provisions of the ISPS Code (as variously interpreted by national governments). The same is true of the unilateral requirements imposed by the major trading entities – most notably the United States. However, even under the most favourable circumstances, undertaking this analysis would be extremely difficult. The nature of the threat is ill-defined. There is little or no information available on the likely costs of any attack, and there is no data on the extent to which proposed security measures will reduce the probability of a terrorist incident.<\/p>\n
A REAL DANGER OF REGULATORY CREEP When this lack of information is combined with a high degree of public concern about the risk of terrorism, and the likelihood that governments will be blamed if there is a failure in maritime security, there is a real danger of ‘regulatory creep’. This is increased by the fact that the ISPS Code requirements are quite general, and the interpretation of these requirements relies to a very significant extent on national legislation and regulation. It is always possible for those in charge of this process of interpretation to propose the adoption of more elaborate security precautions, and to argue – quite correctly – that these will help to lower the risk of a terrorist incident. When the costs of these additional measures are borne by others – by port and terminal operators, and by shipping companies – the temptation to adopt an excessively cautious approach is extreme.<\/p>\n
The best way to maintain some balance between the costs and the benefits of security regulation is to ensure that those who introduce new requirements must contribute significantly to the costs that result from those requirements. This can best be achieved through formal cost-sharing arrangements between government and industry, such as those that have now been put in place in the Canadian port sector. The practice of the United States, where the government makes a significant contribution through ad hoc payments, is less desirable because the decision to allocate funds is separated from the decision to impose requirements. Ideally, the two should be inseparable. Nevertheless, the US approach is preferable to that which has been adopted by the UK, Australia and New Zealand, where governments have avoided any responsibility for meeting maritime security costs, requiring industry to meet the full costs of enhanced security requirements.<\/p>\n
The way is which maritime security is funded matters not because it changes who will ultimately pay the bill for security initiatives, but because it will affect how big that bill will be, and how effectively the money will be spent. Whether terminal operators, shipping lines, shippers or governments pay for security improvements, it is you and I that will in the end pay the price – either through the cost of the goods we consume or through our taxes. But by ensuring that those who make the decisions on security requirements meet a substantial part of the costs of implementing them, we will encourage careful scrutiny and proper evaluation of proposed security measures. The result will be not only lower costs, but also greater effectiveness.<\/p>\n
And this will be in everybody’s interests.<\/p>\n
Steve Meyrick, managing director of Meyrick and Associates, is a maritime transport economist with particular interests in the analysis of ports policy and management; pricing and economic regulation;<\/p>\n
financial and economic evaluation of maritime projects; and global liner shipping. Meyrick and Associates website: www. meyrick. com. au 1 OECD, Directorate of Science Industry and Technology.<\/p>\n
Security in Maritime Transport: Risk Factors and Economic Impact . OECD, Paris, 2003 2 Lloyd’s Shipping Economist, April 2004.<\/p>\n
Security: Counting the Cost . 3 US Federal Register 68(204) 22 October 2003, US Dept of Homeland Security Coast Guard, 33 CFR Parts 2, 101 and 102, Implementation of national maritime security initiatives<\/p>\n","protected":false},"excerpt":{"rendered":"
In the post-9\/11 world of greatly increased security regimes, Steve Meyrick adds up the cost and asks: Who pays?<\/p>\n","protected":false},"author":8,"featured_media":1345,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[31],"tags":[],"sponsor":[],"class_list":["post-1344","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-terminal-operations"],"acf":[],"_links":{"self":[{"href":"https:\/\/www.portstrategy.com\/greenport-congress\/wp-json\/wp\/v2\/posts\/1344","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.portstrategy.com\/greenport-congress\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.portstrategy.com\/greenport-congress\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.portstrategy.com\/greenport-congress\/wp-json\/wp\/v2\/users\/8"}],"replies":[{"embeddable":true,"href":"https:\/\/www.portstrategy.com\/greenport-congress\/wp-json\/wp\/v2\/comments?post=1344"}],"version-history":[{"count":0,"href":"https:\/\/www.portstrategy.com\/greenport-congress\/wp-json\/wp\/v2\/posts\/1344\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.portstrategy.com\/greenport-congress\/wp-json\/wp\/v2\/media\/1345"}],"wp:attachment":[{"href":"https:\/\/www.portstrategy.com\/greenport-congress\/wp-json\/wp\/v2\/media?parent=1344"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.portstrategy.com\/greenport-congress\/wp-json\/wp\/v2\/categories?post=1344"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.portstrategy.com\/greenport-congress\/wp-json\/wp\/v2\/tags?post=1344"},{"taxonomy":"sponsor","embeddable":true,"href":"https:\/\/www.portstrategy.com\/greenport-congress\/wp-json\/wp\/v2\/sponsor?post=1344"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}