PATENGA POSITIVES BUT…

Reports coming out of Bangladesh indicate that the new Patenga Container Terminal will be open for business in June, however, the big question still remains as to who will end up operating it? Equally, the process via which the ultimate operator is selected appears to be an area where there is room for improvement to the all-round benefit of the terminal’s customers, the landlord Chittagong Port Authority (CPA) and the country as a whole.

Currently what is known is that:

• Demand: There is a strong need for the new capacity that the terminal will offer with the present container handling facilities in Chittagong regularly congested and subject to strong annual growth rates – volume hit 3.2mTEU in 2021, up 13 per cent over 2020.
• Location & Facilities: Located near the estuary of the Karnaphuli River, the new facility, designed to have an annual capacity of 500,000TEU, will feature a 600m quay with a depth alongside of 10.5m enabling it accept vessels of up to 4500TEU capacity, a significant step up from the draught constrained Chittagong port which is only able it to accept container vessels of up to 2000TEU.The supporting landside area will extend over 32 acres and be rail connected.
• Operation: Initially to be undertaken by the CPA with eventual award to a private operator reportedly via Bangladesh’s Public Private Partnership Authority.
• Cargo Handling: Will at the outset be achieved via CPA-owned cargo handling equipment with full equipment and IT systems installation to be undertaken by the incoming private operator.
• Cost: The cost of the terminal’s civil infrastructure is put at USD240 million with this financed by the CPA.

OPERATOR SELECTION RETHINK?

It is apparent that the Patenga Container Terminal will soon be ready to open its gates – as further evidenced in the accompanying picture – but nevertheless one big issue remains in order to maximise its positive impact, the fundamentally important question of operator selection, i.e. the selection of an operator from the private sector. This has two key dimensions to it: the process via which operator selection is undertaken and the type of operator that is the best fit.

Reports from Bangladesh indicate that there is strong interest in the opportunity from the terminal operator sector and that proposals have been lodged seeking to secure operating rights for the terminal. It seems this is not via a structured tender process but simply via independently submitted proposals sometimes in accord with government-to-government agreements. To put it crudely, this is like an auction without too many rules. 

There is evidence to suggest that in the latter part of last year the CPA was seriously considering appointing consultants to structure a fully-fledged global tender process for the opportunity. Experience confirms this would prove to be a better option than the proposal route – offering a level playing field from which to formulate bids, a process less open to outside interference/corruption and ultimately the ability to determine the best fit operator via appropriate and objective criteria. Further, this would be a stand-alone approach not influenced by other actions between governments.

As stated, there is also a need in the selection process to fully appreciate that there are two main categories of operator – common user terminal operators and shipping line affiliated operators. The first by their very nature serve all comers on an equal basis but the shipping line affiliated category invariably gives priority to the parent shipping line. Certainly, this is the case with Terminal Investments Limited (TIL) and its parent MSC and with APM Terminals and Maersk both of whom have made it plain in recent years their priority is to serve the parent company. Another common point of differentiation that follows on from this is that common user terminal operators treat their terminal operations as profit centres while shipping line affiliated operators treat them as cost centres. The latter can of course have significant financial and other implications for the landlord port authority.

NOT TOO LATE

Patenga Container Terminal is expected to be the first of a number of terminal concessions in the container sector – for example as proposed at the Bay Terminal – which adds to the importance of getting the initial operator selection right.

Even at this stage, given the intention of CPA to operate the terminal initially, it is not too late to implement a tried and tested tender process as deployed successfully globally. “The prize is worth the pain” as they say and is an option worthy of serious consideration.