Thinking global gives hub ports a chance to spread their knowledge, explains STC-Group''s Maurice Jansen
Over the past five years, port authorities in the Hamburg-Le-Havre range have actively pursued internationalisation strategies, due in no small part to the evolving role of port authorities.
A basic principle for port authorities is to provide a safe and reliable place where goods can change from one modality to the other. In many countries port authorities receive a licence to maintain, develop and operate from a national, regional or local government. However, over the years, ports authorities have realised their changing position from being a node in the transport system to becoming a critical element in increasingly sophisticated international supply chains.
The port authority acting on behalf of the local government is faced with actors – shipping companies, terminal operators, multinationals, freight forwarders and NGO’s – which have grown beyond the city and even national boundaries. As a consequence port authorities have drifted away from city councils to become more autonomous and commercially operating organisations.
More and more port authorities consider themselves as network companies. A good example is Rotterdam Port Authority: a corporatised landlord port whose vision is to create value for customers by developing chains, networks and clusters both in Europe and in emerging markets worldwide.
Open outreach
Let’s consider the internationalisation activities of ports in the Hamburg-Le Havre range (see table one). It was the port of Rotterdam who was the first port authority - at that time still a municipal port authority - to enter into a joint venture with the Omani government in a greenfield port development in Sohar. Both joint ventures (Sohar Industrial Port Company and Sohar Industrial Development Company) have turned out to be very successful, but questions remains whether Sohar is an exceptional case where all the pieces fell into place.
Coincidentally or not, the port of Antwerp is active in Oman as well. It has acquired a 50% stake in the Port of Duqm Company via a consortium between the Port of Antwerp and Rent-a-Port. For the Port of Antwerp the co-operation with economic growth areas is of vital importance for its foreland strategy. It aims to benefit from intensive co-operation to build a stronger international maritime network and thereby generate new traffic.
Other ports in the port range, such as Hamburg and Le Havre have not yet ventured in overseas participations yet. Nonetheless Hamburg has outlined a strategy to strengthen ties with the most important overseas relations through co-operations with local ports and the parties within the supply chains of their customers. Their focus is on Brazil and India.
Table two above provides an overview of the type of activities per port authority. Here, Antwerp and Rotterdam have been the most active. Sister port relationships have existed for several decades aiming to foster trade and business facilitation. In recent years some ports have renewed these relationships or turned them into more intensive ways of knowledge sharing on a mutual basis on topics such as sustainability, stakeholder management and corporate social responsibility.
Beyond sharing knowledge on a mutual basis, Rotterdam and Antwerp have gone a step further by offering consultancy services to other ports. Both have established consultancy teams that work on projects around the world.
However, the more advanced forms of partnerships are less evident. There are only a few cooperation agreements on management services or participation in development and operation of a foreign port. This could reflect the level of complexity and sensitivity involved. Cargo flows projections, local stakeholder assessment and changing political environments make it difficult to determine when to step in as a foreign investor.
Cast the net
The reasons for internationalisation can be explained in different ways. Both the Dutch and the Belgium port industrial complexes are located in comprehensive clusters where excellent conditions exist in terms of infrastructure, a vast hinterland, availability of capital resources, advanced business service companies (such as lawyers, insurers) and a highly developed knowledge and education infrastructure. Both ports are a geographical hotspot of trade flows. However, their home countries are small, space is limited and expensive, and GDP growth is marginal.
Furthermore, port expansion projects are complicated and cumbersome due to the many stakeholders, and permits and environmental impact assessments required. On top of this, ports in the Hamburg-Le Havre range fight each other for volumes, continually enhancing their quality and service level to please ever more demanding customers. Supporting industries flourish in such an environment as well. World leading dredging companies such as Van Oord, Boskalis, Jan de Nul and DEME originate from this area. It is the combination of these factors which determines the port authorities' competitive strategy, pushing and pulling it into renewal and innovation of their businesses.
Illustrative to customers pulling the port authority is the relationship between Port of Rotterdam and Brazilian mining company Vale, exporting iron ore to Europe and the rest of the world. The Port of Rotterdam is keen on securing cargo flows for the long term, while Vale is in need of expertise to develop port infrastructure in Brazil and in strategic storage and blending facilities around the world. Both companies found each other in Oman where Vale is building a pelletising plant, a way to shorten its time-to-market in Asia and Middle East. The same concept applied for Dutch company Royal Vopak who sought a trustworthy port manager abroad and thus pulled the Port of Rotterdam into feasibility studies.
It is this strategic connection which explains the increasing internationalisation of port authorities. Port authorities no longer operate as traditional landlords, but are network companies tying themselves into the supply chains of their customers. In order to understand how Antwerp and Rotterdam port authorities are positioning themselves in the global arena, researchers from Rotterdam School of Management developed a strategic framework, combining Porter’s Diamond model with the concept of strategic connectivity. They found that the more companies strategically connected with the port of Rotterdam, at both ends of the supply chain, the stronger the network becomes, and the more this contributes to the overall objectives of the home port.
Tight rein
While internationalising, landlord port authorities with governments as major shareholders can only pursue the road towards further internationalisation through a delicate balancing act. They have to balance foreign investment with economic and strategic contribution of the home base port.
And even when a port authority is convinced a strategic balance can be reached to verify a port participation abroad, a complicating factor can be the balance of the host port. Equally important, there has to be an added value for host ports, to allow foreign port authorities to set foot on their territories. Sharing know-how and expertise to develop master plans are surely welcome, but in the long run are not sustainable. Long lasting value has to come from establishing networks where knowledge and skillsets are embedded within the people, the process and management.
The key to success may be in finding strategic balance from both ends. A change of perspective for internationalising port authorities indeed.
Maurice Jansen is senior manager innovation, research & development at STC-Group, Rotterdam, setting up a research plan in port strategy with focus on international strategic connectivity.
