READY FOR A CHALLENGE

Poland’s oppressive history has made for a long and uncertain road towards economic democratisation. Now though, in a time of relative peace and stability among European nations, Poland is making bold strides to catch up. Its geographic position on the northern European plain, once a flashpoint for conflict because of the flat terrain and the lack of natural barriers, now offers great potential for a modern freight transportation system.

However, years of Soviet rule hardly made for a vibrant import/export economy and a shift in export patterns has meant many traditional cargoes are no longer the focus of freight movements. So ports are having to restructure their operations and so is much of the rest of the country’s transport infrastructure which is in dire need of upgrading.

Poland’s accession to the EU on 1st May this year has presented the country with a raft of challenges to overcome. It still suffers from low GDP growth and high unemployment. Poland brings to the EU a population of 38.6m people keen to share the collective social and economic improvements of EU life. According to US government estimates in 2000, 18.4% of the population were living below the poverty line. In a nationwide referendum in November 2003, 77% voted to join the EU.

Business and the government are facing substantial costs to deal with water and hazardous waste pollution as industrial establishments are now required to conform to EU code. But this is clearly offset by the significant EU funding that is reaching Poland for economic development initiatives.

Despite such drawbacks, Poland’s progressive economic policies have made it noticeably robust as it joins the EU. The development of the private business sector has been encouraged with the privatisation of small and medium state-owned companies and a liberal law on establishing new companies. Adopting tried and tested privatisation models appears to be a winning formula. Along with a raft of EU funding has come the services of some of the world’s top banks and partnerships with well-backed international players. This has created a seemingly optimistic financial environment.

Economic growth is running at around 6% per annum and some predictions suggest a dramatic increase in this growth rate in the next few years. In order to accommodate the freight volumes resulting from free European trade, Poland must improve its old and under-developed transport infrastructure. Extensive development programmes are already well underway, not least to update the longneglected road and railway systems.

EU funding is beginning to make a difference and road improvement works are becoming an ever more common site. A thirteen month road construction project funded by the EU is due to commence adjacent to the port of Gdynia which will provide enhanced vehicle access, particularly to the Baltic Container Terminal (BCT) on its western perimeter. A new motorway is also planned going south from Gdansk.

“Of course the road system is not great, ” comments Jan Mors, executive vice-president of BCT. “EU policy favours rail.” Even so, Mors acknowledges the lack of rail shuttle services from Gdynia and the fact that arrival and departure times of trains are not yet reliable.

The railway, along with the coal, steel and energy industries, are considered sensitive sectors when it comes to restructuring and privatisation. Privatisation has been initiated in these sectors but has faced disruption and delay.

Nonetheless, there appears to be no shortage of new players keen to stake a claim in the new intermodal market. “We need to develop ‘upstream’, ” says Mors who can see the benefit of holding a stake in the integrated transport system which Poland needs to develop. The intermodal rail operation in the port of Gdynia is owned by the port authority and one of the country’s biggest freight forwarders. This is due to be privatised and includes a number of inland terminals around Poland.

In Gdynia, like most other Polish ports, privatising the various business units that make up the port is crucial to its development plans. A shift in the balance of trade has meant that once viable operations are becoming barely profitable. Gdynia’s coal throughput, for instance, used to be a steady two million tonnes a year but this year’s total will be down to 600,000 tonnes.

Gdynia’s general cargo, bulk and grain operations which are up for privatisation are all currently owned and operated by the port authority.

Of these privatisations, grain is at an advanced stage, general cargo is next and is due to be completed by the end of 2005, while some restructuring will be required before bulk goes ahead. As well as stevedoring operations, the privatisation of Gdynia’s tug service is underway and interest from international tug operators has been reported.

The benefit of private enterprise realised by Gdynia port authority is clear to see. The first business to privatise was BCT Gdynia, the container terminal. It took from 2001 to 2003 to complete due to antitrust processes as well as a fair amount of bureaucracy. Nonetheless, it netted the port authority $42m.

A PRETTY GOOD DEAL “The money paid to the port authority can only be used to improve the port and so clients and partners will see further improvement, ” explains Janusz Jarosinski, vice-president of the Port of Gdynia. A pretty good deal then. Well, Manila-based stevedoring company ICTSI thought so. However, the company realised the potential of Gdynia and in May 2003, ICTSI acquired BCT, its first European operation.

The ICTSI concession model hinges on identifying potentially successful operations and keeping the majority of the organisational structure in place after takeover. BCT was no exception, with Jan Mors being the only person brought in by the new owner, as executive vice president.

The concession agreement and tenancy agreements with the Port of Gdynia Authority were for a 20-year period, while a five-year social package was also negotiated with the unions to cater for the needs of the labour force. Mors says: “This is a win-win situation as staff have a five-year employment guarantee with salary adjustments and this ensures that the labour situation remains stable.”

Throughput volumes were already increasing when ICTSI took over.

The terminal handled 304,745 TEUs in 2003, a 23% increase over 2002. Volumes handled in January to May this year totalled 157,410 TEUs compared to 117,118 TEUs for the same period in 2003, a rise of 34%.

In the first year since the privatisation of BCT, employee numbers increased from 397 to 417 as well as an additional 13 further trainees. There is no shortage of job applicants of course and a queue of hopeful young men can be seen waiting for interviews at BCT’s offices every day.

Despite the capacity to handle 400,000 TEUs, BCT faces the same problem of space constraints as many other container terminals around the world. The volume of containerised goods entering Poland is certainly expected to climb in the coming years and to accommodate this, BCT has some impressive expansion plans.

Over the next fifteen years, the terminal plans to invest $80m in its facilities. The first phase of this expansion included purchase agreements with various equipment suppliers. Kone is due to deliver a Panamax ship-to-shore crane in June 2005 while Kalmar has won an order for four RTGs, due for delivery as this article goes to press.

Kalmar has also delivered five prime movers and is scheduled to deliver a further three in June 2005. As well as the new units, Kalmar is also working with BCT to increase the stacking height of its existing fleet of RTGs (see box story).

BCT also recently signed an agreement with Buiscar for the purchase of eleven 40ft internal trailers, six for delivery in 2004 and five for May 2005. The total investment for these equipment acquisitions and modifications was almost $12m.

Despite increasing the stacking area with heightened RTGs, land constraints must also be addressed by BCT as it plans for future expansion. In April, it reached agreement with the port authority on a long range infrastructure expansion programme that will include additional quay and container yard area.

Some BCT land is currently leased out for car storage, mainly imports by ro-ro vessels calling at the terminal. BCT is considering swapping an area of quay with the Polish Navy in exchange for an adjacent piece of land for container yard storage. According to Mors, these areas would allow them to handle a throughput of over 800,000 TEUs. The port authority is planning to move the adjacent Stena ferry terminal to another location. The current 800-metre quay would then be extended to 1km and total throughput of 1.2 million TEUs could potentially be achieved.

ROOM FOR ANOTHER?

However, there is competition on the horizon as Gdansk is continuing with its proposal to develop a greenfield site for a 1m TEU facility – Deep Sea Container Terminal (DCT) – at a cost of $200 million. A UKbased management team has been selected by the Port of Gdansk Authority to build and operate the terminal.

It is not yet clear how the market has responded to DCT Gdansk’s calls for capital funding and equity finance. Early indications suggested that there may be some difficulty getting the project off the ground, because BCT Gdynia is already operational and has the advantage.

DCT is promoting itself as the major container hub on the Baltic.

Its proposed facility would have a depth of 15 metres alongside the quay, compared to BCT which has 8.5-10.4 metre depth alongside (13 metre construction depth).

Tom Falknor, ICTSI’s senior vice-president responsible for BCT commented: “There has recently been a lot of hype and spin about Poland being a major hub for the Baltic as a whole and Poland being the recipient of various direct liner services, big ships and so on.

There will be a limited number of direct services added in the future, but otherwise we do not subscribe to these theories.”

Whether Poland needs a 15-metre quay will continue to be debated. In the meantime, BCT hopes that if competition for containers does materialise from Gdansk, it will already have expanded its facilities and enhanced operational efficiencies sufficiently to maintain its position.