NO NEED FOR THE INTRODUCTION OF “WeWork” CULTURE
COMMENT: It is interesting to see the European Sea Ports Organisation (ESPO) voicing a pitch for a larger slice of Trans-European (Ten-T) funding and particularly on the basis of assisting ports that have projects with an ROI which is “low and slow, writes Mike Mundy.
In practical terms, ESPO seems to suggest that projects of the latter description are deserving of funding on a “society-wide” cost benefit basis – their implementation will accrue wider economic and other benefits other than those measured in relation to the core function.
This seems a tenuous route to head down as part of a campaign to secure a larger slice of Ten-T funding, albeit that ESPO in general terms may have a point about TEN-T funding for ports with this only accounting for four per cent of the total funding available in the 2014-17 budget period.
On the other hand, isn’t it up to individual ports to apply for Ten-T funding – so before we can have a degree of sympathy with the four per cent figure it would be useful to know the number of applications submitted?
As ESPO acknowledges, there is also funding available to ports and terminals under regional or cohesion frameworks so Ten-T is not the whole story. The contention, however, that port projects with a “low and slow ROI” should come more into the framework of Ten-T funding is basically difficult to swallow.
Taking a macro look Europe is not short of ports and inter and intra port competition. Equally, taking a look around at previous Ten-T port projects a number might fall into or border on this sort of criteria and to be frank after implementation have only achieved White Elephant status or are in the process of doing so.
Realistically, there is also the temptation on the part of some public bodies to use Ten-T funding to bring projects to market in the hope of establishing another source of income rather than meet a genuine need.
Bottom line though, the biggest objection to using Ten-T funding for port projects with an ROI that is “low and slow” is that projects don’t need external support when they are commercially sound. To argue otherwise draws parallels to the current and much publicised case of WeWork, the hip and trendy provider of shared office space, which has been running huge losses since its start in 2010 and in an effort to deflect from its financial problems, has been extolling the virtues of its wider positive impact in the community, and as part of this thrust highlighting a community-based EBITDA.
Economics and common sense prevail in the end, however, and now, a few months on from planning a big IPO with a target valuation of USD47 billion, We Work is close to bankrupt and in need of a bail-out.
The ports sector is the focus of considerable interest from investors and the range of investments being undertaken is steadily broadening. To provide a mechanism to invest in soft projects only seems likely to distort what to-date has been a largely successful approach to investment in the port sector.